Rural Youth Financial Inclusion: A Bridge too Far?

Sponsors

Making Cents International’s Youth Economic Opportunities Network (YEO Network) implements activities designed to facilitate knowledge exchange, collaboration, and action among the full range of stakeholders working to expand youth economic opportunities.

The Global Center for Youth Employment, launched by RTI in 2015, is a virtual learning and action center that brings together a broad, diverse coalition of allies to identify and nurture innovative youth employment solutions. The Center’s partners include workforce development experts from universities, NGOs, foundations, and the private sector.

Speakers

Paul Nelson Digital Finance Advisor

U.S. Global Development Lab, USAID

1/10/2017 4

Promising Methods For

Overcoming Financial

Exclusion

Paul Nelson

Digital Finance, USAID

USA

ID, vi

a A

FP

1/10/2017 5

USAID’s Digital Finance team looks for three primary

market-facing opportunities in any given country

2 encouraging institutions (including gov’ts, donors, and USAID implementing

partners) to digitize institutional payment flows and thus build demand for

digital financial services

1 fostering enabling

environments (policy, laws, regulatory frameworks,

supervision), private sector investment, and demand

for inclusive financial services

3 harnessing digital financial

services as tools for achieving development outcomes in agriculture,

energy, governance, health, and humanitarian

assistance

these three opportunities are often integrated with our capacity-building efforts for both USAID staff and implementing partners through the Community of Practice for Digital Finance: in-person training, webinars, toolkits, knowledge-sharing, etc.

1/10/2017 6

USA

ID

Setting the

scene first…

≠ Gender, Age, and Geography Access Gaps

Across low and middle-income countries: 49% of women have account (58% men);

48% of rural adults; 39% of young adults (15-24);

54% of adults (and 45% of young adults) save, but only 23% in financial institution

World Bank Global Findex 2014 | 7

The

imperative

for

financial

inclusion

☂ Limited Access to Emergency

Funds

43% of adults in low-income countries would have a difficult

or impossible time accessing funds in an emergency

♖ Dependence on cash for gov’t

payments

48% of recipients of government transfers in low- and middle-income countries received transfer in cash

World Bank Global Findex 2014, GSMA | 8

45% of adults in Sub-Saharan Africa with a mobile money

account do not have any other formal account

Growing Diversity of Financial Access Points

2.5 million

2 million

1.5 million

1 million

500,000

Post Offices

Commercial Bank

Branches

ATMs Mobile Money Agents

and the opportunity

posed by digital

technology

and new business

models for financial

services

70% of the population in developing markets expected to have a mobile by 2020, and many markets are already near 100% penetration

• Enabled by a sound policy and regulatory environment - in which policymakers (a) develop

and implement plans for harnessing digital technology within government and (b) regulate and

supervise the market to enable both robust innovation and consumer protection

• Achieved through this type of digital finance market system - an array of providers (banks,

non-bank financial institutions, technology providers, telecoms, agents, etc.) compete or partner to

offer inclusive financial services on a commercially sustainable basis

• Offering these types of financial services - consumer and MSME financial services (basic

wallets/accounts, payments, savings, credit, insurance, other value-added services) accessed by or

delivered via electronic channels (e.g., mobiles, point-of-sale devices, cards, computers)

• Riding on a modern digital payments infrastructure - designed to enable easy, secure, minimal-

cost, and near real-time payments to any person or institution for populations overlooked or poorly

served by legacy systems

1/10/2017 9

But these opportunities require some nudging. They

depend on a vibrant digital finance ecosystem.

Just to highlight two…

• Market facilitation – working with a range of actors, focused

specifically on overcoming systemic barriers

– See MM4P program at UNCDF, FSD Africa, Catalyst initiative of

USAID in India

• Graduation model – multifaceted way to stabilize consumption, build

assets, and enable growth opportunities

– See CGAP/IPA studies on impact of this approach, supported by

Ford Foundation

1/10/2017 10

How can we help growing that ecosystem? And

overcome other barriers to financial inclusion?

