Maria PERDOMO opened this session by welcoming and thanking the audience for their interest. She distributed voting devices to the audience that were used for counting votes on various polls throughout the session. She then gave the floor to the panellists who started by introducing themselves.
Perdomo presented the first topic of the session: ID requirements and age restrictions, explaining how they can be barriers or enable youth access to finance. She asked NDAHAYO how the regulatory framework in Rwanda enabled Umutanguha to reach the high uptake of youth. Ndahayo explained the favourable regulatory framework regarding youth age requirements in Rwanda. Youth have an ID and can open a bank account as soon as they turn 16. He added that youth under the age of 16 can open an account, but only with a guardian. In order to mobilize savings, youth under the age of 16 can deposit on their own, but they can withdraw only with a guardian.
Perdomo mentioned that most countries allow youth to open an account once they are 18 years old. She asked GINCHERMAN what the legal age restriction are in countries where WWB works. Gincherman gave the example of XacBank in Mongolia. Youth are allowed to open a bank account once they are 16 years old. However, after WWB studied the civil code, they found that youth can open and transact a bank account from the age of 14. This gave XacBank a comparative advantage as youth as young as 14 can open accounts with the bank, and so XacBank has the youngest clientele in Mongolia. However, Gincherman explained that regulations are not always that favourable. In the Dominican Republic, youth have ID and can open and transact a bank account from the age of 16. However, at the age of 18, they receive a different ID card allowing them to vote. This hindered the uptake of youth under 18 as youth commonly wait until they can have the second ID card.
According to the Ethiopian law, youth can only open a bank account without a guardian after the age of 18. However, WWB noticed that, according to Ethiopian labour law, anyone with a job contract can open a savings account. WWB took advantage of that loophole in the legislation, to allow youth as young as 14 years of age to open a bank account with PEACE, a UNCDF-YouthStart partner. Gincherman warned that the norms in a society are also crucial on the uptake of youth. She gave the example of India where youth are allowed to open and transact a bank account at the age of 10. However, minors do not have accounts before the age of 18, as according to cultural norms, this would make parents feel uncomfortable.
Perdomo started the first poll of the session: "Any youth (15 to 24 years old) should be able to open and independently manage a savings account." 71% of the audience agreed, 24% disagreed and 6% were unsure. One person in the audience disagreed with the statements arguing the need for financial literacy and education provision before opening a bank account. Gincherman argued that financial education without the financial product does not work. Financial education and financial products have to be provided to youth simultaneously so that youth become financially capable.
The next topic revolved around technology and its impact on the use of financial services by youth. Gincherman explained that a good youth product should be relevant, connected to a savings goal, accessible in term of geographical and emotional distance, and affordable. She mentioned that technology plays an important role in making products more accessible and possibly more affordable for youth. If you wish to scale up, technology is the way forward. Ndahayo stated that Umutanguha Finance has experienced challenges to make sure youth can easily use the savings accounts they have opened. This is because they work mostly in remote rural areas, making it difficult for youth to frequently visit Umutanguha's branches. As a result, the FSP is testing POS agents to bring their services closer to youth living in rural areas. Perdomo continued with the second poll of the session: "Some people argue that the more we invest in technology, the more youth we are going to reach, so there is no need to develop youth-centric products as long as we are using technology." 33% of the audience agreed while 67% disagreed. Gincherman discussed that technology makes a financial product more accessible for youth but not necessarily more relevant. Perdomo showed a slide that shows how FSPs in Rwanda are using technology but are not necessarily attracting more youth than Umutanguha has in the past 2 years.
The topic of the session then shifted to risk mitigation youth lending practices. Perdomo asked Ndahayo how Umutanguha achieves that. Ndahayo commented that Umutanguha prepares youth to access a loan in the future by asking them to save regularly. This way they can assess the commitment of young clients and predict their repayment profile. He emphasized the importance of doing market research before launching new lending products. Many young people have no capital to start up their own business and no collateral to take a loan. Umutanguha developed a microleasing product through which young professionals can lease the equipment they need. The equipment is used as collateral and youth takes possession only after they pay all instalments. To develop this financial product, Umutanguha had to persuade the Rwandan government to change the microleasing law, as leasing was charged with VAT, putting extra barriers to low income earners.
Perdomo continued with the third poll: "Lending money to young adults is much riskier than lending money to more mature adults." 47% agreed and 41% disagreed. She provided some data from UNCDF-YouthStart partners who provide loans to youth showing that their youth portfolio quality mirrors the quality of the institution's overall loan portfolio. These data suggest that is youth is not necessarily riskier if the monitoring and risk management tools of the FSPs are already strong. Gincherman added that young clients, aged 18 - 24 years old have a higher repayment rate than older clients. However, more data is needed if we wish to gain further insights.
The last topic of the session was about client protection and financial education. Gincherman explained that practical financial education should be provided to all clients. Ndahayo added that peer-to-peer education has been successfully used by Umutanguha as a delivery channel of financial education. This delivery channel has been quoted as a good practice in the recently launched National Financial Literacy Strategy of Rwanda. Perdomo started the fourth poll of the session: "Some people argue that FSPs should not be delivering financial literacy to their clients as it risks becoming an opportunity to just promote their products. Hence, government or YSOs are the only ones that should be delivering financial literacy through schools." 14% agreed and 73% disagreed. A comment from the audience stated that financial education by governments and FSPs should be complementary and not exclude each other. Governments can provide financial education through schools while FSPs may be better placed to reach out-of school youth.
Fantastic programme mixing the theoretical and the practical