When Women’s World Banking (WWB) started our savings and financial education program for girls in 2008, we were excited about the potential to provide a sustainable, scalable way to encourage girls to build assets and become better money managers. However, in our research on how to encourage youth to save we have come across findings and theories that suggest the potential impact of these programs could be much, much greater. Research examining psychological mechanisms that enable kids to exercise willpower by delaying gratification is especially encouraging in thinking about the potential long term impacts of programs that encourage savings as well as strategies to achieve them.
WWB is currently supporting two deposit-taking microfinance institutions, XacBank in Mongolia and Banco ADOPEM in the Dominican Republic, to design and introduce savings products and financial education programs for low-income girls and young women. Most of our work has focused on designing and rolling out products that are both popular with the target markets and make business sense for the banks to offer. While getting the operational part right is essential, WWB is ultimately interested in the greater impact these products could have on girls and young women.
WWB’s organizational focus leads us to broadly divide this impact into two categories: impact on all youth, and impact specifically important for female youth. Much of the impact theory for the latter has been collected and synthesized around the concept of the “Girl Effect.” Indeed it was this concept, so persuasively communicated by the Nike Foundation, that drove WWB’s interest in launching this program in the first place, one of the first in the world to focus on girls and to closely integrate financial education with formal savings accounts.
In terms of all youth, recent program evaluations, especially those associated with the US-based SEED program, suggest that increased savings is associated with a number of positive outcomes including higher educational aspirations and attainment at both the secondary and tertiary levels. In fact theory around asset-building posits that the very acts of building and maintaining assets lead to improved outlooks on life, longer time horizons for planning and better planning skills. However, the chain of impact that connects having more assets to outcomes like better planning skills and broad, positive impacts is still unclear. Discovering these pathways seems particularly important because it could inform the design of programs encouraging asset building.
Research and theory around willpower, self-regulation and delayed gratification may shed new light. Longitudinal studies spanning decades suggests that children who are able to delay gratification from an early age enjoy very similar advantages to those who build and maintain assets: higher educational attainment, higher sense of self-worth, less drug use and better physical health. In fact, the ability to delay gratification makes perfect sense as an important driver of asset building behavior, especially saving, as well as those later life impacts previously mentioned.
Researchers are now looking into how this works in the brain and how these skills can be most effectively taught. So far this work has focused on very young children aged 3-5, but we think there is potential for older youth to learn these skills too. Once youth have done so, marketing and financial education efforts could be much more effective in increasing youth savings.
WWB has already begun to apply this insight about the significance of willpower into our youth savings program with current and future partners. As more results come in from research projects currently under way we look forward to translating them into effective strategies for teaching delayed gratification. Not only can financial institutions see immediate results in terms of more deposits and closer relationships with youth customers and their families, but we can contribute significantly to the health, education self-confidence and potential of these young women and men.
It is extraordinarily important for organizations to focus on women. From my work with Opportunity International (opportunity.org, I have learned that women tend to spend most of their profits on their family and community. This is not to say that all men are irresponsible, but women tend to be more family oriented. Therefore, in the microfiance industry, this can serve as an invaluable tool to build communities at a whole.
Nice piece. I work with Five Talents International, and one of our branch offices recently sent us a story about the daughters of one of our women microfinance clients in Bolivia. The two girls have been helping their mom with her vegetable business, and one has now even joined a savings and loan group to prepare for a launch of her own business. It’s so exciting to see the impact that can come when working with women.