1/10/2017 11

USA

ID

Thanks

Speakers

Timothy Nourse President

Making Cents International

Financially Excluded

Rural Youth Economic Empowerment Project

• 3 Year Learning Project funded by IFAD and Silatech • By project end – 5 pilots served 20,000 youth with

financial services and almost 15,000 with non-financial services

• 1 global Learning product and 5 Case Studies produced

The Path to Rural Youth is through Adults

Build Capacity as you Build Assets

• Youth Savings Groups in Egypt sponsored by Plan International included asset building with educational activities

Adapt for Youth and Rural Contexts

Al Barid Bank launched a slick nation-wide campaign for a youth savings account

Adapt for Youth and Rural Contexts

While Youth specific, they did not adapt the product for rural areas and only “creamed” the most educated youth in those areas

Adapt for Youth and Rural Contexts

Their second version of the product was beginning to be more successful at reaching rural areas

Partnerships are critical to success

(but difficult)

Exploit new technologies

Speakers

Sarah Mattingly Senior Workforce and Youth Economic Opportunity

Development Specialist RTI International

1/10/2017 24

Kenya Youth Employment and Skills (K-YES)

Project

January 11, 2017

Sarah Mattingly, RTI International

USAID funding $21.9 Million

5-years through September 2020

Implemented by RTI, IRC, SSG Partners, McKinsey

& Co., Geopoll and Land O’ Lakes International

K-YES aims to enhance employment opportunities and

the overall labor supply in focused geographic areas

and sectors through both wage employment and self-

employment for unemployed and underemployed

youth (aged 18–35) who have not completed

secondary education

1/10/2017 25

Kenya Youth Employment and Skills (K-YES) Project

1/10/2017 26

K-YES Objectives

Objective 1 (strategic): Improved technical and vocational skills of youth participants;

Objective 2 (strategic): Increased business skills;

Objective 3 (strategic): Improved effectiveness of market and employment information,

career counseling, mentoring, and job placement for youth participants in target

areas/sectors;

Objective 4 (strategic): Youth awareness and utilization of financial services;

Objective 5 (crosscutting): Gender equity; and

Objective 6 (crosscutting): Sustainability through partnership

1/10/2017 27

K-YES Achievements in Year 1

Competency Based Education and

Training (CBET) Vocational Programs

– Vocational Training Centres (VTCs)

– Integrated Employment Training

Programs

– Direct Placement

Market-based Business and Agribusiness

Program through local implementing partners

and village level Community Resource Persons

Access to Finance through VSLAs, SACCOs,

MFIs, and FIs

Private sector partnerships with employers

and market actors

1/10/2017 28

K-YES: Integrated Approach to Implementation

1/10/2017 29

The K-YES Context

Challenges

• Target Youth cohort aged 18-35 who have not completed secondary school

• Low literacy and numeracy

• Rural population

• Large geographic coverage

• Low mobile and internet usage

• Implementing partners lack resources and infrastructure

Opportunities

• Build on USAID investments through Yes Youth Can (2010-2015)

• Leverage extensive network of youth connected by county youth bunge groups and

NYBA strengthened by USAID investments through Yes Youth Can (2010-2015)

• Existing network of youth SACCOs

Mobilize and assess youth where they are…. at the village level

• Youth Bunge members are Community Resource Persons who conduct basic trainings and awareness events at village level

– Financial Awareness (VSLA, SACCOs, MFIs, affirmative government funds)

– Work Readiness Workshops at village level

– Learn to Earn Basic Business Skill Training at village level

• “My ID, My Life” Campaign to engage target youth cohort and as a platform for learning and raising awareness about financial, market and employment opportunities

1/10/2017 30

Youth Mobilization

1/10/2017 31

Skills Building for Financial Access

Literacy and Numeracy: K-YES working with and building capacity of the Kenya Department

of Adult Education in each county to deliver trainings and/or refer youth to available trainings.

