AIM Youth
Advancing Integrated Microfinance for Youth
Saving Together: Group-Based
Approaches to Promote Youth Savings
By Rossana M. Ramírez and Laura Fleischer-Proaño
DECEMBER 2013
“I like being able to save money and come
together in a group every week.”
This is what Nianama Traore, age 17, says when asked about her
experience with a group-based savings project. Nianama lives in a
poor rural village in southwest Mali, and is engaged to be married.
Unable to save money before joining a youth savings group,
Nianama now reports being able to buy shoes and thinks about
having her own business in the future.
Introduction
This paper examines the potential of poor youth to harness the power
of groups to develop positive savings behaviors and long-term savings
habits. Because youth are at a stage in their lives when they are particularly
susceptible to peer influence, groups can positively impact their financial
behaviors through a group structure, integrated financial education and the
dynamics of social pressure and social capital. When young people start
saving early, they increase their potential to develop a savings habit that can
carry into their adult lives, strengthening their financial capabilities as they
begin to face increased financial and social responsibilities.
Saving Together: Group-Based Approaches to Promote Youth Savings
The significance of this approach became evident as Freedom
from Hunger set out to test and learn from three different group
models of financial services integrated with financial education
as part of its Advancing Integrated Microfinance for Youth (AIM
Youth) initiative developed in partnership with The MasterCard
Foundation. We explored the promise of groups as a platform
to cultivate a habit of savings among young people by providing
a mechanism to save regularly and to promote good money
management skills through financial education. In the course of
three years of implementation, monitoring and evaluation, we are
finding stronger results in promoting savings behaviors among
a greater number of young people, when they are able to save
in a group and receive financial education than when they save
individually. A review of similar group models by a variety of
organizations around the world provides additional supporting
evidence about the strength of groups, especially for young people.
A group-based savings approach is defined as one in which youth
come together and agree to save regularly on a voluntary basis
while following a set of group-defined norms. The focus is on
groups of young people because they are often at a point in their
lives when they may already meet in groups regularly (for example,
in villages or in school) and may not face the time constraints and
responsibilities that many adults face. A group might be formed
through a community-based organization following a savings
group or village savings and loan association model, or it might be
formed by a formal financial institution that links youth to a savings
account. For young people living in remote, rural areas, a savings
group approach might be the only savings mechanism readily
available.
After providing a brief background on youth and savings, this paper
examines the barriers to saving that poor youth face. An in-depth
analysis of how a group-based savings approach can address those
obstacles follows. We conclude by exploring the limitations and
opportunities that should be considered when engaging in groupbased savings for youth.
2
Youth Savings Groups:
A Classic Example of a
Group-based Savings Approach
Youth Savings Groups are being
implemented in multiple countries in
Africa, led by international development
organizations including Freedom from
Hunger, Plan International, CARE and
Catholic Relief Services. In Mali, Freedom
from Hunger and its implementing
partners—CAEB ( Conseils et Appui
pour l’Éducation à la Base) and Le
Tonus—have implemented youth Savings
Groups following the Saving for Change
methodology. With this approach, a group
of about 10–15 young people—girls and/
or boys—meet on a weekly basis to save
and lend money to each other. With initial
support from a trained facilitator, an
elected Management Committee facilitates
group meetings and helps enforce group
rules. The group jointly decides on the
amount that every member will save at
each meeting, which is stored in a cashbox.
As money accumulates, members agree
to make the group fund available for loans
to group members. Members also agree
to a social goal that they will collectively
work towards, such as a village sanitation
project or promoting malaria-prevention
strategies. Members continue to meet on
a regular basis over approximately one
year, when the group fund is distributed.
This approach works especially well in the
rural areas of Mali, which have not been
traditionally reached by formal financial
service providers and, as a result, have no
other reliable options for saving.
3
Saving Together: Group-Based Approaches to Promote Youth Savings
A Focus on Youth and Savings
The United Nations defines young people as those
between the ages of 15 and 24 years old. 1 For the
purposes of this paper, the definition has been extended
to cover primarily young people between the ages of
13 and 24 years.
The focus on youth in the development field can be
explained by the convergence of the “youth bulge”—a
demographic condition at which the proportion of
youth in the population reaches a peak—and high
levels of youth unemployment, which exacerbates
levels of poverty.2 This is especially a concern in
many less developed countries that have a greater
proportion of youth and greater levels of poverty,
and where poverty can be more easily passed from
generation to generation. For example, in sub-Saharan
Africa young people comprise the greatest portion
of the population.3 This is the only region globally
that will continue with a substantial growth in its
young population. But this growing youth population
is faced with limited economic opportunities—with
unemployment rates for young people in sub-Saharan
Africa at 11.6 percent , young people are twice as likely
to be unemployed as adults.4
While increasing economic opportunities and
transitioning out of chronic poverty require a
multi-dimensional and cross-sectoral strategy, the
accumulation of savings and assets over time is one
approach that is gaining attention for its potential to
improve the economic wellbeing of people living in
poverty.5 Savings are also critical for young people
who start their own enterprise and need to invest in
material and/or equipment. While savings alone will not
lift young people out of poverty, they can strengthen
their resilience to face financial shocks by helping to
build assets—even in the form of small savings—early
in their lives before they face greater financial and social
responsibilities in adulthood.
