Our recent policy brief, “Regulatory Environments for Youth Savings in the Developing World” tackled two primary barriers to youth financial inclusion, particularly through savings accounts at FIs: identity and control. In it, we made a series of recommendations to policy makers and other stakeholders about ways to create regulatory environments that were more likely to foster and support the development and uptake of savings accounts at FIs for youth in the developing world. We focused on those recommendations that would allow youth to benefit the most from the habit-forming and positive economic effects of controlling and managing their own savings while allowing for age, developmental, and context-appropriate protections as flexibility was introduced. Furthermore, recognizing the significant interest financial institutions have in comporting with international standards and practices, particularly those related to know-your-customer regulations, we noted the importance of collaboration across sectors (private, governmental, and non-governmental) in creating new regulatory environments for youth savings in any specific context. Ensuring oversight for the security of banks and young savers is of paramount importance when considering how our brief’s recommendations can be implemented in a specific country. And, knowing that commercial banks, specifically, but also other FIs would need to consider the business case for youth savings as they contemplate creating products tailored to the needs of youth, it was important for us to advance policy recommendations that reflected what we’d heard from banks and from youth themselves about what would make a product attractive for youth. In other words, friendly regulatory environments need to respond to the needs of youth in a way that increases potential uptake and usage if the changes are to foster product development and healthy competition among FIs to serve this sector. Without uptake and, perhaps more importantly, usage, scalability and sustainability become questionable especially in contexts where the business case contemplated is longish in terms. To these ends, then, the first set of recommendations revolved around identification requirements that youth must meet to open savings accounts. We noted that while we support national and international efforts toward universal birth registration and documentation systems, we recognize the need to create interim solutions for youth who lack documentation for the purpose of youth banking. We proposed flexibility and offered options such as allowing youth to provide identification in the form of a letter from an authority to prove their identity and age – for example from a school principal – or instituting a tiered Know-Your-Customer framework. These recommendations would allow youth lacking identification documents to open accounts and benefit from both the availability of savings for long-term goals or to weather financial shocks/emergencies and from the potentially positive developmental impacts from participating in savings behavior. Secondly, we recommended that youth have as great control as possible over their accounts. To this end, the brief encourages regulatory changes that would enable youth to own and manage accounts with as much flexibility as possible. Among our suggested options were allowing for alternative co-signer arrangements when parents and guardians are unavailable to co-sign on an account and, especially where protective and oversight mechanisms could be well-instituted, lowering the age of account opening and management.
While we stand behind the importance of creating friendly regulatory environments for youth savings, research from projects and programs targeting youth savings through FIs is beginning to show that even when uptake is facilitated by extensive outreach to youth and by the creation of more flexible regulation regarding identity and control, usage of youth accounts is not as promising as practitioners would hope in the absence of incentive structures to encourage youth to save or facilitating structures to make saving at an FI easier. UNCDF, for example, has noted the seed deposits, savings matches, conditional cash transfers or other bonus transfers into savings accounts might stimulate or sustain continued usage. These discussions are presently well underway in the field as experiments and pilot projects are beginning to publish their mi-term and final evaluations and results. UNCDFs YouthStart, for example, identified in its mid-term evaluation that it was necessary to identify the best models through which to integrate financial and non-financial services such as financial literacy and other life skills, was critical. According to YouthStart, “among YouthStart partners, a hybrid form of the unified model, which uses ‘ambassadors’ and existing clients or community networks to reach out to youth and to provide or facilitate some of the non-financial services, has been developed and seems to deliver better results than pure unified or linked models….Early signs show the hybrid experiments yielding not only better take-up and absorption of financial an dnon-financial services and lessons among youth, but also greater chances for long term institutional and financial sustainability” for partner FIs. There is, then, a complementary, community-centered range of interventions and facilitation that must happen or be encouraged to make youth savings accounts a success. It seems that regulatory environments are only one piece of this financial inclusion puzzle.
