2016 ─ Research Evidence for CYFI’s Model of Economic Citizenship for Children and Youth: Summary

Research Evidence for CYFI’s Model of Economic Citizenship for Children and Youth CYFI Landscape Series – Summary

Child & Youth Finance International (CYFI) CYFI is a global system change organization working with partners in 132 countries. We have taken on the challenge of ensuring that everyone works together to reshape financial systems in order to economically and socially empower children and youth worldwide. CYFI has committed to three different roles: advocate, network connector & expert hub and network advisor.

1. Introduction CYFI developed its model of economic citizenship together with leading academics, multilaterals, and experts in the field. Economic citizenship empowers children and youth and builds their capabilities to be successful in life through three building blocks: financial education, social and livelihoods education, and financial inclusion. In 2011, a substantial amount of research on the benefits of financial inclusion and education for children was already available.

During the past five years, that research has been complemented by numerous new studies on all components of economic citizenship. From this overview it becomes clear that some questions have been answered and suggestions for further research have been taken to heart. These future research directions include understanding the long term impact of economic citizenship interventions on behavior, studying the relevance of digital solutions for achieving financial access, and working on an optimal division of responsibilities and costs to ensure long term sustainable solutions for economic citizenship interventions. Another key topic that requires more attention still is the integrated approach to economic citizenship and how it contributes to asset building and reduced income poverty.

The Concept of Economic Citizenship and its Components CYFI defines economic citizenship as economic and civic engagement to promote a reduction in poverty, sustainable livelihoods, sustainable economic and financial well-being, and rights for self and others. It has the potential to improve economic and social well-being, increase economic and social engagement, enhance understanding of and respect for basic rights, reduce income and asset poverty, and lead to sustainable livelihoods for children and youth. The model of economic citizenship consists of four components: financial inclusion, financial education, social education and livelihoods education. These components are the building blocks of empowerment and financial capability that underpin economic citizenship for children and youth.

CYFI defines a child as an individual under the age of 18, or under the age of majority as prescribed by national law, as defined by United Nations Convention on the Rights of the Child.1 Youth are persons between the ages of 15 and 24, as defined by the United Nations.2 Financial inclusion is access to safe, appropriate, and affordable financial services.

Financial education includes instruction and/or materials designed to increase financial knowledge and skills. Social education is the provision of knowledge and skills that improve an individuals’ understanding and awareness of their rights and the rights of others. It also involves fostering of life skills such as problem solving, critical thinking, and interpersonal skills. Livelihoods education builds one’s ability to secure a sustainable livelihood through skills assessment and a balance between developing entrepreneurial and employability skills. Empowerment is the sense of confidence and efficacy experienced by children and youth through controlling their own lives, claiming their rights, and having empathy toward others.

Financial capability combines a person’s ability to act with the opportunity to act. To be financially capable, people must have financial knowledge and skills as well as access to appropriate financial services to enhance social and economic well-being. This means that financial capability has both individual and structural components.3

2. Theory and Research on Economic Citizenship Microeconomic evidence for adult populations showed that the use of financial products significantly affected the lives of the poor in the form of access to credit for housing and savings to help households manage and build working capital, thus boosting household welfare. Macroeconomic evidence demonstrated that financial inclusion is positively correlated with growth and employment. A number of studies suggested that children and youth benefit from financial inclusion, with a positive relations being found between owning a savings account and economic wellbeing, improved health, academic achievement, and expectations for the future.4 The logic of offering financial education to children and youth was generally accepted, but the conclusive evidence off its effectiveness was still limited. Most studies could only show short-term gains in knowledge and behaviors. Offering financial products and education together had positive results, leading to improved financial knowledge and skills. However, there was no conclusive evidence on whether it increased the amount of savings over the long run.

Figure 1. CYFI Model of Economic Citizenship

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UN website UN website 3 CYFI (2013) 2

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Omunjalu & Fondo (2014), Friedine (2014), Chiapa, Prina & Parker (2014), The MasterCard Foundation (2015)

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Identified Gaps in the Research on Economic Citizenship in 2012 In 2012, after conducting a review of the existing research related to economic citizenship for children and youth, the CYFI Academic Working Group listed a number of gaps and opportunities for further research.

Identified gaps in the research on economic citizenship in 2012 1.

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Limited understanding of independent and joint contributions of financial access and education Need for a definition of social education and its relation to financial and livelihoods education Need for a way to measure financial inclusion for children and youth Limited understanding of the impact of product and education design on effectiveness of building financial capabilities Lack of experimental research projects

Research Overview In addition to financial access, financial, social, and livelihoods educations form the other building blocks of economic citizenship, empowering children and youth and building their financial capabilities. Together they form the holistic learning framework of Economic Citizenship Education (ECE).