Young people can save
However, a question often raised is whether young
people can accumulate savings if they are living in
poverty, are unemployed and have no sources of
income, or whether promoting savings can lead to
young people dropping out of school to engage in
income-generating activities. We know from a variety
of studies conducted around the world that poor
youth do have access to money—albeit in very small
amounts—and engage in various forms of short-term
and non-formal savings.6
Young people, especially adolescents, have access to
money from their parents, who give them money
for their schooling, transportation and meals.7 More
importantly, the reality is that many poor youth are
already engaged in some form of income-generating
activity, though often on a small-scale, such as
agricultural work and selling fruits and vegetables at
the market for youth living in rural areas, and cooking,
doing construction work or housekeeping for youth in
urban settings. Youth report engaging in these activities
precisely to ensure they have money for their own
expenses and to help meet household needs. These
studies also show that youth save in informal ways—
hiding the money in a box or a hole in the ground—or
sometimes by giving it to their parents, though they
report that none of these methods are safe.8 These
findings and many youth savings programs around the
world have debunked the myth that poor youth cannot
save, a finding that is consistent with the evidence on
poor adults’ ability to save.9
Young people who save now will save later
While research is limited and primarily focused in
developed countries, there are a few studies that point
to the potential for savings in childhood leading to
continued savings later in life and improved financial
Saving Together: Group-Based Approaches to Promote Youth Savings
well-being in adulthood. According to a longitudinal research study
conducted in the United States by Friedline, “children are likely to
continue saving later in life—over and above their parents’ financial
resources—if given savings accounts when they are young. That is,
when children have savings accounts early in life, they continue to
have savings accounts later in life, perhaps developing relationships
with mainstream financial institutions and continuing to access
basic financial services.10” Moreover, an 18-year longitudinal British
study also finds that saving during adolescence is linked to saving
in adulthood.11 The authors of this study note that the findings
are important for policymakers, educators and parents since they
“imply that encouraging adolescents to save could go some way to
shaping their behaviour in later life.”
Although these studies focus on adolescents living in wealthy
countries with higher standards of living and access to formal
financial institutions, both draw from nationally representative
longitudinal survey data, implying that the participants come from
a variety of socioeconomic backgrounds. Moreover, while the
authors of the British study note that youth “whose parents have
savings on their behalf and have higher net worth are more likely
to have higher amounts of savings as young adults,” they also find
that individual psychological factors—such as attitudes about
managing money—are critical in this equation.12 These studies
suggest that saving at a young age could help develop a savings
habit that continues into adulthood. The importance of instilling
this habit in young people, especially adolescents living in poverty,
is that they are at a point in their lives when they don’t typically
face as many financial responsibilities as adults (such as having
children, managing a household, paying for health expenses), so
there is a potential for helping youth build assets and break the
vicious cycle of intergenerational poverty.
Barriers to Saving
While there seems to be a growing consensus about the
importance of increasing the savings capability of youth living
in poverty, young people face many challenges in accumulating
enough money to meet even their most basic needs or to lead
to future asset-building: small and irregular savings amounts, lack
4
5
Saving Together: Group-Based Approaches to Promote Youth Savings
of access to safe savings places, onerous savings account opening
requirements, psychological biases and sub-optimal financial
behaviors. 13
Small and Irregular Savings Amounts
When poor youth save, they typically do so irregularly and
informally given their sources of income. In a market research
study conducted in Mali, poor youth reported being able to save
a range of 25 CFA to 500 CFA (US$0.05 to $1.10) on a weekly
basis.14 With such limited funds, they will have difficulty depositing
their money in a formal savings account because of the minimum
deposits and account fees that eat away at their scant funds. For
example, in Mali opening up a savings account with Nyèsigiso, a
credit union, requires a minimum of 9,000 CFA ($18), including
minimum opening deposits and fees.
Much like Rutherford concluded for poor adults in The Poor and
Their Money, poor youth can and do save, but the amounts can be
even smaller and more irregular than that of adults.15 Reports from
monitoring visits of youth Savings Groups in Mali indicate that young
people save as little as 50 CFA,16 compared to saving upwards of
100 CFA observed among adult groups. Therefore, the challenge is
even greater to develop appropriate financial products and relevant
financial education that meet the savings capacity of youth.
Limitations on Physical Access to Safe Places
Youth living in rural areas, where poverty levels are often higher,
have limited access to formal financial services because the
branches are located in more populated, urban centers. Because of
a lack of safe places to save, youth may either hide their money or
give it to their parents. Youth report being aware that these savings
methods are inadequate, but have no other reliable options.17
Savings Account Opening Requirements
Youth also face macro-level and institutional challenges. As part of
“know your customer” (KYC) requirements aimed at preventing
fraud and money laundering, financial institutions require a form
of identification as well as other onerous documentation such as
proof of address, which many youth lack.18 In Mali, for example,
Saving Together: Group-Based Approaches to Promote Youth Savings
the cost of obtaining a formal identification document is 3,200
CFA (US$6.40). For a young person who is able to save only 100
CFA (US$0.25) per week, it would take more than six months to
save that amount. Youth living in rural areas with little or no access
to financial institutions are further limited in their ability to access
financial services because of the cost and time needed to visit a
bank branch.19 Also, youth who are minors (defined as under the
age of 18 in many countries, such as Burkina Faso, Ecuador, Ghana,
Malawi, Mali, Senegal and Uganda), are not legally able to open
a savings account on their own and require parental or guardian
approval, which adds to the burden and complexity of accessing
formal savings services.20
Psychological Biases and Sub-Optimal Financial Behaviors
Young people often feel little urgency to set their money aside.
