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Financial services programs work with regulators, financial institutions, and supporting NGOs and CBOs, to design and deliver financial services and education that respond to the savings, borrowing, and risk mitigation needs of young clients. Inclusive finance can play a critical role in enabling youth to invest in employment or educational opportunities, but is often limited by legal hurdles, lack of collateral, and lack of business experience and financial know-how.
Where are we now?
The youth-inclusive financial services (YFS) sector is working to engage policymakers, donors, financial service providers, NGOs, and youth at the macro and micro levels to experiment with new or adapted financial services that meet the needs of youth, while creating business opportunities for the private sector. At the macro level, efforts are focusing on regulators and policymakers to advocate for youth-friendly banking policies that would allow youth more independent access to a range of financial services, and to develop appropriate youth-inclusive client protection principles. At the micro level, financial institutions are researching the youth market to better understand their financial behaviors and needs; and to pilot financial products and services that promise to meet a young person’s specific financial goals as well as present a future business opportunity for financial service providers (FSPs).
Trends and Best Practices
- Regulatory constraints to serving younger clients require an FSP to think creatively, i.e. finding alternatives to formal identification and minimum age requirements.
- To appropriately serve young people, practitioners must first use youth-friendly market research techniques to better understand their financial habits and preferences.
- Youth financial service needs grow and change as they do. Adolescents only need access to savings services, whereas young adults can use a full range of services. Their needs also differ based on geography, education, marital status and employment. FSPs should consider which market segment they can best serve given their experience and assessment of institutional partnerships.
- Youth financial products may only differ slightly from those offered to adults, including low or no minimum balance savings accounts and alternative guarantees for credit.
- The major product differences lie in marketing (i.e. attractive color schemes/special logos and tailored messages for young people) and delivery mechanisms (i.e. thinking outside the branch) and in the accompanying non-financial services (i.e. financial education and entrepreneurship) critical for building a young person’s capacity to save, manage their money, and generate income.
- YFS are often best delivered in partnership, enabling the FSP to focus on the financial product while partner NGOs or government agencies address the financial education and entrepreneurship needs of young people.