European Microfinance Week 2015

PRESENTATIONS

Jared PENNER introduced the topic and noted that the case studies discussed in this session can be found in the latest publication of the e-MFP Youth Financial Inclusion Action Group: More inclusive finance for youth: scalable and sustainable delivery models for financial and non-financial services. He remarked that an enabling macro-environment is crucial for both scalability and sustainability. Providing services to youth of legal age in urban areas allows for high sustainability and scalability while targeting rural populations is more challenging. He stressed that investing in youth financial services is a multi-year investment. Profitability, scalability, and sustainability cannot be achieved within a short time frame, even in the presence of significant external grants.

Ata CISSE introduced the UN Capital Development Fund’s programme YouthStart and noted UNCDF is the United Nations leading agency focused on financial inclusion. YouthStart was initiated in 2010 in partnership with the MasterCard Foundation and is active in eight African countries, partnering with ten Financial Service Providers (FSPs). YouthStart provided grants to FSPs in order to design, test and scale up responsible, affordable, and accessible youth products and identify and build partnerships with financial training providers to reach youth. The main products include loans and savings and the objective of the program was to reach up to 200,000 youth by the end of 2014. By June 2015, YouthStart’s partners surpassed that goal as they reached more than 600,000 youth, collected USD 16 million, gave USD 11 million loans to 80,000 young entrepreneurs and provided financial education trainings to more than 660,000 youth. Most of the loans provided were used to pay for education or start up a business. Cisse remarked that youth have higher repayment rates when compared with other clients mainly because of the provision of financial education.

Cisse identified three factors that assisted partners to scale up their programs. The first factor was integrating youth into the programs by using young leaders and clients of the FSPs as youth officers to help promote the FSPs services and products, deliver financial education and serve as role-models for other youth. Secondly, YouthStart encouraged FSPs to partner with Youth Serving Organisations (YSOs) to deliver non-financial services to increase its outreach, in particular to vulnerable groups such as young women and out-of-school youth. Thirdly, FSPs provided youth with targeted and concise financial education trainings. With regards to sustainability, Cisse mentioned that nine out of the ten partners have institutionalised youth services in their organisations. Many of them have accomplished sustainability by either finding other revenue streams via cross-selling, or by increasing savings volume by providing savings accounts to more affluent youth that can then be used to target more vulnerable groups of youth. Using youth officers has also been proven significant as it helped minimise labour costs. Penner commented on partnership mismatches and asked Cisse how YouthStart managed to deal with this challenge. Cisse mentioned that mismatches and partnership failures occur because the objectives of each partner are not well understood by the other. It is extremely important for partners to share their expectations with each other and keep strong lines of communication open between parties.

Aymeric FUSEAU talked about the experiences of the Youth Entrepreneurship Program (YEP) initiated in 2013 in Egypt, Lebanon, and Palestinian Territories. YEP’s goal is to foster the economic empowerment of youth, to strengthen MFIs’ capacities and improve their support services in targeting youth. YEP’s methodology includes the adaptation of the financial and non-financial services offered by MFIs to the needs of targeted youth, the training of field staff on the newly adapted services, and the establishment of exchange forums for the various stakeholders. Fuseau explained the model used by Al Majmoua MFI in Lebanon. The first step was identifying the target youth and classifying them to existing entrepreneurs; fresh graduates; and formal or informal workers. After this classification youth received training relevant to their needs and had to prepare a business plan. Successful participants received a loan and further one-to-one coaching.

Fuseau mentioned that the socioeconomic and political situation and instability are the main challenges YEP is facing. This instability decreases start-up opportunities, as the Syrian crisis is affecting youth employment and has caused a lack of motivation to existing entrepreneurs. Penner remarked that in order to receive a loan, youth need to provide 25 percent of the capital themselves, mainly via savings. Moreover, they need to have at least one year of working experience. These terms and conditions were another challenge on scalability of the project in terms of outreach.

Katia GOMEZ talked about MÍA, ADOPEM’s youth savings program. ADOPEM is a regulated bank with 70 branches in the Dominican Republic. ADOPEM has currently 29,501 MÍA savings accounts representing seven percent of the bank’s portfolio. In the Dominican Republic, youth receive an ID card at the age of 16 segmenting ADOMEP’s clients in two groups; younger youth: 0 to 15 years old and older youth: 16 to 24 years old. Younger youth need to have a guardian to open a savings account and although both youth and the guardian can deposit, only the guardian can withdraw. Older youth can open a savings account with their own ID and they are the only ones who can access their accounts. ADOPEM does not charge transaction fees but imposes a dormancy fee if the account stays inactive for a period longer than six months. To avoid charging dormancy fees and incentivise youth savings, ADOPEM calls young clients with inactive accounts or accounts with a decreasing balance to remind them of the importance of saving. ADOPEM offers passbooks to youth and encourages them to keep it in a safe place and maintain control over it. Gomez said that ADOPEM’s goal with the MÍA savings accounts is to create a culture of saving amongst youth and children. She emphasized the importance of providing financial education both to the parent and the youth to achieve this, and stressed the significance of being a child-friendly institution. Gomez focused on the importance of cross-selling to achieve sustainability, emphasizing that 81 percent of youth accounts have been created after a member of the family was already a client of ADOPEM. 

DISCUSSION

Gabriella Crescini from Swisscontact asked Gomez whether MÍA is profitable since there are no transaction fees in place. Gomez explained that ADOPEM is about to break even on MÍA but cross-selling brings extra revenue in the bank. She added that ADOPEM has received a grant to kick-start MÍA. The discussion was continued by Penner asking Cisse whether the youth products have changed the organisational culture of partners. Cisse mentioned that there was a lot of awareness raising within partners’ institutions and she emphasized that management buy-in is of crucial importance to incentivise the staff. Penner closed the session by encouraging the audience to review the Youth Action Group’s publication which describes each case study in great detail and offers further lessons learned and recommendations for practitioners.