SPECIAL REPORT: Serving Youth: Back-to-School Savings Promotions, Lower Loan Portfolio-at-Risk (PAR) Ratios

European Microfinance WeekOn Friday, during the final day of European Microfinance Week, Ata Cisse of the UN Capital Development Fund (UNCDF) explained how that organization’s YouthStart program, which was launched in 2010 in partnership with The MasterCard Foundation of Canada, facilitated microfinance institutions (MFIs) in Africa collecting deposits equivalent to USD 16 million through 2014 from 600,000 youth, roughly evenly divided between young men and women. Ms Cisse described that MFIs were motivated less by the tiny per-person balances collected, but more by the prospect of developing the skills and appetites of customers who would use more profitable products in the future. After receiving financial education, 85,000 youth borrowed USD 11 million from the MFIs. The portfolio-at-risk within these loan pools was up to 3 percent, compared with 5 percent to 10 percent for loans to adults.

Some of the MFIs has success recruiting and educating young clients via peer “youth officers.” The MFIs also often partnered with external youth-serving NGOs to provide training, although this sometimes went sour when the expectations of the organizations were poorly communicated to each other. Additional ideas discussed in the session included cross-selling to other family members, as well as profiting from the larger savings accounts of more affluent youth to subsidize the cost of accounts with smaller balances.

Katia Gomez of Asociación Dominicana para el Desarrollo de la Mujer (ADOPEM), a regulated bank focused on the provision of microfinance in the Dominican Republic, described her institution’s Mia account, which offers youth savings accounts with balances that can run as low as USD 0.64, annual interest of 2.5 percent and no fees if used at least every six months. The bank holds 30,000 such accounts, totaling 7 percent of the bank’s total deposits.

Ms Gomez stated that “we are a child friendly financial institution” and described special benches that allow kids to see staff over the counter. “We don’t ask kids to settle down if they run through the bank…. We approach the kid and talk to the kid…. Do you want to save? Do you know what an account is? Do you have a piggy bank?”

Jared Penner of Child and Youth Finance International, who was moderating the session, stated that ADOPEM had to make tough decisions after initial grant funding was expended to launch Mia. Regarding account dormancy, he asked, “How have you…kept the excitement about the account, building that savings practice?”

Ms Gomez replied that, “We have seasonal marketing. We have back-to-school campaigns. If you deposit DOP 100 (USD 2.20), we give you a backpack…. Other approaches are less expensive; we make phone calls at the start of each month [to clients whose balance] has gone down. Mia has two characters – one for boys and one for girls.” Staff calls [clients] acting as these characters: “‘This is your Mia friend! Do you remember that savings is important?’ It has really worked well. Every month we have a Mia day at each branch where we decorate for the kids. We call them and encourage them to come by and make a deposit and get a lollipop.”

This story is part of a sponsored series on European Microfinance Week, which is held each November by the European Microfinance Platform (e-MFP), a 125-member network located in Luxembourg. MicroCapital reported live throughout the event.

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