Financial Literacy: Curriculum developed and adapted by IRC to meet needs of low literacy,

less-educated youth

• Learn to Earn Curriculum

- Low to Moderate Literacy levels

- Part of 8 module / 4- day business skills training that is adaptable to different skills level and business

maturity delivered by Community Resource Persons, business training institutions or in partnership

with MFIs,

- Linked to sector/value chain business opportunities and integrated into CBET curriculum

• Economic and Social Empowerment (EA$E) Curriculum

- Illiterate to low literacy levels

- VSLA coupled with financial literacy education as an entry point for pulling marginalized youth into

the financial system.

Key Adaptations:

• Revise Facilitator Manual, Training Exercises and Participant Workbook

– Facilitator Manuals adapted to meet needs of youth village-level trainers

– Training Exercises and Participant Workbooks

• Simple language

• Visual learning

• Activity-based

• Timing and location in villages

• Multiple platforms for engagement, information dissemination and monitoring – SMS,

WhatsApp, Twitter, radio, face-to-face, via phone

1/10/2017 32

Skills Building for Financial Access

• VSLA

• SACCOs

• MFIs and FIs

• Digital Finance

1/10/2017 33

Financial Products

• K-YES train bunge youth as Community

Resource Persons through ToTs

• VSLAs groups of 15-25

• K-YES continue to monitor and provide

mentoring to Community Resource

Persons

• K-YES partner with umbrella NGOs to

capitalize at low interest rates; starting

conversations with MFIs but a harder

sell…

• In Year 1, 839 loans were issued via

VSLAs

1/10/2017 34

K-YES Village Savings and Loan Associations (VSLAs)

1/10/2017 35

Savings and Credit Cooperative Organizations

• Expand membership to K-YES youth cohort

– Financial Literacy

• Capacity Building

– SACCOs’ Central Management Committee (CMC) members are receiving capacity

building to improve risk management, leadership and governance, and cost-

effectiveness

– Development of new financial products Sustainability and Business Planning

• K-YES facilitate capitalization with sub-grants; long term strategy to develop linkages with

MFIs and FIs such as Equity Bank

1/10/2017 36

Linkages to FIs

MFIs

• K-YES broker relations for 200 youth to financing from MFIs

• YEHU Microfinance, Livelyhood, Kuku Faida, and Farm Drive

Commercial banks

• Kenya Commercial Bank (KCB) partner with K-YES to deliver integrated package of

agribusiness support

– K-YES: Agribusiness Field to Farm model in five selected value chains: (1) sweet potatoes, (2)

dairy, (3) beef, (4) chickens eggs, and (5) chickens meat.

– KCB: Patient capital, improved inputs and quality control, guaranteed market access

1/10/2017 37

Digital Finance ….The Way Forward?

The Dream…

– Millions of youth banked through M-Shwari and other DFS apps

The Current Reality….

– Rural youth have shared access to mobile phones; these youth do not own their

own phone

– K-YES provides information on DFS products; urban youth and those with phone

are accessing DFS products on their own

The Future…..

– Strategies to link group savings to DFS products to increase financial return,

consumer protection and reduce management cost;

– Increased effort to link youth to DFS products where appropriate

1/10/2017 38

Thank You!

Speakers

Alison Boess Former Deputy CEO, FINCA Microfinance Bank (Nigeria)

Current Senior New Business Development Officer FINCA International

Proprietary and Confidential

Opportunities & Challenges for Financial Service Providers

Inclusive Finance for Rural Youth

Proprietary and Confidential 41

MISSION

To alleviate poverty through lasting solutions that help

people build assets, create jobs and

raise their standard of living.

VISION

To be an unconventional community-based bank that

profitably and responsibly provides innovative and

impactful financial services to increasingly large

numbers of low-income clients.

