Highlights:
- There are nearly 600 million women aged 15-24 in the world today, with ninety percent living in low- and middle-income countries (LMICs). These young women represent 8 percent of the global population, and in some countries, they constitute an even larger share of the population.
- This paper highlights customized strategies to expand meaningful access to and use of financial services among young women, to help them negotiate the critical life transitions that mark this age. These young women are diverse, making it important to segment them using a life-stages approach. The application of success principles varies based on whether the target young women fall into the 'Dependent' or 'Independent' segments.
- The paper draws on published literature, practitioner interviews, and peer review to identify five key components of financial inclusion strategies that successfully include young women: product design, product delivery, financial capability building, social intermediation, and commercial viability.
- There is a social and business case for financially including young women, illustrated with real-world examples of how various implementers have applied these success principles. The research includes recommendations for funders, policymakers, and researchers on how to support the growth of financial inclusion for low-income young women.
Executive Summary
Many of the nearly 600 million young women around the world today face formidable obstacles in achieving a successful transition to empowered adulthood. In many regions, norms around both gender and age limit young women’s access to information and opportunities, as well as their ability to exercise their rights. As a result, they may experience early childbearing, lower levels of education, and unpaid labor – challenges that affect their ability to develop human and financial capital across their lives.
In low- and middle-income countries (LMICs), young women’s patterns of financial inclusion reflect these challenges. Yet research shows that financial inclusion can play a key role in efforts to improve young women’s outcomes. Well-implemented financial inclusion interventions that encompass financial services provision and/or financial capability building can not only improve young women's financial outcomes, but, in combination with broader supports, enhance outcomes in other areas. Given both the positive economic and potential noneconomic impacts, financial inclusion can be an important tool to improve young women’s well-being and advance gender equality.
Financially including young women can also make business sense for financial services providers (FSPs) as research shows that young people can be consistent savers, highly entrepreneurial, and early adopters of technology. Young women often demonstrate better savings patterns and repayment rates than young men, although they may take longer to become profitable customers.
This working paper provides readers with a guide to strategies that have worked in financially including young women in low-income countries. All of the strategies included in this paper are drawn from one or, usually, multiple materials cited in the References section and/or Resources Annex or obtained through our interviews.
Young women’s life stages, contexts, and financial characteristics
Lessons learned and collected for this paper were organized by how they apply to a spectrum of segments of young women, with “Dependent” and “Independent” segments falling at either end of the spectrum. Dependent and Independent segments vary along three key life stage dimensions: age, school/work status, and family position. Dependent segments include those under the age of legal majority, and/or in school, and/or in the “child” position within the family. Independent segments include legal adults, workers, and caregivers.
Contextual factors such as social norms, rurality, and socioeconomic status often influence correlations among different points on these life stage dimensions. Together, dimensions and contextual factors determine key financial characteristics: access to and control over resources, access to financial infrastructure, financial dependence/responsibility, and complexity of financial needs. These, in turn, determine the right financial inclusion strategies for a given segment.
Five key components of financial inclusion strategies for young women
The literature we reviewed and the individuals we consulted highlighted five components of financial inclusion strategies that are key when focusing on serving young women: product design, product delivery, financial capability building, social intermediation, and commercial viability.
Product design. Products for young women need not be solely limited to this demographic but must be designed to suit their needs. This can mean that product features are slightly adjusted to fulfill the use cases created by transitions such as leaving school, starting work, getting married, having a child, or migrating. Savings play a foundational role for all segments of young women, although savings solutions for typically younger Dependent segments may include informal savings groups.
Formal accounts, on the other hand, may be more appropriate for young women with access to financial services infrastructure. Meanwhile, Independent segments have both the ability and the potential use cases to take up a full suite of formal products, including payments, insurance, and, importantly, loans. The key to retaining young women as clients entails arranging products in a continuum they can seamlessly transition through as their life stage needs evolve. The shift from legal minor to legal major is a particularly important moment where FSPs must ensure that young women’s accounts do not go dormant.
Product delivery. Social norms that limit young women’s mobility mean it is often critical for financial institutions to meet them where they already congregate, for both outreach and transactions, if possible. Transaction locations must be secure; the closer service points are to where young women normally move around, the better. For Dependent segments, group delivery mechanisms can fulfill some of these requirements and offer the added advantage of simultaneously building social and financial assets. For segments with connectivity, digital methods can also provide conducive delivery channels. However, regardless of segment, young women’s access to or trust in digital delivery is not guaranteed. The human element in sales and service is therefore still important when serving young women, especially since many may be unfamiliar with formal financial services. Investment in staff training and incentives for quality service can be pivotal to developing long-term relationships with young women clients. The business case for serving them rests on those relationships.
Financial capability building. Financial capability can be defined as having both the knowledge and the tools to effectively manage financial affairs in personal life or business. It is associated with greater confidence and trust in the financial system, which many young women lack. Many FSPs consider confidence building to be an important investment in their business, but an investment that is often under pressure. Therefore, many FSPs seek to maximize cost efficiency through two channels: content and delivery. Focusing financial capability content on the “critical minimum” – concepts (including digital financial literacy) that are absolutely essential to safe and effective use of financial services – optimizes investments in time and resources for both providers and participants. Various models can be deployed to optimize delivery, including using FSP staff as trainers, training youth ambassadors to provide financial education, having agents advise clients on financial management issues, and partnering with nongovernmental organizations (NGOs). Whatever the main delivery model, reinforcing content via additional channels and presenting it in short, easily digestible pieces can enhance effectiveness.
