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Implications for Program Design: Access to Formal Financial Services

The following table summarizes market research findings with respect to young people’s experience of formal financial services and the implications of these findings for access to such services.

Increasing Access through School-Based Models

Reaching youth through schools to promote products and facilitate account opening and transactions provides convenient access for youth, while at the same time helping the FSP increase uptake and usage of its services (YouthStart). In Sri Lanka, Hatton National Bank set up permanent banking units run by students within schools. Branch staff of Nike partners XacBank and ADOPEM visited schools to provide information about the bank and youth savings accounts, offer incentives, and open accounts (Savings Innovation and Expansion for Adolescent Girls and Young Women–Morocco).

UNCDF-YouthStart partners FINCA Uganda and PEACE Ethiopia use lock boxes and regular staff visits to schools to encourage account usage for in-school youth. Young people can either keep the lock boxes at school (and open them when FSP staff visit), or they can carry them to the branch when making a deposit. FINCA Democratic Republic of the Congo uses school-based agents who use POS devices for account opening and transactions so that students do not have to leave the school premises (YouthStart).

Increasing Access through Technology

Point-of-sale (POS) devices, automatic teller machines (ATMs), and mobile banking can facilitate access for youth in rural and peri-urban areas. A large network of mobile banking agents, such as small kiosks, grocery stores, pharmacies, mobile operating stores, and post offices, can facilitate young people’s access to savings accounts when they live far from branches of financial institutions.

Increasing Access through Alternative Know Your Customer Requirements

FSPs can help lower the barriers of access to formal financial services for youth. Depending on the flexibility of regulators and their interpretation of the legal framework, FSPs can be more flexible in accepting various forms of legal identification from  youth than with adults in order to open an account. Several UNCDF-YouthStart partners accept alternate forms of  identification. Finance Trust in Uganda accepts a recommendation letter from an adult who knows a youth as a form of  identification. It also accepts school IDs for in-school youth end village IDs for out-of-school youth. For mentors or youth above the age of 18, it accepts a voter’s card or driving permit/license. Opportunity Bank Malawi (YouthStart) accepts letters from the village chief as a form of identification (UNCDF). Several YouthSave partner banks have also eased identification require- ments for youth, often accepting letters from local authorities and/or school IDs in place of birth certificates or proof of citizenship (YouthSave). 

FSPs can also develop innovative models to overcome minimum age requirements so that youth can open and manage accounts independently. In Uganda, individuals under the age of 18 must be accompanied by a guardian to withdraw money from a formal financial institution. To overcome this obstacle, FINCA Uganda consulted with legal advisors and incorporated the use of a  mentor to enable allow girls to withdraw money. Mentors can co-sign, help manage an account, and take money collected at each group meeting to deposit in a FINCA branch, along with the youth client. However, there are several potential risks with the mentor model. Since most mentors participate as unpaid volunteers, turnover may be high. If mentors are given the ability to make deposits on behalf of girls, they could mismanage the savings, causing the girls and their parents to lose trust in the mentor and, potentially, the entire program. In addition, mentors may not have enough technical knowledge or competency to provide financial guidance and training. 

It may thus be necessary to provide some type of monetary incentive for mentors and build their knowledge of financial services and savings. However, if mentors are paid, this could threaten the sustainability of the program (Nike Process Documentation).

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