Financial inclusion: Challenges of reaching the young, children

By Newsday | Jun. 24, 2014

MUCH work is being done in the area of broadening access to financial services by the general populace in the country.

Various government arms under the Finance ministry from the supply side and the Small and Medium Enterprises, Women’s Affairs, Gender and Community Development ministries, and the Youth, Indigenisation and Economic Empowerment ministry just to mention a few, are seized with initiatives aimed at broadening and deepening access to finance and financial services by various constituencies that they represent.

The banks on their own are setting out a national financial inclusion strategy of their own, highlighting the importance of driving financial inclusion as both a business imperative and social responsibility.

A crucial stakeholder that should not be overlooked are the youth and children. In our earlier articles on: Teaching children to save and Money values every child must have, we discussed various aspects of how parents could encourage their children to become responsible with money.

We have discussed various issues pertaining to the development of a national savings culture and deepening financial inclusion in the economy.

However, these discussions will ring hollow if this constituency is not properly considered. Across the world, national strategies are being crafted, banks are developing financial products and education programmes are being developed to target the youth and to equip them with skills necessary to interact with the financial system and to give them the opportunity to build a sustainable livelihood.

However, the true impact so far has been modest. One of the reasons all these efforts sometimes fail to deliver an optimal result is the fact that various players and stakeholders are not seamlessly integrated in delivering financial inclusiveness for the youth sector.

Moving our youth towards full economic citizenship

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A national financial education programme aimed at young people aged eight to 24 years is effective if it:

Improves life skills,
Improves livelihood skills,
Increases the ability and capability of young people to save money.

These three components have been identified as key in any financial literacy programme for youth and children in giving them an opportunity to live socially responsible and productive lives, an ability to find the right jobs suited to their skills sets and interests and the ability to accumulate personal asset base that sets them up for a decent life in adulthood.

However, current research is revealing that the saving component of financial literacy is often given less prominence and emphasis in financial literacy and education programmes. This is a major drawback and an opportunity for banks and other financial institutions in Zimbabwe who are nursing nascent financial inclusion programmes at various stages of implementation.

Another identified weakness of financial literacy programmes is that they usually focus on basic numeracy and building understanding of financial products and services, but place less emphasis on behavioural change.

Therefore a strong practical savings component in a financial literacy programme for young people is imperative. Furthermore, research reveals that such behavioural change is only achievable if the literacy programme links children and youth to a real formal bank account.

In Zimbabwe banks are making the effort to make this practical connection a reality, despite the numerous legal and other hurdles that are making it a challenge to make access to financial services possible for our young people.

Banks have also realised that knowledge of financial matters alone is not sufficient for the creation of a sustainable future, but it has to be supported by appropriate savings behaviours, appropriate credit behaviours and the right temperament in handling financial affairs. These aspects are best taught at a young age rather than later when a person has already developed bad habits.

Our children must be schooled in the value of money as an economic resource.

We must encourage them to learn the habits of first earning a living from productive endeavour and intellectual acumen, then saving money and delaying consumption, living within their means and respecting and repaying debts and generally observing financial contracts.

These behavioural aspects are key and in fact, more important than giving our children a deep understanding of derivatives and other fancy forms financial mathematics.

The opportunities ahead; tackling challenges The three components alluded above of financial numeracy as a life skill, livelihood skills and behavioural change all make up the economic citizenship of an individual. For the efforts being made by stakeholders to create complete economic citizens out of our youth of today, we must do several things together.

First there currently exists a disconnect between financial education in finance and the practical side which must be closed. We must actively and deliberately link the knowledge and the real experience.

Fortunately the banking sector having embraced this principle, already has member banks offering products and services aimed at the youth and children.

The effort must be increased and enhanced. Children and young people must touch and feel the financial services for them to appreciate them better in adulthood.

Secondly , stakeholders that are involved in financial capability initiatives must all align and identify with the common theme.

There must be a common pool of research and a national body of knowledge that must shape the financial inclusion agenda.

We discuss some of these issues in some previous articles, Meeting the financial exclusion challenge; Banks must take the lead in driving financial inclusion.

The need for co-ordination and collaboration by stakeholders To meet this challenge there is need for all stakeholders to put up resources required for this important initiative.

Banks are doing so within their means, but promoting this form of economic citizenship requires an efficient integrated approach that involves the public sector, the private sector, led by the banking industry, and the non-governmental organisation (NGO) sector.

An inter-sectoral awareness initiative anchored on a multi-sectoral collaborative effort the feeds into sectoral and national plans and engages both local communities and the youth stakeholders themselves is the only way forward.

The role of regulatory reforms The good news is that the existing efforts by banks are only a first step in creating national strategies and regional strategies that will reshape the financial landscape.

It now generally accepted the government has a big role to play in facilitating the right legislative environment that not only safeguards the interests and rights of children in their financial matters, but ensures that as children’s efforts to save are encouraged, their saving activity is not constrained by laws that end up pushing them to the informal savings markets.

By leading collaboration between the private, public and NGO sector infrastructure could be developed to address the lack of infrastructure which hiders the development and provision of financial products and services to children, particularly those in rural areas.

Putting up such an infrastructure is costly and financial institutions cannot do it alone, but would require appropriate policy interventions.  Clive Mphambela is a banker. He writes in his capacity as advocacy officer for the Bankers’ Association of Zimbabwe (BAZ). BAZ expressly invites other stakeholders to give their valuable comments and feedback related to this article to him on [email protected] or on numbers 04-744686, 0772 206 913