Financial Education The OECD is a global leader in the promotion of financial literacy. Through its Program for International Student Assessment (PISA) it tests, amongst other topics, the financial literacy of 15-year-old students in OECD countries.

Its 2012 survey revealed that large proportions of students have only basic skills in financial literacy. There is a range of recent studies that show the positive effects of financial education on the financial literacy and knowledge of children and youth. This conclusion rings true for formal financial education in school and other forms of education such as short, one-off educational programs and radio awareness shows. These findings are supported by a number of other studies. It has to be noted that some of them still only include adults. Whitebread and Bingham show that by the age of seven years, several basic concepts relating broadly to later ‘finance’ behaviors will typically have developed in children.5 A review of multiple programs showed that financial education is effective in improving knowledge, attitudes and behaviors. Interventions that were found to be most successful were those combining

Social Education Social education, also known as life skills education, helps children develop critical thinking, builds their sense of personal worth and teaches them to interact with other people in a constructive and effective fashion. 7 Limited research is available on the relation between social or life skills and educational attainment or employability. An intervention by BRAC in Uganda provided adolescent girls with life skills and vocational training. The life skills training was not school-based, but taught in ‘adolescent development clubs’ in the community, as the program also targeted girls who have dropped out of school. The social education included topics such as sexual and reproductive health, conflict resolution, and child marriage. The program increased knowledge about HIV, pregnancy, and the use of condoms. Empowering adolescent girls also reduced the number of individuals having sex unwillingly.8 Livelihoods Education Livelihoods education advances one’s ability to plan for future well-being. This involves increasing the entrepreneurial and employability skills of children and youth so they can achieve sustainable livelihoods within their communities. According to UNICEF, livelihood skills include technical and vocational skills (carpentry, sewing, computer programming), research skills, interview skills, business management skills, entrepreneurial skills, and money-management skills. 9 These skills can bolster their employability when they are joining the labor force. A number of programs focused on livelihoods education and the skills needed to earn a living. Cho and Honorati conducted a meta-analysis of multiple entrepreneurship programs. They discovered that the largest hurdle for youth is access to credit, and that business training can contribute to increase youth’s earnings. According to their analysis, training programs prove more effective by combining training with counseling and financing. They concluded that combinations of different intervention types matter for different beneficiaries under different contexts, and that the holistic approach proves to be more beneficial and has more of an impact on youth and highly educated individuals.10 Financial Inclusion A key challenge for those in the Child and Youth Finance Movement has been the lack of data measuring financial inclusion specific to children and youth. Most of the data is only available for adults and youth 15 and up and can’t

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The Money Advice Service (2013) O’Prey & Shephard (2014) 7 UNICEF website

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financial education with another ECE component, targeting younger children, with shorter instructional timelines.

Indeed, some features have been identified as potentially having a complementing effect, such as learning while doing, and soft skills building.6

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BRAC (2012) UNICEF website 10 Cho & Honerati (2013)

provide insight to the inclusion of younger children.

However, the Global Findex confirms there is a youth gap, in other words, young adults (15-24) are 50% less likely than older adults (age 25 and above) to have a formal banking account. This applies in all countries, but the highest gap is in the Middle East, where young adults are less than half as likely to have an account as older adults.11 Recent studies have shown that youth want to save and do so when given the opportunity. YouthSave, a project funded by the MasterCard Foundation, and led by a consortium of Washington University, New America Foundation, Save the Children and the Consultative Group to Assist the Poor (CGAP), supported local financial institutions and researchers in developing, delivering and testing savings products accessible to low-income youth in Colombia, Ghana, Kenya, and Nepal. The results of this project showed that account uptake is influenced by a number of factors, such as the minimum age at which children can independently open a bank account, terms and conditions of the account, and sales incentives provided by financial institutions.12 Financial institutions seem reluctant to offer financial products to children and youth because they believe youth are more difficult and expensive to bank.

YouthSave implementing partners have found that the benefits of financially including youth include economic and financial well-being, financial knowledge and skills, health, and educational achievement.

Financial capability occurs when young people are personally empowered, gain access to appropriate financial products and services, and have the opportunity to practice using these services.13 OECD research has found that after accounting for socio-economic status, students with a bank account score higher on financial literacy tests than without an account. Additional research has shown that students learn more when given the opportunity to apply their financial education. 14 The YouthSave experiment in Ghana supports this: the more familiar participants became with saving, the more savings techniques they developed.15 Adequate consumer protection frameworks are key to consumer confidence, and trust in a well-functioning market for financial services promotes financial stability, growth, efficiency and innovation over the long term.