Social intermediation. Social intermediation refers to activities that tackle nonfinancial capability or relational gaps that may prevent young women from making effective use of financial services. Activities can include supports related to health, livelihoods, or education, or the creation of social capital. Providing livelihoods support in conjunction with financial services can be especially powerful as one enables the other. Simultaneously building financial and social assets (i.e., strong relationships with peers and caring adults, “soft” skills) can be mutually reinforcing. Engaging gatekeepers who control access (e.g., parents) is another often important aspect of social intermediation, especially for segments whose access to information and institutions is mediated by others. The more severe the economic empowerment constraints for a given segment of young women, the more valuable these types of social intermediation become. Social intermediation may also reduce risks that can accrue when young women begin to visibly access financial resources, especially when this ability to access departs from accepted gender norms.
Commercial viability. Different segments of young women require different lead times before they become profitable FSP customers, with Dependent segments generally requiring more time and Independent segments less. In addition, financial capability building and social intermediation often require very different skill sets than those FSPs normally possess. Therefore, many financial institutions that aim to cultivate young women as long-term clients choose to partner with specialized NGOs with both the competencies and the cost structures to undertake such activities. However, FSPs and NGOs operate with very different mandates and incentive structures – even when they are part of the same organizational family. A partnership’s working modalities must therefore be made explicit, with management on both sides ensuring the agreement is understood and internalized at every level of their organization.
Measuring progress
Different provider types have different goals in financially including young women – some are more social, others more commercial. Measuring progress toward these goals requires different levels and types of data, ranging from outputs to outcomes to impacts. While output indicators and some outcome indicators are commercially valuable and are critical for influencing FSP strategy, commercial FSPs are less likely to invest in long-term impact monitoring. Impact indicators, on the other hand, can be particularly valuable for influencing policy and funding. For providers, regular tracking helps identify patterns in account usage that may point out client segments in need of additional follow-up or those ready to transition to other products. Tracking can also alert implementers to unintended consequences. Complementing quantitative with qualitative data collection can provide both the rigor needed for evidence building and the richness necessary to understand how and why interventions impact young women's lives.
Box 1. Key takeaways: Financially Including Dependent Segments of Young Women
- Lead with savings services. Asset accumulation is a foundational financial need. For younger Dependent segments, developing a savings habit and record can also prepare these clients ] to take credit, which may be appropriate for some Dependent segments over time, depending on age and livelihood activities.
- Groups can be an ideal delivery mechanism in cases where formal financial services infrastructure is not accessible – as for many rural or younger segments – or for delivering complementary services. High-quality facilitators are key to success.
- Formal deposit accounts may be appropriate for some Dependent segments but should be designed to ensure accessibility to and protection of clients’ funds. Certain types of social intermediation may also be required to ensure access for particularly vulnerable Dependent segments.
- Gatekeepers play an important role in the lives of many young women in Dependent segments. Gatekeepers may include parents, educators, community leaders, husbands, and in-laws. It is critical to engage with them at the start of any young women’s financial inclusion initiative.
- Complementary services that build client capacities and reduce risk can maximize the chances that young women make effective and meaningful use of financial services, which benefits both the young women and FSPs. Complementary services include not only financial capability building but potentially also empowerment, sexual and reproductive health (SRH), and livelihoods trainings or services. Several curricula already exist that interweave several of these topics, which can be mutually reinforcing.
- FSPs often cannot be sole providers of the optimal mix of services. If properly structured and implemented, partnerships with youth-serving organizations/civil society organizations (YSOs/CSOs) to deliver complementary services outside an FSP’s remit bring benefits to both parties and to the young women they serve.
Box 2. Key takeaways: Financially Including Independent Segments of Young Women
- Independent segments need a full range of financial products in addition to savings – especially credit. While young women’s access to credit is traditionally impeded by lack of collateral and financial history, several FSPs have developed innovative ways to work around these obstacles. Savings, credit, and other products need not be created exclusively for young women but must be tailored to their needs and marketed to resonate with Independent segments as they transition through different life stages.
- To retain young women as they age, products should be designed to seamlessly transition from one stage-appropriate service to the next. It is particularly key to create ways to transition legal minors from trust or custodial accounts to accounts of their own.
- Digital delivery channels may be especially promising for Independent segments given the generally higher levels of digital savvy exhibited by younger vs. older women and the lower barriers to opening mobile accounts. However, both digital access and digital financial literacy (DFL) levels of different Independent segments of young women vary, and specifics are pivotal when formulating a digital delivery strategy. Digital does not completely eliminate the need for a human element in marketing and delivery or for safe and convenient physical transaction points.
- Financial capability building remains important for many Independent segments, especially first-time financial services users. Financial capability content for these segments must be efficient, relevant, and up-to-date, and incorporate DFL as needed. Avoiding over indebtedness is of particular concern, given the specific risks young women may face due to overly large loans (with implications for both product design and financial capability building). Many FSPs, therefore, consider financial education an important investment when serving these segments, and may provide it in-house or through partnerships with specialist organizations.
- Independent segments of young women can be financially viable FSP clients, assuming a long-term approach that focuses on the elements above, including retention over time and investment in product design, marketing, and financial capability building. This mixes the indicators and the obstacles.