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Experience with Formal Financial Services

Most youth don’t have experience with formal financial services and do not have their own accounts or shared accounts with their parents. Their experience of formal financial services can often be directly linked to whether or not their parents have accessed these services. For example, some youth may have gone to the bank with a parent to make a deposit (Savings Innovation and Expansion for Adolescent Girls and Young Women–Dominican Republic, Mongolia). Or they may be influenced by their parents, who save mostly small amounts at home and large amounts at a bank (Savings Innovation and Expansion for Adolescent Girls and Young Women–Mongolia).

Youth lack experience with formal financial services because they (ESAF–West Bank/Gaza):

• Lack money to deposit
• Don’t feel the need to open a bank account
• Don’t have banking information
• Prefer to rely on friends and family first for saving and borrowing

In many regions, youth face the following three barriers to accessing and using formal financial services (YouthStart):

• Restrictions in the legal and regulatory environment (e.g., minimum age and identification requirements to open and  manage an account, or to take out a loan on their own)
• Inappropriate and inaccessible financial products offered by FSPs (e.g., high opening or minimum balances, branches located too far from communities where youth reside, or operating hours that conflict with school or work obligations)
• Poor financial capabilities (e.g., knowledge, skills, attitudes and behaviors) of youth

In most developing countries, with a few exceptions (e.g., Ethiopia, Colombia, Uruguay, Chile, the Philippines, and Mongolia), youth must be 16 or 18 years of age to open and manage an account on their own. As a result, youth below the legal age must rely on their parents or guardians to open and access an account (mainly for withdrawals).

Most countries also have strict “know your customer” (KYC) regulations that require birth certificates, national  identification (ID), or national registration cards (NRCs) for youth if they are old enough, or for their parent or guardian. Since most youth lack these types of identification, they are unable to access formal financial services (YouthSave). 

Finally, most youth don’t know how formal accounts work. They are unclear about financial terms (e.g., minimum balance, current account, fees), the requirements for opening an account, and the differences among various financial products (ESAF–West Bank/Gaza, YouthInvest–Morocco, YouthStart). Youth in some regions associate formal financial services more with providing loans than with savings (ESAF–West Bank/Gaza). As a result, the majority of young people seek more information on financial services and greater understanding of how they work.

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