Aug 22, 2012
Peter Kasprowicz of Credit Suisse and Elisabeth Rhyne of the Center for Financial Inclusion have recently completed an examination of global demographic trends and their implications for financial inclusion. What they found could change how we think about financial inclusion:
Blog #1 in a special series for the 2012 Youth Economic Opportunities Conference
September 11-13, 2012 Washington, DC
1. The youth bulge is ending for much of the developing world. It is axiomatic to think that in the developing world the population is very young and birthrates high. However, things have already changed for many of the world’s middle income countries. In Mexico, South Africa, and many other countries there will actually be fewer children by the end of the decade than there are today, while the number of elderly people, though still small, will grow rapidly. Only in the poorest countries, particularly in Africa, are children and youth still the fastest growing segments. For those countries with changing demographics, now is the time to begin focusing on the financial needs of older adults.
2. The “demographic window” challenges countries to use financial inclusion to make the most of a unique economic opportunity. In the many countries where birthrates have fallen but the population has not yet aged, the percentage of working age adults is higher now and in the next few decades than at any other time. These demographics set a country up for strong economic growth. BUT, countries must mobilize all their working age population to if they are to reap those benefits, including women, informals, and other excluded groups. Financial inclusion could make an important contribution to this effort.
3. Longer life expectancies require greater attention to savings and pensions. In the past, the elderly constituted a tiny percentage of the population of most developing countries, and their needs were often met informally. When more people live longer, a major need appears for long term savings and pensions to support them during their later years.
4. Financial needs change in important ways throughout the lifecycle and this provides opportunities for client segmentation. For example, young families are more likely to need access to credit for household set-up (consumer credit, housing finance)and to care for young children, while mature families face responsibilities to help launch their children in to adulthood (saving for weddings), care for aging parents (funeral insurance) , and prepare for their own old age. To date, microfinance institutions have paid relatively little attention to such changes in product design and marketing, and this could be a fruitful avenue for experimentation.
5. Because financial needs vary across the lifecycle, financial education must be a lifelong process. We know that financial education is most effective when it is directly relevant to a client’s life. Thus, messages on retirement savings will be lost on teenagers, but a 45-year old who has never thought about retirement savings may be urgently in need of some coaching. Financial education must be designed to follow changing needs across lifetimes.
Hear more about demographics and financial inclusion from Elisabeth Rhyne during the release of their publication, “Financial Inclusion and the Demographic Window,” at the 2012 Global Youth Economic Opportunities Conference. Register now!
Jul 17, 2012
All around the world, even with modest financial aspirations, people find it difficult to accumulate small amounts of savings towards meeting their goals. At Innovations for Poverty Action (IPA), we are committed to gathering evidence about how people can improve their ability to save.
Junior high school students display their Aflatoun Savings Workbooks at Pantang School in Abokobi district, Accra, Ghana. (Photograph courtesy of Jessica Benjamin, Financial Education Fund)
Learning good savings behaviors early is particularly relevant for young people new to the world of financial independence. For this reason, we were eager to team up with Aflatoun, an international NGO dedicated to providing social and financial education to children and youth, to run an impact evaluation of their flagship program.
Aflatoun’s theory of change rests on the idea that teaching financial education and values, side by side, will help young people become economically and socially empowered individuals, through child-centered learning. However, it’s possible that the same outcomes could result from an alternative program that emphasizes financial education alone.
Randomized Control Trial
To test these competing theories, Aflatoun took advantage of its 2010 program expansion in Ghana to conduct a randomized controlled trial with IPA researchers Jim Berry, Dean Karlan, and Menno Pradhan. For this study, IPA created a new financial education-only curriculum called the Honest Money Box (HMB), to compare against the Aflatoun program. The HMB only included the Aflatoun program elements related to financial education and school-based savings.
Results. The results of the impact evaluation are striking: both programs have small positive effects on savings, and an increase in the number of students who report saving at school. At the same time, both programs cause students to become more risk averse, which may imply that the students are thinking more about planning for future shocks.
The HMB program caused a small increase in recognition of the importance of saving and in labor market participation, which together might represent a greater drive to become more financially independent.
We didn’t find any significant effects on other self-reported measures of financial literacy; support for saving at home; general expenditure and spending on temptation goods; future planning, time preference, and spending on self-improvement; social behaviours like teasing and peer influence; or test scores.
Implications. Of course, teaching young people to save is only important if the habit continues throughout life. This evaluation was conducted over the course of one year, and we are interested to see whether either program causes long-term changes in students’ savings habits and attitudes. We are also keen to measure long-run impacts on consumption, assets, or other investments that directly improve the lives of the poor.
In some ways, these results open up as many questions as they answer. We must still investigate the mechanisms through which such programs affect habit formation. An interesting finding from the study so far is that we have seen shifts in behavior without seeing shifts in financial literacy per se. This might point us to the possibility that savings, like many other things we pursue, is a social activity and we are encouraged to engage in it by the social circles in which we participate (in this case the school’s savings clubs).
There is much that we have now learned on the value of financial education and access to savings in schools in promoting savings habit formation among youth. And as always, there remains much more to be discovered through further rigorous inquiry.
Click here to access IPA's PowerPoint presentation on the study.
To watch a 10-minute video of key take-aways, please visit: http://www.youtube.com/watch?v=f_6oTW3Bl8Y.
Mar 29, 2012
Child and Youth Finance International (CYFI) is a global network of financial service providers, government representatives, youth serving organizations, and academics working together to improve financial access and financial, social and livelihoods education for children and youth throughout the world. Based in Amsterdam, the Netherlands, the CYFI Secretariat coordinates efforts to advance the Child and Youth Finance Movement worldwide.
Child and Youth Finance Week
Our first Child and Youth Finance week was a resounding success, and we could not be happier! Youth from all over the world were given the opportunity to connect and share about the financial issues that matter most to them. Young people from 26 countries participated in events ranging from central bank tours, visits from financial luminaries, Skype calls with youth in different countries, and talks from financial planners and experts. Kids spoke about savings, starting their own business, earning interest, working, and sharing with their friends and family members.
Young people Namibia showed us their Ant Banks (click for video), which are used to encourage savings at home and at the bank; Junior Achievers in Argentina told us about making and selling auto safety kits and brownies to put money towards their future; and young people in Turkey shared their experiences saving for motorcycles to get them to and from work. It is exciting to see kids from all over the world enthusiastic about saving and enterprise. You can watch a short video on the hi-lights from Child and Youth Finance Week here.
Photos and videos from all of our partners, collaborators and new friends are being posted at www.WOFCHA.org. The site, set up by CYFI, allows young people from all over the world to connect virtually on issues related to money, enterprise, and relations with financial institutions. We encourage you to visit the site and share it with young people who you think would be interested in joining our online community and helping to change the future of finance for youth around the world.
Ringing of the NASDAQ Opening Bell
CYFI also had the honour of ringing in the opening bell at the NASDAQ on Wednesday, March 21, alongside Making Cents International and other industry partners. This was an excellent way to bring a close to Child and Youth Finance Week, and we were thrilled to be able to share our core beliefs with the financial community. You can watch the video of the opening bell ceremony below.
CYFI Summit, April 2-4, 2012
We hope that the success of our first annual Child and Youth Finance Week and our upcoming CYFI Summit in Amsterdam (April 2-4, 2012) will bring us that much closer to our goal of financial inclusion for 100 million youth in 100 countries by 2015.