In “Accelerating Financial Capability,” Pathak, Zimmerman and
Holmes synthesize behavioral economic theory to explain the
psychological biases that keep people from making “rational
savings choices.21” The biases they present include the tendency
to make financial decisions based on what they see other people
doing, such as saving under the mattress (availability bias); the
tendency to continue doing what is comfortable and familiar,
such as not regularly setting aside money (status quo bias); and
the tendency to prefer present-day smaller rewards such as
buying something now, over long-term larger rewards, such as
saving for the future (hyperbolic discounting). While these biases
apply to most people, they can be particularly acute with young
people who lack experience and exposure to financial services.
During monitoring visits in Ecuador of AIM Youth activities, young
people report not feeling a sense of urgency to open up a savings
account, even when they indicate that they can meet the accountopening requirements. As a result of the psychological biases, many
youth demonstrate sub-optimal financial behaviors.
6
Advancing Integrated Microfinance
for Youth (AIM Youth)
In implementing its AIM Youth initiative,
Freedom from Hunger selected to work
in Ecuador and Mali because of their high
rates of poverty, especially in the rural
areas (Table 1). As part of its mission to
find self-help solutions to chronic hunger
and poverty, Freedom from Hunger focuses
much of its work in rural areas, where
poverty levels are greater—according to the
World Development Report, three out of
four poor people live in rural areas.22 For
the AIM Youth initiative, the identification
of several financial institutions and NGOs
in Ecuador and Mali that had expressed a
strong desire to offer services to young
people, and the availability of local Freedom
from Hunger offices made these countries a
logical choice.
Table 1. Poverty Levels (Entire Population)
Rural
Urban
Ecuador
47%
25%
Mali
75.9%
30.1%
Source:World Bank,World Development Indicators, 2005
(National Poverty Line)
Saving Together: Group-Based Approaches to Promote Youth Savings
7
Freedom from Hunger’s Group-Based Approaches to Youth Savings
The framework for group-based approaches draws primarily from Freedom from Hunger’s experience implementing
and evaluating three different models of integrated services. Table 2 outlines the models and where they were
implemented.
Table 2. AIM Youth Models
Type of
Institution
Cooperatives
Country
(Location)
Ecuador
(primarily rural)
Financial
Service
Individual savings
accounts
(formal financial
service)
Cooperatives
Mali
(urban)
Group savings
accounts
(formal financial
service)
Non-governmental Mali
organizations
(rural)
Youth savings
groups
(non-formal
financial service)
Integration of Financial
Education
Key Characteristics
Financial education sessions
are delivered first in a group
setting, primarily through schools.
Participants receive information
and are encouraged to open an
individual savings account.Youth
save on an individual basis.
No opening or maintenance fees
and an affordable minimum deposit.
Group is formed first, youth agree
to save and open a group savings
account, typically in an 8-week
period. Financial education is
delivered after group formation.
Group approach enables youth to
more easily meet opening account
requirements (minimum opening
amount and identification).
Group is formed first, youth
agree to group norms and start
saving within a month, typically in
a cashbox. Financial education is
delivered after group formation.
Based on a savings group
methodology, in which youth meet
weekly in a group to save and loan
to each other.
Although all young participants receive the financial education in a group setting, only the two models tested in Mali
were structured to save as part of a group. The youth savings groups and the group savings accounts are based on
the same methodology, where youth meet on a regular basis (usually weekly), agree on a certain amount to be saved
every week over a period of time (usually 9 to 12 months), and distribute the combined funds at the end of the
period. The main differences between the two approaches include the following:
1. Youth with a group savings account deposit the money into a formal savings account at the credit union, and
funds are not available for internal loans.
2. Youth in a group savings account must save enough to meet the minimum opening amount, as well as
identification requirements.
Throughout the three years of implementation, it became clear that the group savings format resulted in stronger
savings behaviors. Table 3 shows outreach figures and savings for each model. In Mali, because the groups were
formed for the specific purpose of saving, all participating youth had savings (either non-formal or formal), and the
majority (over 70%) received the financial education. In contrast, while over 11,000 young people participated in
financial education sessions, a smaller number accessed the savings service that was available to them.
