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Alternative Pathways for Young Women’s Dreams: How FI Policy Can Help

A recent report by the Center for Global Development, the Population Council, and the World Bank, Pathways to Prosperity for Adolescent Girls in Africa shows that over 50% of African girls aged 15 to 19 are out of school, married, or have a child. Yet, most policymaking around adolescent girls ignores this reality and continues to be primarily focused on keeping girls in school or preventing early pregnancy and child marriage.  Since many of these young women have already been thrust into the workforce, it’s time to consider how policymakers can support alternative pathways to young women’s well-being, including helping them make the most of their economic activity. For this to happen, policymakers must better understand the differences among young women and the trajectory of rapid change they go through between the years of 15 and 24, and design policies accordingly. 

Some governments have started to do so. For example, Mexico reduced the legal age to independently open basic bank accounts from 18 to 15 in 2020. In addition, 16-year-olds can open basic payroll accounts, which aligns with the minimum full-time working age without authorization from a parent or guardian. Such accounts are legally required to be free of fees or minimum balance requirements and to be accessible through digital channels. The Mexican government provides a positive incentive for compliance to banks by channeling scholarships for over 2 million students through these accounts, which reach about a third of Mexico’s youth aged 15-17. 

It’s time to consider how policymakers can support alternative pathways to young women’s well-being, including helping them make the most of their economic activity

These kinds of policy measures can correct market failures that cause the exclusion of young people from the formal financial system. Previous CGAP analysis shows that while young men and women in their teens face equal levels of financial inclusion, around the age of adulthood, young women start to be more excluded than young men and a gender gap emerges. This is concerning because there is clear evidence that financial inclusion of young women can have positive outcomes not only for the women themselves but also for their communities and generations to follow. Contrary to perception, most studies on financial inclusion interventions show they do not cause school dropout. In fact, in combination with other development supports, they can reduce risks for young women and better enable them to work part-time while studying without compromising their school engagement. 

What can policymakers do to pursue this goal?

The public sector has a key role to play in supporting the equal financial inclusion of young women by taking into account the realities of diverse segments of this population. CGAP’s review of what works based on two decades of industry experience in financially including young women revealed the following insights on what policymakers can do to support this goal. A few key actions include sector-wide efforts, incentivizing financial service providers (FSPs), adjusting policy frameworks, and establishing safeguards.

Collect age- and gender-disaggregated data to identify underserved segments and incentivize FSPs to use it

The Central Bank of Egypt (CBE) has been a leader on this front, establishing its DataHub in 2018. This supply-side data informs capacity-building efforts with FSPs, which have been coupled with directives for banks to create appropriate products for youth. In combination with demand-side data also collected by the CBE, it has also informed the country’s National Financial Inclusion Strategy (NFIS), which spotlights youth as a priority sector.

Make youth and gender a focus of an NFIS or National Financial Education Strategy (NFES)

NFIS and NFES can help focus ecosystem-wide efforts on closing financial inclusion gaps. With the backing of their NFIS, the Central Bank of Egypt has driven a range of demand-side initiatives such as:

  • In-the-field account activations 
  • An annual financial inclusion event specifically for youth 
  • A school-based financial education strategy 
  • Targeted social media outreach
  • Demand-side data collection 

As a result of these efforts, the young women’s financial inclusion rate in Egypt grew by nearly a third, from 31% to 39% between 2020-22. In addition, 34 of 36 banks in Egypt now recognize youth as a priority segment. Consultation processes around NFIS/NFES can also bring together the stakeholders to discuss issues such as the minimum age of account ownership and other regulations, building productive institutional relationships.

Encourage FSPs to develop products and services that support young women through key transitions

These transitions could include leaving school, starting careers, marriage, or childbirth. In Mongolia, the government redistributes mineral revenues to every Mongolian child through bank accounts, resulting in nearly 100% financial inclusion and impressive account usage even among young adults, who usually have lower access and usage than older adults. Similar schemes where the mother is the automatic trustee for child benefits could boost financial inclusion among mothers as well.

Reduce regulatory costs and other obstacles to serving young people while preserving safety for the individual and the financial system

Some regulatory costs stem from know-your-customer (KYC) requirements that ask for identification that few young people (especially young women) have – an often unnecessary burden given the typically small balances and transactions associated with youth accounts. This obstacle can also be tackled through the extension of universal IDs, ensuring that marginalized young women also receive them, or by establishing alternative forms of identification for low- and electronic KYC account categories. Digital infrastructure can be a game changer for universal identification systems and reduce the cost of account opening significantly. Clarifying and providing more leeway on co-signatories of youth accounts can also simplify account-opening processes for young women. Clarifying relevant laws so FSPs understand what is permitted would reduce their hesitancy to accept non-traditional co-signatories and alleviate the cost of clarifying it themselves.

Establish measures to limit risks from new digital financial services (DFS)

Multiple studies have found that women are more vulnerable than men to risks such as fraud, misconduct, identity theft, and online harassment. This vulnerability is in turn driven by lower levels of financial and digital literacy, sometimes compounded by poor communication from governments and DFS providers. Policymakers can mitigate these risks and their drivers by collecting gender- and age-disaggregated data on consumer risk and promoting programs to increase young women’s financial and digital literacy. The latter, however, is not a substitute for the core regulatory and supervisory building blocks of a responsible digital financial ecosystem.

It is imperative to move away from solely a protection-oriented approach of keeping them in school and consider other ways of supporting them to have the power to act in their own interest and generate an income.

For policymakers prioritizing gender equality and young women’s empowerment, it is imperative to move away from solely a protection-oriented approach of keeping them in school and consider other ways of supporting them to have the power to act in their own interest and generate an income. By sensibly lowering the minimum age to independently open a bank account, policymakers can help build an effective plan B for those adolescent girls and young women who’ve had their dreams of education deferred.  


Join CGAP on December 4 to learn more about how to offer customized financial inclusion strategies for different segments of young women – and hear firsthand practitioner perspectives on applying these strategies to reach young women at different stages of financial independence. Together, we will discuss how we can help more young women rise up the financial inclusion ladder. 

Resources

Publication

This paper summarizes nearly two decades of learning to help practitioners realize the social and business case for financially including young women. It presents customized strategies covering product design, delivery, financial capability building, and social intermediation to address the needs of different segments in this diverse and critical client group.

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