The Impact of Financial Inclusion on Young Women’s Well-being: A Survey of Evidence and Recommendations for Practitioners

Highlights

• Young women in low-income countries face many barriers as they navigate major life transitions. Their access to financial services diverges markedly from young men’s around the age of majority, and this gender gap persists across age.
• Financial inclusion initiatives can improve young women’s financial skills and savings levels. Combined with other types of interventions, financial inclusion may also improve psychosocial, health, and livelihood outcomes.
• Funders, financial service providers, and policy makers must work together to better support young women at this critical stage of life.

Executive Summary

Of the nearly 600 million young women ages 15-24 in the world today, approximately 520 million live in developing economies. Young women in this age bracket often transition dramatically in a short time span—from legal minor to major, student to worker, single to partnered, child to caregiver. The timing, sequencing, and nature of each transition can have lifelong impacts for these young women and for future generations.

The difficulty of these transitions is compounded by the fact that young women are among the most socially and economically excluded of all demographic segments due to both normative and structural barriers related to their gender and age. Across the world, the proportion of young women not in employment, education, or training is twice that of young men. In Sub-Saharan Africa, young women are eight times more likely to be married before the age of 18. And globally, the prevalence of HIV among young women is double that of their male counterparts.

In developing economies, young women’s levels of financial inclusion reflect this broader exclusion: after rising steeply at fairly equal rates during the late teen years, young women’s and young men’s rates of access to formal financial services diverge markedly around the age of majority, producing a gender gap that persists across age.

Yet almost two decades of research indicate that financial services can help young women develop the financial assets that are a key support in overcoming these conditions. Financial inclusion may also facilitate the development of other assets and capabilities—such as human capital, voice and agency, and bodily integrity—which young women need to become healthy, productive, and empowered adults. However, the weight of this evidence has been difficult to assess. Although there have been several excellent reviews of economic empowerment programming for young women, evidence to date specifically on the impact of financial inclusion interventions has not been synthesized and made easily accessible.

This Working Paper aims to fill that gap. It takes stock of current evidence on the impact of financial inclusion interventions—defined as either formal/informal financial services and/or financial education—on young women’s financial and nonfinancial outcomes (health, education, livelihoods, and psychosocial functioning). Recent, robust evidence was synthesized through a rigorous systematic review, conducted for CGAP by Global Social Development Innovations (GSDI) at the University of North Carolina School of Social Work, which screened for studies published since 2012 that disaggregated results by age and gender. All studies identified through these criteria were of plural programs (those that combine financial inclusion with interventions in other domains), and all were implemented and evaluated as a package—meaning they did not specifically identify the impact of the financial inclusion interventions. This paper therefore also incorporates evidence from select other studies relevant to that question. Hence, characterizations of the research refer to both of these bodies of work combined.

The vast majority of the research for all the studies reviewed was conducted in Sub-Saharan Africa on work with highly marginalized young women: all in high poverty settings, often out of school, and often child brides, young mothers, or orphans/vulnerable children (OVCs). Financial education was the most common financial inclusion intervention, often in combination with some type of formal or informal financial service. The programs also offered a wide variety of interventions in other domains, most frequently related to health, followed by psychosocial functioning and livelihoods, and, less often, education. These interventions sometimes included cash or material transfers. The services were very often delivered through clubs animated by female mentors, commonly known as safe spaces. As such, their main goals were not necessarily to increase financial inclusion; rather, financial outcomes were often instrumental to improving other well-being outcomes.

The plural programs registered results in a variety of domains. Almost all demonstrated some type of improvement in financial knowledge or behaviors, from improved motivation and plans to save to higher financial literacy, better savings habits, increased savings, access to credit for income generation, and greater assets. Although not all programs were successful in improving all targeted financial outcomes, the weight of the evidence indicates that such programs can be impactful for young women if correctly implemented.

Positive impacts from the plural programs were also demonstrated in other domains corresponding to their interventions. Illustrative outcomes included improvements in sexual and reproductive health (SRH), less engagement in risky sexual behaviors, and improved HIV knowledge; increased self-efficacy, aspirations, and gender empowerment measures; higher labor force participation and earnings; and increased ability to meet educational costs, higher enrollment, and better grade attainment.

Plural programs including financial inclusion interventions have therefore proven effective at improving both financial and nonfinancial outcomes. However, available evidence specifically on the impact of the financial inclusion interventions is less conclusive. Several studies have shown that program components such as microcredit, financial education, and savings mechanisms have intensified positive outcomes related to psychosocial functioning, livelihoods, health, and education. On the other hand, randomized controlled trials (RCTs) designed specifically to investigate this question have not demonstrated results in nonfinancial domains.

The entirety of the research reviewed does, however, suggest additional arguments for combining financial inclusion with other interventions. First, financial inclusion components appear to boost program participation—not surprising given the salience of poverty amid the constraints faced by marginalized young women. Second, plural programs may reduce risks for young women by, for example, better enabling them to work part-time while studying without compromising their school engagement. Complementary programming may also equip young women with protective mechanisms against male backlash that can sometimes occur when financial inclusion interventions lead to women’s rapid and visible access to resources. Savings groups, for example, appear particularly effective at allowing for the simultaneous development of financial and social assets.

Considering the insufficiency of evidence to conclusively characterize the contributions of financial inclusion to broader development outcomes for young women, it is tempting to recommend more research to pinpoint whether financial education and/or services are able to not only produce financial outcomes but also changes in other domains. However, the level of study needed to produce definitive programming recommendations across contexts and subsegments of young women may be unrealistic and impractical. Instead, research resources might be more fruitfully directed at determining how to implement plural programs with financial inclusion interventions, rather than whether or why. For example:

• Which is the best tool to help young women accumulate and control financial resources: financial education and/or formal/informal financial services? How do these tools perform in the presence or absence of livelihoods programming, and how do they compare to cash or other transfers?
• How can tradeoffs between the coverage, cost, and complexity of plural programs be minimized? Specifically, can digital channels of the type used to deliver financial services at scale be leveraged without sacrificing impact? What are the potential cost savings from commercial delivery of financial services in such programs?

Answering these questions will require collaboration across not only the researchers, youth-serving organizations (YSOs), and funders that have already produced so much of the rigorous work reviewed, but also private actors such as financial services providers (FSPs) and telecommunications operators. Beyond this, specific stakeholders can also act to promote financial inclusion that improves outcomes for young women:

• FSPs can carefully choose the segments of young women they target, partnering with YSOs and other actors as needed to ensure their products benefit more marginalized young women.
• Funders can support the full cost of successful plural programs while continuing to test if (and how) the private sector can implement interventions such as financial inclusion without sacrificing impact.
• Policy makers can promote young women’s financial inclusion by changing incentives for FSPs, providing paths to scale, and establishing safeguards.