Saving Together: Group-Based Approaches to Promote Youth Savings
8
Table 3. AIM Youth Outreach Figures as of June 30, 2013
Mali
Savings Groups and
Financial Education
Rural Areas
Mali
Group Savings Accounts
and Financial Education
Urban Areas
Ecuador
Individual Savings Accounts
and / or Financial Education
Rural/Urban Areas
Total number of youth
24,070
2,540
11,139
Number of youth with
savings
24,070
2,540
4,820
Number of youth
who received financial
education
19,391
2,337
11,139
Indicators
Impact research data conducted in both Ecuador and Mali shows
similar results. Surveys of young people in Ecuador indicate that
only 27 percent report opening a savings account, though 76
percent report having savings through formal and non-formal
mechanisms. However, when asked about the frequency of saving,
65 percent of participants in Mali report saving money during the
week in most weeks, while only 9 percent of participating youth
in Ecuador stated saving on a weekly or daily basis.23
The monitoring and evaluation results are not surprising—in the
group setting, the youth commit to saving on a weekly basis. With
the individual accounts, although cooperative staff encourage
savings on a regular basis by visiting young people at their schools
and houses, the visits are not weekly, and there are no built-in
mechanisms to enable young people to save on a regular basis.
We theorize that group structures, social capital, social pressure
and integrating financial education into group meetings—integral
elements to the group approaches in Mali—are key factors that
explain the different results in Mali and Ecuador because they help
address many of the barriers to saving for young people.
The rest of this paper will elaborate on how each of these
mechanisms helps overcome challenges and encourage young
people to save.
Group structure
Research suggests that peer groups can be multi-faceted and can
lead to both positive and negative changes.24 What makes group-
Group Savings Accounts
Freedom from Hunger and Nyèsigiso,
a credit union federation in Mali, have
developed a group savings account,
modeled after the youth Savings Group
methodology. Since the group effectively
holds only one savings account, Nyèsigiso
only requires identification from the
three Management Committee members.
In a country where having a personal
identification is an exception because of
the bureaucratic burden and the cost,
this structure makes it easier to meet this
requirement. Moreover, since the savings
account requires a minimum opening
amount of $18, the group structure
enables youth to meet the account opening
requirement by contributing collectively
to reach that amount, especially when
considering that individual youth in Mali
report being able to save only $0.05
to $1.10 on a weekly basis. The total
amount in fees is distributed among the
15 members, so the individual amount is
reduced to approximately $1.20. Moreover,
group members are able to save the
minimum amount over an eight-week
period, which reduces the weekly amount
needed to save to $0.15, which is within
the savings capacity reported by youth.
9
Saving Together: Group-Based Approaches to Promote Youth Savings
School Banking
Another group model being implemented
in multiple countries is School Banking, in
which schools are leveraged as an entry
point to reach youth (and children) and
facilitate access to savings. In this model,
student classes are already constituted into
groups. In Ecuador, Freedom from Hunger
has partnered with financial cooperatives
to reach youth through this key entry
point. The field staff of the cooperatives
visits the schools to facilitate a series of
dynamic and engaging financial education
sessions and provide information about
an individual savings account offered by
the cooperative. Some cooperatives are
able to receive savings deposits at the
schools utilizing SmartPhones and handheld
mini-printers. Although the accounts are
individual, the delivery approach is groupbased, in which youth commit in front of
each other to meet their savings goals.
However, for school banking to be feasible,
banks must be in a regulatory environment
that allows for agent banking or branchless
banking to facilitate transactions
electronically or outside the branch. School
banking also requires high levels of approval
from the Ministry of Education and local
coordination and buy-in from teachers and
school administrators to be effective.
Child and Youth Finance International,
an NGO based in Amsterdam, is building
a movement around their own defined
concept of SchoolBank.29 With this
approach, Child and Youth Finance
International is encouraging schools to
become intermediaries, with the potential
for teachers collecting documentation
to open accounts and also taking savings
that are then deposited at the financial
institution.
based savings approaches have a potential for leading to desired
savings behaviors is the structure of the group, where participation
is voluntary, and the group has a specific format focused on a
particular goal—savings—agreed upon by all participants. In a study
by Hansen, youth participating in structured voluntary activities,
such as community organizations and vocational clubs, reported
having more experiences related to setting goals and effort, when
compared to hanging out with friends or in required academic
classes.25 According to Larson, these behaviors are the result of
an environment where young people are “directing and regulating
their actions in pursuit of a goal.26” In essence, a group structure
centered around savings helps motivate young people to reach
their goal to save, overcoming some of the psychological barriers,
such as a lack of self-motivation to save.
Group-based approaches, whether Savings Groups or youth-group
savings accounts, also provide a safe place for poor youth to save.
In a savings group, the cashbox in which the money is placed is held
by one person while the key to the cashbox is held by another,
thereby providing a safeguard mechanism to those funds. Since
the counting of the money is carried out in front of all members,
everyone knows how much money is being held at all times. In
addition, because it is more difficult to access savings that have been
put into a collective group account at a formal institution or within
a non-formal youth Savings Group, it is easier for poor youth to
resist the temptation to use their savings on unnecessary expenses.
The group also represents a safe space where young people can
congregate and bond.
The group structure can also lighten the burden of the accountopening requirements because young people can collectively save
for the opening balance. Similarly, if identification is required to
open an account, not all members are required to obtain it; rather,
three members of the youth group can open the account on behalf
of the others.
The structure of a group approach can be especially influential
for young people because it can lead to a lifelong savings habit. A
savings habit can emerge by developing an ongoing cycle: a habit
loop, a concept developed by Charles Duhigg and referenced
by Pathak in “Creating Creatures of Habit,” which results from
Saving Together: Group-Based Approaches to Promote Youth Savings
establishing “cues, routines and rewards. 27” Pathak
explains that the habit loop is created when people
engage in some type of routine where they are cued
into a specific behavior and are rewarded for the
behavior. The reward helps reinforce the behavior the
next time the person receives the cue.