FINCA’s Microfinance Mission & Vision

Proprietary and Confidential

Our Approach to Financial Inclusion

PUT THE CUSTOMER EXPERIENCE FIRST

We treat our customers as collaborators and every

employee delivers on our brand attributes.

MAKE INNOVATION OF PRODUCTS AND

SERVICES AND HOW WE DELIVER THEM

PART OF OUR DNA

We offer our clients financial products that are less

complicated and more flexible. We leverage

digitization, creating speed and efficiency.

DIVERSIFY OUR FUNDING

We are sourcing deposits, local currency and

capital to lower costs.

1

2

3

42

Proprietary and Confidential 43

• More than 50% of our borrowers are women

• Typically 20-50 years old (median age 31-45)

• Supporting an average of six family members

• Living and work in urban, peri-urban, and rural areas

• 37% are from Africa; 24% Eurasia; 21% MESA; 17% Latin American;

• More than half of borrowers use group lending, with an average loan size of $420

FINCA’s Clients

Proprietary and Confidential

Youth & Financial Services

40% of the world’s population is under age 24; 1.8 billion people

are between the ages of 10 and 24.

-->Not a homogenous group

• Appropriate products (savings for all, credit for some, and

addresses specific needs and barriers for youth)

• Proximity and frictionless processes for account opening

AND transactions

• Targeted marketing

• Youth-friendly service and protections specific to children

• Financial education and building financial confidence

44

Proprietary and Confidential

Creating Opportunities for Youth at FINCA

• Through Financial Services to Adults: FINCA’s work

touches the lives of nearly 4 million youth in client households

• Inclusive Design of All Products: 22% of our clients are

aged 30 or younger (over 400K) even with more generalized

approaches

• Specific Efforts: Youth Savings in DRC & Uganda

45

Proprietary and Confidential

Youth Savings in DRC & Uganda

• Primary market research conducted in advance in both countries to

inform product design around the needs of youth

• Products: Savings focused, with credit products left general. No fees,

low minimum balance ($1 for savings / $20 for term deposit), attractive

interest rates, relaxed ID requirements.

• ”Avenir” savings account

• “Avenir” term deposit account

• Junior account & school fees collections

• Star girl account and

• Super saver school club account

• Marketing: Through specific Youth Savings Officers and directly in

schools or with youth groups

• Financial Literacy Training: Provided through partnership in DRC and

directly by FINCA in Uganda

• Delivery Channels: Remote Account Opening and POS/Agency Banking

proved critical for uptake and “client conversion” after training

46

Proprietary and Confidential

Digitization, Technology and Rural Youth • Cover a greater scale and a wider

geography (including rural area) at a lower

cost per transaction for all segments

• POS / Agency Banking and remote account

opening dramatically increased youth

participation in financial services in urban

areas at FINCA

• Agency banking provides income generation

opportunities for youth

• Youth are adopting smart phone

technologies at a rapid rate, and FSPs

should look ahead to this new channel

• Philanthropic funding partners are critical both

for investment in new technology and to

provide resources for “additional” services like

financial education for youth

Proprietary and Confidential

Key Takeaways from FINCA’s Experience • ”Youth” are not a homogenous group, and sub-segments should be

understood

• There is considerable demand for financial services among youth, especially

those who have begun at least part time work

• Specialized products are not always needed, especially for young adults

• Financial services for younger children is largely a philanthropic endeavor

which is not self-sustaining, especially where financial education and specific

staffing is required

• Youth savings products can effectively increase youth financial inclusion

even without specific youth savings staff or financial education programs

• Investment in delivery channels and technology is the critical bridge to

financial inclusion of rural youth

Learn More: youtheconomicopportunities.org

makingcents.com

Learn More:

www.makingcents.com/financial-inclusion

www.youtheconomicopportunities.org

https://www.rti.org/impact/global-center-youth-employment

Thank you!