Financial literacy and enterprise training
Young people are the key to unlocking economic growth in many developing markets, however they often lack the necessary access to the financial services needed to realise this potential. This is often due to the misconception that young people lack the ability or interest to save or borrow responsibly - but we know different.
The recent Findex report highlights the scale of the issue. The good news story shows that there has been a drop from 2.5 billion to 2 billion people with no access to formal financial services globally, but if you look more closely at the figures only 33 per cent of adults and 20 per cent of youth in Sub-Saharan Africa have a bank account.
Further, the figures also show that from 2011 to 2014, an extra 5.7 per cent of adults have gained access to formal financial services, compared to an increase of 3.5 per cent for youth over the same period; so not only are young people more financially excluded than adults, they are being included more slowly.
The younger generation are in an increasingly competitive job market, with soaring youth unemployment at 75millon worldwide. Coupled with limited access to formal savings and credit, their opportunities are severely limited. That is why Banking on Change is prioritising access to financial services for young people, initially through Youth Savings Groups (YSG), but with scope for YSGs and individual young people to link to bank accounts when they are ready to do so.
But, having access to a bank account is only part of the story for young people. Often we focus on what makes young people different to adults when it comes to savings but we need to change our mind set to not what differentiates them, but how we can ensure a proactive, informed saver for now and the future.
Working with 236,000 members across more than 11,000 YSGs we are working to create economic opportunities for young people through the Banking on Change programme. Established in 2009, it is a partnership between Barclays, CARE International and Plan UK. It aims to break the barriers to financial inclusion and improve quality of life in some of the world’s poorest communities by giving young people the skills to save and manage their money effectively.
We’ve learnt that using savings groups as a platform for delivering interactive training is an effective way of equipping young people with important skills in financial management. So the groups are not only a place where young people can save and take loans, but also where they learn the crucial financial literacy, business skills, employability and bank literacy knowledge that will help them to save, and better understand how to maximise and create their own opportunities.
Early results from our monitoring indicate young people’s financial literacy improves after training, but the most marked improvement in knowledge is seen after the enterprise training.
Financial literacy training (covering how and why to save, managing your money, savings goals, keeping savings safe, exploring borrowing options, borrowing wisely, negotiating and reaching your goals) showed an uplift of between 9-15 per cent in the young people’s knowledge. Enterprise training (covering decision-making, market research, business planning and budgeting, investing wisely and ‘soft skills’ including self-perception, negotiating, confidence and partnerships, all with coaching and mentoring throughout) showed an uplift around 20 per cent and up to 80 per cent.
Uplift in knowledge is not the same for everyone, but many of the young people we work with attribute certain aspects of the training as being the most valuable skill gained from being part of the group that they have applied to their business. For example they are now able to budget, calculate profit and loss, and plan for how they will use and repay the loan they have taken. These are all skills that are vital to success in managing small enterprises.
The importance of financial education is part of the set of principles in the Linking for Change Savings Charter. Greater investment must be made in expanding access to bank and financial literacy education, particularly for young people. Practical involvement in financial activities facilitates economic growth and supports sustainable small enterprise development, which will be essential as we seek to tackle youth employability and financial inclusion challenges. Banking on Change has shown that as young people begin to save more in their YSGs, as their financial and business skills grow, there is increasing demand for linkage to formal financial services.