Consumer protection deals with topics such as product design and delivery, transparency, responsible pricing, and recourse mechanisms. 16 The G20 High Level Principles on Consumer Protection and the World Bank’s Good Practices for Financial Consumer Protection are key source documents for both policymakers and practitioners in developing and implementing consumer protection on a national level.

Current Research Gaps Valuable contributions to the literature in the past five years have answered some of the questions posed at the start of the Child and Youth Finance Movement, but some questions remain and new questions have arisen. As it was five years ago, research is still catching up with the fastpaced development of the field of financial inclusion and ECE. This means that financial products, services, and educational programs are being developed, but their designs are only partially informed by research on what works well and what does not. As a result, many intervention programs remain temporary solutions that lack sustainable, large-scale impacts. A range of stakeholders should be involved in promoting economic citizenship for children and youth: governments, central banks, financial institutions, and civil society. All parties have to come to an agreement on which components of economic citizenship should be provided by whom in order to ensure a comprehensive and integrated offering of both educational and financial access.

3. Implications for the Conceptual Model of Economic Citizenship Over the past years, the social and livelihoods education components of CYFI’s model for economic citizenship have gained momentum. In the original version of the model, social and livelihoods educations are combined in one building block. However, with the further development of both social and livelihoods educations, and more examples of the practical implementation of both, literature and practice seem to support the claim that they deserve to be seen as a building blocks in their own right. Another aspect to consider is the increased call for greater emphasis on consumer protection for children and youth within the framework of economic citizenship. One option is to include a greater emphasis on consumer protection within financial education, while another would be to recognize it as its own unique block within the model itself. For the sake of simplifying the model, CYFI proposes to keep consumer protection within the financial education block, with a strong recommendation that policy makers and practitioners uphold this principle.

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World Bank (2015) YouthSave Consortium (2015) 13 CYFI (2013b)

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CFED (2014) YouthSave Consortium (2015) 16 OECD (2011)

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persists. In many cases, this is due to the lack of division of responsibilities amongst national stakeholders. The top challenges mentioned to CYFI by policymakers and practitioners include bringing all relevant stakeholders together at the national level, hesitation to implement financial education and financial inclusion programs in parallel, and difficulties in securing resources.17 The balance between cost and impact should always be taken into account, as low cost initiatives with a limited scale are unlikely to be scaled up sustainably without an understanding of the relation between cost and impact.

Figure 2. Updated conceptual model of economic citizenship

Currently, every individual component of the conceptual model seems to have proven valid, though the back up for this claim is perhaps stronger for financial inclusion and financial education rather than for social and livelihoods education. The validity of the integrated concept of economic citizenship remains unchallenged, though it has to be said that there also has not yet been any final validation through extensive research involving each component together. More and more programs successfully combine two or more of the components, which seems to confirm that providing the building blocks in isolation does not render the most optimal effect. The role of financial inclusion and ECE in empowering children and increasing their financial capabilities is crucial.

4. Opportunities and Challenges for Further Research It is clear that room exists for further research on economic citizenship for children and youth. Although financial inclusion is settled firmly on the international development agenda, with the topic of financial education not far behind, there is still limited evidence on the long-term impacts of the holistic offering of financial inclusion and ECE on wellbeing, skills and behavior of young people. To better understand how to make lasting change in people’s lives, it is necessary to monitor program beneficiaries for a longer period of time. Government authorities, donor agencies, and multilateral institutions should be prepared to fund such research about the fully integrated model of economic citizenship for children and youth.

Mobile technology holds great potential to bank many more people in a short period of time, including children and youth. However, still more research needs to be done, particularly on the impact of introducing youth to financial services outside the physical banking environment. Further research can provide insights into how products and educational programs should be designed to be most effective, making use of message reminders, online games and tools, or even interactive voice response systems.

The many lessons learned in the past five years regarding what works well when providing savings products combined with financial education should also be tested for other financial products appropriate for different youth client segments. For loans, this can be extended beyond just financial education to also include livelihoods education focusing on responsible ways to earn a living, of which the topics of business loans and debt form a substantial part.

Now that it has been confirmed that children and youth do save, and that this makes them more resilient to economic shocks, it would be interesting to see what role a wider suite of financial services (such as cash transfers or microinsurance) can play in further increasing that resilience. To understand this, future research can focus on outcomes in terms of economic well-being, skills and behavior when combining access to additional financial services with ECE. For more information on research evidence related to economic citizenship for children and youth, please consult the CYFI Research Landscape Document.18

The transition from developing national strategies on financial inclusion and education to actually implementing these strategies seems challenging in many countries, often due to conflicting agendas or lack of sufficient resources.