In a classic Savings Group approach, the youth meet to
save on a weekly basis over the period of one year. The
youth Savings Group approach creates a continuous
loop that conditions the development of a savings habit.
Members engage in a routine (weekly meetings that
10
follow the same agenda), receive a cue (members are
called one by one to save in front of the group) and are
rewarded (access to internal loans and a lump sum of
money at the end of the cycle).
We are now seeing early evidence of how this habit is
formed. While impact research is ongoing with youth
Savings Groups, preliminary findings from Freedom from
Hunger’s research point to positive results among youth,
with greater savings from participants in youth Savings
Groups than non-participants in comparison groups.28
When young people start saving early,
they increase their potential to develop
a savings habit that can carry into their
adult lives, strengthening their financial
capabilities as they begin to face increased
financial and social responsibilities.
Financial education
In addition to saving and borrowing in a group, financial
education can help address the barriers to youth saving
in a group-based savings approach. Groups represent a
promising conduit to building the financial capability of
poor youth when access to and use of savings services
(formal and non-formal) are integrated with financial
education. The combination of these two elements
is critical because the education develops financial
knowledge, skills and attitude changes, while the savings
service provides an opportunity to immediately apply the
new learning, resulting in the desired behavior change. As
the financial capability of youth is built in the social setting
of a group, integrated services can help achieve the full
financial inclusion of young people, an important objective
given their limited access to financial services.30
Financial inclusion is defined as “a state in which all
people who can use them have access to a full suite of
quality financial services, provided at affordable prices, in
a convenient manner, and with dignity for the clients.31”
Thus, financial education equips young people with the
knowledge of how to access and effectively use those
financial services. For example, Freedom from Hunger’s
financial education sessions guide and equip young
people to
ƒƒ establish savings goals and a plan to reach their goals;
ƒƒ make informed savings and borrowing decisions;
ƒƒ identify safe places to save;
ƒƒ make good money management decisions by
differentiating between needs and wants; and
ƒƒ plan for difficult times.
Youth with access to formal savings accounts also learn
how to meet the account opening requirements, how to
fill out deposit and withdrawal forms and how to access
the bank.
11
Saving Together: Group-Based Approaches to Promote Youth Savings
Financial education can be easily incorporated in group
approaches as the education can be delivered at the
regular group meetings. T
he delivery might be done
either by the same staff facilitating access to the savings
service (for example, staff of a financial institution in
the case of savings accounts, or staff of NGOs forming
youth Savings Groups). To engage young people, the
financial education needs to follow key principles of
youth learning:
ƒƒ Relevant and practical to the actual financial
needs of the youth.
ƒƒ Dynamic, participatory and fun to engage
youth, but without distracting from the learning
objectives.
ƒƒ Respectful and safe so participants feel their ideas
are valued.
ƒƒ Inclusive of their family, especially for minors, who
need the support and sometimes approval of
their parents to engage in certain savings activities.
ƒƒ “Do No Harm” principle that promotes and
protects the safety, dignity and human rights of
young people.
Financial education aims to equip participants with key
knowledge and skills to make good decisions regarding
their money. This includes making decisions about using
a variety of financial services, including savings and credit.
The education can also help young people establish
savings goals and a plan to meet their goals, so they
become proactive about meeting needs rather than
having to scramble when financial demands crop up.
While there is some debate on the effectiveness
of financial education in the adult population, there
are a number of recent studies exploring the impact
of financial education when combined with savings
mechanisms for young people. Research findings
from a recently completed randomized control trial
(RCT) point to promising results in a group savings
approach when accompanied by financial education.
IPA partnered with the Church of Uganda, FINCAUganda, and Straight Talk Foundation to evaluate two
interventions: a financial education curriculum and a
youth-group savings account.32 The financial education
sessions were adapted from the Global Financial
Education Program curriculum, which were originally
developed by Freedom from Hunger and Microfinance
Opportunities.33
Preliminary findings from this evaluation indicate that
both groups receiving the financial education, one with
the group savings account and the other without it,
improved their financial knowledge. The groups with
only the savings account but no financial education did
not show significant improvements, which points to the
importance of integrating financial education to build
the financial capability of young people. According to
IPA, “all three treatments slightly increased self-reported
savings, though the increases were only statistically
significant for the two financial education treatments.”34
Karlan has concluded that “access to savings and
financial education both improve savings behaviors.35”
Social Capital
Social capital plays a critical role in promoting positive
savings behaviors in a group setting. Group members
build social capital in their groups as they participate
in weekly meetings and abide by group rules, thereby
increasing their credibility among group members.36
Strengthened social capital has widely been cited as a
potential impact of participation in community banking
models. Global research indicates that social capital has
improved repayment rates and increased savings37 and
empowered women.38 While social capital can create
positive social and financial outcomes, it is also an
important input for successful groups. As summarized
by Dunford, “social capital helps build successful groups,
and successful groups help build social capital.39”
Saving Together: Group-Based Approaches to Promote Youth Savings
Woolcock and Narayan define social capital as “the norms
and networks that enable people to act collectively,” which
requires drawing on the social ties within and outside of their
communities.40 Group-based youth savings approaches can build
internal social ties by requiring youth to mutually agree upon and
adhere to a set of norms that are monitored by the entire group.
