Steps to a financial future where there are as many financial opportunities as there are young people.
There have never been so many young people in the world. There are 1.8 billion people between the ages of 10 and 24 and that population is growing fastest in the poorest countries. In 15 countries in sub-Saharan Africa, half the population is under age 18.
Here in Kenya, 43% of the population is under 15. They face problems unique to their age group, including 25% unemployment – double that of the general population. They also lack access to finance that works for them: 23% of 18-25 year-olds are excluded from financial services.
This is despite the fact that, as we wrote about last month, young Kenyans are learning about money earlier than you might think: they’re picking up financial lessons from their parents from as early as four or five years old. By 18, almost a third have mobile money accounts.
Despite this, limited financial service providers in developing countries target youth specifically. Around the world, youth are 33% less likely to own a bank account than adults.
This is a missed opportunity for financial service providers – youth are potential long term customers – and for social gains: there are high correlations between youth savings and gross domestic product per capita and secondary school enrolment.
But youth savings accounts can be challenging. As CGAP notes in their report The Business Case for Youth Savings: A Framework, youth savings accounts often bring small returns over a longer period of time. Youth are also harder to reach, tend to have limited savings, and are scared off by even small fees.
Youth are also vulnerable to getting stuck in debt cycles. In Kenya, as in the rest of the world, more youth use credit than saving money. In 2012, youth globally had $186 million outstanding in credit, $48 million in savings, and only $1.2 million in insurance.
Still, Kenyan youth have a lot of things to be excited about.
Last month, we wrote about Touch Doh, an app still in beta testing that we hope will change the way young Kenyans think about and interact with money. Touch Doh was developed when FSD commissioned Well Told Story to research what moves people from basic mobile transactions to more advanced uses. We found that, in most cases, it’s a crisis.
Which made us wonder: how can we help young people move to these more complicated forms of finance without a crisis? That’s where Shujaaz and Well Told Story comes in
“Imagine the Excel spread sheet meeting the Shujaaz comic,” and you begin to understand #PesaPersonas and the Touch Doh app. Still in beta testing, Touch Doh uses Shujaaz time-tested ability to communicate with young people, it uses animation to track young people’s income and expenditures, portraying one’s financial life like a video game. Read our post about it here.
The Kenyan government has also shown it values addressing the financial needs of youth through the establishment of the Youth Enterprise Development Fund in 2006, a fund for young entrepreneurs who lack access to the finance they need to expand their business.
Kenya’s Post Office Savings Bank (Postbank), a large state-owned bank, also stands out globally because of their deliberate efforts to target youth. Since launching its SMATA Account in 2012, Postbank opened approximately 70,000 new savings accounts directed explicitly at adolescents.
It’s all a start but here at FSD, we believe these are the first steps to a financial future where there are as many financial opportunities as there are young people.