Youth Savings Accounts in Developing Countries: A “Social Innovation”

From the urban slums of Nepal to the rural villages of Ghana, what can a teenager do with a few extra bucks? It wouldn’t alleviate her poverty in the long run, but with access to a savings account, she may be able to invest in her future.

Youth Savings Accounts (YSAs), a financial service commonly offered in the U.K. and other industrialized nations, may be an effective tool for improving the lives of disadvantaged youth in slums across the world. The concept is simple: instead of handing out money to the young and marginalized, we can grant them access to savings accounts and teach them life skills.

Save the Children, a nonprofit working to empower children and families in developing countries, launched the YouthSave Consortium in 2010, working with the New America Foundation (NAF), the Consultative Group to Assist the Poor (CGAP), and Washington University’s Center for Social Development. The consortium’s goal was to study the life-changing potential of YSAs on low-income youth in four developing countries: Colombia, Ghana, Kenya, and Nepal.

In Washington, D.C. on June 7, representatives of YouthSave presented their findings after a year of research and fieldwork.

“We’re not so much learning whether youth savings are a good idea, but answering questions of what works, what doesn’t, and for whom,” said Michael Sherraden, director of Washington University's Center for Social Development. “Imagine a world where everyone has access to financial services. This is a reachable thing. Maybe not in 10 or 20 years, but certainly in the next few decades.”

Sherraden, a keynote speaker at the event, called YSAs a “social innovation.” The use of YSAs to trigger change in developing countries, at this point, has been experimental, and no conclusive evidence is available to illustrate any long-term or widespread impacts. Nonetheless, past results have been promising.

In 1998, an experiment was launched in the slums of Nairobi, Kenya. A group of young women, who had been living in poverty, were granted savings, credit, business, and life-skills training, as well as adult mentoring, and were encouraged to open savings accounts at local banks.

The women, aged 16-22, were Muslim and Christian and had a variety of life circumstances: with and without children, married and unmarried, and living within and outside their families of origin.

The program, known as Tap and Reposition Youth (TRY), proceeded to track the lives of its participants. TRY found that the women who opened savings accounts were more likely than others to significantly increase their level of income over time.

They also had a higher level of independence and gender empowerment, believing, for example, that wives can refuse their husbands sex, marriage is not the only option for an unschooled girl, and having a husband is not necessary to happiness.

Uganda’s SUUBI Project, launched in 2004, reached similar conclusions. SUUBI, which means “hope” in a local language, offered 300 orphans between the ages of 12 and 16, both boys and girls, the opportunity to open a savings account for secondary education and microenterprise. The project included life-skills training, strict withdrawal restrictions, and a 2:1 savings match of up to ten dollars per month to encourage saving.

The orphans who received the intervention, compared to those who only received traditional care from social workers, demonstrated better grades, higher standardized test scores, and more confidence about the future.

YouthSave intends to explore the potential of YSAs on a much wider scale. The project is working with one financial institution and one research institution in each of the four target countries to design a YSA product that (a) is capable of reaching children and adolescents in the poorest slums and rural areas who need it most and (b) can be profitable to the financial institutions that offer it.

This is challenging, according to the representatives of YouthSave, because disadvantaged children and adolescents have a high risk factor and a low profit margin in the eyes of banks. However, if YSA products are paired with the right outreach and mentoring initiatives, banks can profit in the long run by building relationships with communities and gaining loyal customers at an early age.

Rani Deshpande, director of the YouthSave project, said current data from the four target countries reveals that young people living in poverty were already thinking about money and microenterprise on a daily basis, even more so than the researchers anticipated.

In-depth interviews revealed that the majority of these kids were highly interested in financial services as a means of building a better future and achieving more financial security in the face of emergencies.

Henry Taksier [@HenryTaksier] is a former editorial intern at Campus Progress and an editorial board member of The Fine Print, a progressive publication at the University of Florida. 

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