The agreed-upon social goal that is collectively worked on further
builds their internal social cohesion. In turn, these internal social
ties led to other positive effects. For example, studies in South
Africa by the Population Council found that adolescent girls with
more social connections were less vulnerable to risky sexual
behaviors.41
External social ties are built through the partnership among the
participating youth and the organization that brings the groupbased savings service to them and provides support for the
youth to set and achieve savings goals. For youth who become
more economically productive by leveraging their savings for
productive activities, they might enhance their social position
within the community, thus further strengthening their external
social ties. These internal and external ties enable the group and
the organization to work together towards a common purpose,
thereby nurturing members’ social capital, which can be leveraged
to support each other to increase their savings and reach their
individual savings goals.
The Population Council piloted a group approach in Kenya and
Uganda in which groups of 20–25 girls meet on a weekly basis.
While each girl in the group opens her own individual savings
account, the intent of coming together is to support each other
in saving and to participate in financial and health education.
Research on the Uganda pilot evaluation compared girls who
participated in the group and had a savings account with girls
who only had the savings account but did not know they could
join a group.42 Although results from the evaluation did not find
a significant difference in savings balances between girls in groups
who had a savings account versus girls with a savings account only,
the evaluation did find that girls in groups who had an account
had greater social capital and stronger social networks, and were
less likely to be sexually harassed or exploited.43
12
13
Saving Together: Group-Based Approaches to Promote Youth Savings
Social Pressure
While the group structure and financial education help address
many of the barriers to youth saving, peer groups can be leveraged
to promote desired behaviors by addressing some psychological
barriers. Pathak, Holmes and Zimmerman point out that peer
dynamics can help youth overcome the status quo and the
tendency to prefer immediate satisfaction vs longer-term rewards
(i.e., hyperbolic discounting) through the effect of “social pressure
exerted by fellow community members.” Youth-based savings
approaches have a built-in commitment mechanism that leverages
social pressure to compel youth into saving. As participants
commit to their peers to abide by the group rules, including
making a weekly savings, they are influenced by each other to
sticking to their savings goals.
Evidence from an RCT conducted in Chile found that “selfhelp peer groups work much better in increasing savings than a
substantial increase in the interest rate.44” In the study, participants
engaged in weekly meetings during which they voluntarily
announced their progress in meeting their savings goals by showing
a deposit slip to the group. Although the authors do not delve into
the underlying psychological factors at play, the research implies
that the peer group dynamics created a commitment mechanism
that led participants to saving more than they would have without
participating in the group.
It is widely understood that susceptibility to peer influence
increases during adolescence.45 Although social pressure among
young people often evokes negative connotations, such as gang
activity or risky behaviors, strong affirmative social relationships,
especially when properly supported and guided, can be very
important in developing the positive behaviors of young people
related to academic outcomes and well-being.46 For example,
because youth Savings Groups collectively decide the amounts
to be saved, and youth can leave the group at any point, the peer
pressure that is exerted is not likely to have negative impacts. If
youth are unable to make their savings in any given week, they
are charged a fine, which is also collectively agreed upon. Youth
in Mali who are in Savings Groups report being supported and
encouraged to participate in the groups by their parents who
Saving Together: Group-Based Approaches to Promote Youth Savings
14
often help them meet their weekly savings commitment. Because peer pressure is combined with parental support
in group-based savings approaches for adolescents, it may play an even stronger and more lasting role than for other
populations.
The evidence presented here and summarized in Table 1 indicates that group-based approaches address many of the
barriers faced by poor youth to access and accumulate savings.
Table 4. How Group Savings Approaches Address Barriers to Youth Savings
Barrier
Group Savings Opportunity
Small and Irregular
Savings Amounts
The group structure of regular meetings centered around savings motivate young people to save regularly
and accumulate larger amounts over time, creating a savings habit loop.
Limitations on Physical
Access to Safe Places
In rural environments, youth Savings Groups make accessible a safe financial mechanism that is otherwise
unavailable.
In school settings, teachers or financial institution staff can receive deposits at the schools, thereby
eliminating the physical access limitation.
Savings Accounts Opening The group structure requires that only a few youth meet the identification requirements of formal savings
Requirements
accounts.
Youth collectively can meet minimum opening balances and account fees that would be difficult to meet on
their own.
Psychological Biases:
Status Quo Social capital and social pressure influence youth to save every week to meet their savings goals.
Availability Bias Regular group meetings serve as a reminder and commitment mechanism for poor youth to save.
Hyperbolic Discounting Youth experience immediate rewards when they see their savings grow and have access to loans.
Sub-optimal Financial
Behaviors
Financial education builds knowledge and skills to make good money-management decisions and establish
savings goals.
The group mechanism locks the funds over a period of time, discouraging members from spending their
savings on unnecessary expenses.
Limitations and Opportunities
There are some valid questions that are still unanswered regarding group savings approaches, and some clear
limitations that need further exploration. However, given advances in technology and the field of youth financial
services, there are also significant opportunities emerging.
