Building the Business Case for Youth Financial Services: Further Insights from the YouthStart Programme

Findings from a multidimensional study on cost/revenue for targeted youth products

This publication outlines the importance of youth financial services (YFS) for sub-Saharan Africa, provides the reader with three case studies tackling the profitability question of youth savings and loans with integrated financial education components, and offers recommendations for future endeavors. 

The decision to serve youth and the necessary time frame to break even on initial investments depend on the market in which the FSP operates, the FSP’s institutional muscle and the segment of youth the FSP targets (rural/urban, age, gender, etc.). An assessment of the different market, institutional and segment-specific levers will help an FSP decide whether or not to start serving youth in a targeted manner. The Frankfurt School made such a qualitative assessment of the different levers following the CGAP business case framework for youth services. To further assess the business case for youth products, a quantitative assessment of the profitability drivers using the Product Costing Tool (PCT) developed by the Frankfurt School was also conducted. This approach formed the basis of a multidimensional study that applied a quantitative cost/revenue analysis for products targeting youth and analyzed the results within market and institutional contexts.

The main findings of the Frankfurt School report were:

  • For there to be a business case for YFS, they must be integrated into the overall approach of the FSP and not be simply stand-alone offerings.
  • Standardization of processes helps an FSP increase efficiencies (lower costs) to deliver services to youth.
  • YFS in tandem with financial education should be viewed as a means to financially educate youth, hence creating financially responsible clients who will increase their savings balance over time and/or utilize other financial products. Initially, however, youth savings accounts can lead to the accumulation of large numbers of dormant accounts with very low balances. In the short term, it is unlikely for a youth savings product to be a profitable business line. FSPs tend to offer youth savings for both social and strategic objectives.

About this Publication

By Kruijff, D. , Perdomo, M.