Our global experience has shown us that savings groups are an effective starter system to introduce teenagers and young adults to finance. This includes developing a regular savings routine, experience in collective financial management and the elements of personal finance.
Savings groups are particularly effective as a financial learning tool because they are low risk: the amounts of money are relatively small, and there is little pressure to borrow. As with adult saving groups, the youth saving groups are also an ideal way to deliver complementary interventions in financial education, life skills and entrepreneurship training. This can help them become self-employed and serve as a valuable skillset for salaried employment in areas where there are job opportunities.
Case Study: Youth savings group in Uganda
With funding and technical support from the Swedish International Development Cooperation Agency (SIDA), Plan International Sweden and Accenture Development Partnership (ADP), Plan International Uganda is implementing A Working Future – Uganda (AWF), a three and a half year project intended to support employment and improve the economic empowerment of youth, with the targeted age group being 12,000 15- to 25-year-old young people. Savings groups are used as an entry point to communities, a mechanism for organising youth and a platform for financial education and capital build-up.
To help youth move into the local economy, AWF provides practical entrepreneurship training and post-training mentoring. The greatest impact has been on individual income-generating activities where youth have undertaken a new activity or diversified or somehow improved existing activities. An informal inventory of activities revealed a good variety of businesses in small trade, buying and selling agricultural produce, food processing and some animal-raising. Many of these are the result of market research rather than youth just copying activities already existing in their communities.
A lot of these businesses can be started on a modest scale with small amounts of capital that youth can access from their savings groups. Most members seem to have a plan for scaling up and show great discipline in reinvesting profits to build a larger capital base. One field assessment showed that many had doubled or multiplied their individual investment several times in a two to four month period.
Forging relations with private sector businesses to help youth take advantage of markets outside their communities is another feature of AWF. A micro-franchise relationship has grown between a large manufacturer of household products and savings groups members who serve as sales agents in their communities. Other marketing and technical links exist with a large commercial producer of poultry and pigs and a distributor of solar lighting products.