Young People are very mobile. What happens when a young person decides to leave the group?
In West African countries where migration is very common among young people, especially males, this is a very real
possibility. In youth Savings Groups in Mali, siblings replace each other in groups, but this has taken place in a village
setting, where everyone knows each other very well and often step in to help each other when needed. Since youth
Savings Groups are still being evaluated, there is no certainty as to how long they will continue operating as a group
if there are multiple departures. As Pathak47 pointed out, there is the possibility of the habit loop being broken when
the cue or reward is removed, so there is uncertainty about the continuation of savings by youth participating in
Savings Groups if their groups cease to meet.
15
Saving Together: Group-Based Approaches to Promote Youth Savings
However, evidence from adult Savings Groups in Mali
indicates that 95 percent of groups over a six-year
period continue to meet, save and borrow.48 We
can expect a similar trend in youth Savings Groups,
though potentially fewer groups will continue if many
members leave. On the other hand, Savings Groups
have proven to be quite fluid and evolve over time,
whereby members from one group join a new group
when they move or when a new group opens up closer
to their home.49 We may see youth replicating groups as
they become more mobile and transition into different
phases of their lives.
With formal group savings accounts, the process for
a departing member can be clearly laid out by the
financial institution and the group members themselves.
However, departing members could destabilize the
group dynamics and cohesion. In addition, participating
youth who live in urban areas and have not started
families may be more mobile, less socially connected
to a specific group of youth, and their financial needs
may be diverging, which could lead to a lack of
social cohesion and potentially fewer positive savings
behaviors.
Can group-based savings for poor youth meet all
of their financial needs?
As confirmed by Portfolios of the Poor, the poor use
a variety of financial instruments—just as people of
better financial means do—so it is unlikely that one
financial institution or program would meet all of the
financial needs of poor youth.50 Savings groups provide
credit and savings in a convenient, flexible, reliable and
structured manner. While non-formal youth Savings
Groups may meet many of the financial needs of young
people living in rural areas, they do not readily benefit
from a relationship with a formal financial institution
from which they can eventually access other financial
products and services. However, group savings accounts
can meet those needs for young people who live in
or move to an urban area. An opportunity also exists
for youth Savings Groups to link with formal financial
institutions, especially with the increasing access to
branchless banking and mobile money.
One financial need that poor youth may face is the
need to access their savings in an emergency. A potential
disadvantage of grouped savings in a formal account is
that the individual savings of any group member might
not be readily accessible in an emergency; this would
require agreement with the management committee
and access to the financial institution to make a
withdrawal. In addition, it is possible that only the two to
three young people managing the account on behalf of
the group gain critical skills for engaging with a financial
institution, limiting the opportunity to build the capacity
of all of the youth in the group.
Are group settings risk-proof?
While a group properly structured and supervised can
have many checks and balances to protect the savings of
young people, many other risks need to be considered.
When savings are captured in schools, there is the
risk that financial institution staff or even facilitating
teachers face in transporting cash from the school to
the financial institution. The cooperative staff in Ecuador
participating in the AIM Youth initiative are insured in
this situation, though the risk of theft or loss remains.
Youth also face risks in carrying cash to school, to a
group meeting or to a financial institution as there is no
insurance available for them.
There is also a risk of fraud by unscrupulous
intermediaries who collect savings in the field, though
this risk can be minimized by the checks and balances
provided by technology, as with the use of Smartphones
in Ecuador, both for the youth (who receive a receipt
at the time of deposit using a mobile mini-printer) and
the institution (that records the savings deposit into
its system at the time of deposit via Smartphone). In
Saving Together: Group-Based Approaches to Promote Youth Savings
a group savings account context, even if the youth all know each
other and multiple signatories are required to access the account,
two account holders could commit fraud by withdrawing funds
not approved by the entire group. Groups supervised by field staff
could avoid this risk if the staff keeps a matching record system of
the account funds. But such an approach might be expensive to
sustain in the long run.
While peer influence, when channeled adequately, can lead to the
promotion of positive behaviors, it is possible that peer pressure
can lead to negative and risky behaviors. For example, there is
a risk of young people, especially adolescent girls, engaging in
risky sexual behaviors if they feel pressured to meet their savings
commitment.51 Appropriate assessment tools need to be in place
to monitor these risks, and adequate protection measures must
be put in place to prevent them. Building the capability of field
staff is important to effectively transfer new knowledge, support
the group to build social capital, and ensure participating youth are
protected from the potentially harmful effects of social pressure.
Do group-based approaches work better for some youth
than others?
Group-based approaches may work best where youth are more
socially connected and their financial needs are similar, which may
often be the case for younger youth or youth who have married
and started families. For example, group-based approaches work
well in villages and schools because the youth are quite socially
connected through village and school activities and are in very
similar places in their lives financially, resulting in comparable
financial needs. Groups that have mixed-gender composition and
encourage female participation in the management committee
could empower young women to step up to leadership positions.
This is the case of the youth Savings Groups established by
Plan International. But mixed groups also require appropriate
monitoring systems to ensure young women are not overpowered
by their male peers.