Even large interventions encounter challenges once donor money stops flowing in. When financial, social and livelihoods education components are not integrated in the national education curriculum, the risk of discontinuation

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CYFI (2014)

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CYFI (2016)

5. Bibliography BRAC (2012), 'Annual Report 2012'. Retrieved from: https://brac.net/sites/default/files/BRAC-Annual-Report-2012e.pdf CFED (2014), 'Financial Education & Account Access Among Elementary Students, Findings from the Assessing Financial Capability Outcomes (AFCO) Youth Pilot'. Retrieved from: http://cfed.org/assets/pdfs/AFCO_Youth_Full_Report_Final.pdf Chiapa, C., Prina, S. & Parker, A. (2014), 'The Effects of Financial Inclusion on Children’s Schooling, and Parental Aspirations and Expectations'. Retrieved from: https://www.researchgate.net/publication/260246411_The_Effects_of_Financial_Inclusion_Beyond_Financial_Outcomes Cho, Y. & Honerati, M. (2013), 'Entrepreneurship Programs in Developing Countries: A Meta Regression Analysis'. http://econ.worldbank.org/external/default/main?pagePK=64210502&theSitePK=5991650&piPK=64210520&menuPK=64166093&ent ityID=0001583 49_20130408114918 CYFI (2016) ‘CYFI Landscape Series: Research Evidence for CYFI’s Model of Economic Citizenship for Children and Youth’, https://issuu.com/childfinanceinternational/docs/cyfi-research-evidence/1?e=7128000/38088797 CYFI (2014), 'Children, Youth & Finance 2014, Action for Sustainable Outreach'. Retrieved from: http://childfinanceinternational.org/resources/publications/2014-children-youth-and-finance.pdf CYFI (2013), 'Conceptual Development of CYFI model of Children and Youth as Economic Citizens'. Retrieved from: http://www.childfinanceinternational.org/index.php?option=com_mtree&task=att_download&link_id=1523&cf_id=200 Friedline, T. (2014), 'The Independent Effects of Savings Accounts in Children’s Names on Their Savings Outcomes in Young Adulthood ', Journal of Financial Counseling and Planning, 25(1). Retrieved from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2466561 OECD (2011), 'G20 High-level principles on consumer protection'. Retrieved from: https://www.oecd.org/g20/topics/financial-sectorreform/48892010.pdf Omunjalu, B.S. & Fondo, F. (2014), 'The Role of Microfinance in Economic Empowerment of the Youth', IOSR Journal of Business and Management, 16(5), 26-32. Retrieved from: http://www.iosrjournals.org/iosr-jbm/papers/Vol16-issue5/Version-1/E016512632.pdf Onaolapo, A.R. (2015), 'Effects of financial inclusion on the economic growth of Nigeria (1982-2012)', International Journal of Business and Management Review, 3(8), 18-25. Retrieved from: http://www.eajournals.org/wp-content/uploads/Effects-of-Financial-Inclusionon-the-Economic-Growth-of-Nigeria-1982-2012.pdf O'Prey, L. & Shepard, D. (2014), 'Financial Education for Children and Youth: A Systematic Review and Meta-analysis', Aflatoun Working Paper 2014.1C . Retrieved from: http://www.aflatoun.org/docs/default-source/aflatoun-secretariat-evaluation/financial-educationfor-children-and-youth---systematic-review-and-meta-analysis.pdf?sfvrsn=10 The MasterCard Foundation (2015), 'Financial Services for Young People: Prospects and challenges'. Retrieved from: http://www.issuelab.org/requester/sdgs/id/22257 The Money Advice Service (2013), 'Habit Formation and Learning in Young Children'. Retrieved from: https://masassets.blob.core.windows.net/cms/the-money-advice-service-habit-formation-and-learning-in-young-childrenmay2013.pdf UN website. Retrieved from: http://www.ohchr.org/en/professionalinterest/pages/crc.aspx UNICEF website. Retrieved from: http://www.unicef.org/lifeskills/index_7308.html World Bank (2015), 'The Global Findex Database 2014: Measuring Financial Inclusion around the World'. Retrieved from: https://media.worldbank.org/secure/global-findex-2014/Global-Findex-2015-Report.pdf YouthSave Consortium (2015), 'YouthSave 2010-2015: Findings from a Global Financial Inclusion Partnership'. Retrieved from: http://csd.wustl.edu/OurWork/FinIncl/GlobalAssetBuild/YouthSave/Documents/YouthSave%20synthesis%20report.pdf

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