In addition, formal financial services, such as group savings
accounts, may not meet the needs of both females and males
equally, especially in urban settings. While there are more females
16
17
Saving Together: Group-Based Approaches to Promote Youth Savings
than males in non-formal youth Savings Groups in rural
Mali, there is a significantly higher percentage of male
(83%) owners of group savings accounts offered by
Nyèsigiso, one of the credit union networks in Mali.
According to discussions with the credit union staff,
this might be due to the outreach strategy, as they are
more easily able to find and encourage youth to join a
group savings account in vocational training centers (ex.
carpentry) that tend to have more males than females.
In mixed-gender groups, there is also the risk that
the groups could be dominated by the young men,
marginalizing the young female participants. Data of
mixed-gender youth Savings Groups and an internal
evaluation of AIM Youth activities in both Ecuador and
Mali have revealed no negative ramifications of having
both genders represented in the groups. This may
be due in part to the youth Savings Groups being
supported by an adult woman in Mali, and the provision
of services through schools in Ecuador. However, there
is a need for more systematic research regarding the
effects of mixed groups on participating girls.
What role can technology play?
As a result of youth’s changing needs, it is important to
consider how to build the financial capability of youth
to use a broad range of financial services including
formal financial institutions to meet their varied needs
as they transition to different stages of their lives.
Appropriate mobile-banking services can help address
youth’s changing needs and can help young people stay
connected to a financial service even while relocating.
However, as mentioned above, it is critical to build
the financial capability of all of the youth in the group
and not just those who are managing the account on
behalf of the group. Forging partnerships among mobile
operators, financial service providers and youth-serving
organizations can help bring appropriate financial
services to underserved youth populations.
While mobile banking is still a nascent field, a recent
market research study conducted in Benin and
Burkina Faso indicates that 44.6 percent of the 139
youth who were interviewed own a cell phone, with
another 35.2 percent having access to one.52 Given
the rapid pace of technology advancement, those
percentages could increase markedly over the coming
years, creating a significant opportunity for financial
institutions to leverage technology and increase youth
access to financial services. Another promising aspect of
technology is text messaging, which has been shown to
have a similar effect as peer pressure.53 For youth who
migrate, receiving text messages that reinforce key savings
goals, combined with the access to mobile banking has
the potential to completely transform youth financial
services. Exploring creative ways of linking groups of
youth—minors as well as youth 18 years old—to mobilebanking services can help address age barriers as we saw
with the Nyèsigiso group savings account.
Conclusions
We hypothesized that group-based savings approaches
can catalyze positive savings behaviors that continue
into adulthood. More longitudinal research is required
on savings services for youth as these approaches
are relatively new and the evidence on long-term
impact and sustainability is limited, but the findings by
Freedom from Hunger in addition to the evidence by
other organizations point to savings groups as a very
promising approach to building financial capability for
young people, especially for those who are economically
vulnerable and have access to limited resources. Groupbased approaches build on the positive dynamics
generated by the group structure, social capital and
social pressure to increase savings. When financial
education is added to this equation, young people are
better equipped to create a lifelong savings habit, in
addition to making smart money-management decisions
for their future.
Saving Together: Group-Based Approaches to Promote Youth Savings
18
Positive savings behaviors represent an important
intermediary input on the pathway to stronger
economic resilience and improved food security for
youth living in poverty as they transition from one life
stage to another. When those savings are promoted in
a group setting, participants reap greater benefits that
accrue from the group, such as mutual support to meet
their financial goals. Group approaches can be especially
critical in reaching marginalized populations and linking
them to financial services that they would otherwise
not have.
transition to different stages of their lives. Providing
additional services, such as entrepreneurial or health
education, as well as receiving support from a variety
of actors, including family, schools, NGOs, government
and financial institutions are critical components to
equip young people to improve their well-being. Given
the interest in young people in the development field,
especially in countries with high levels of poverty and
unemployment, group approaches represent a solid
platform with which to build a comprehensive positive
youth development strategy.
Moreover, groups represent an ideal platform to deliver
additional and complementary services. Dunford
states in a blog about the evidence of the impact of
microfinance: “It is not enough to build impressive
borrower or savings groups, if they cannot engage
with outsiders who can offer them not just banking
services but also market opportunities and health,
education, agricultural and other services and products.
They are taking collective action to remain poor... the
individuals in those groups have to be empowered by
this social capital to move beyond their groups and their
communities into the wider world and be able to deal
with it on its own terms, not theirs.54”
Acknowledgements
The key to unlocking the potential of youth living
in poverty is to build their capacity to engage with
a broad range of financial services, including formal
financial institutions, and other development services
that they can utilize to meet their varied needs as they
This publication is made possible thanks to the
partnership with The MasterCard Foundation.
The authors would like to acknowledge the many
reviewers for their valuable feedback. We are greatly
thankful for the insightful comments from Ruth DueckMbeba and Prabhat Labh from The MasterCard
Foundation. We are especially indebted to Chris
Dunford for his multiple reviews. We would also like to
thank Megan Gash and Kathleen Stack from Freedom
from Hunger. A special thanks goes to our external
reviewers, Payal Pathak (International Youth Foundation),
Karen Austrian (Population Council), Bella Lam and
Joanna Melymuk (Plan International) and Wendy-Ann
Rowe (CRS) .
Reviewers and their organizations do not necessarily
endorse all of the content of this report.
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