Financial system transformation

What are the priority areas of financial system transformation that could lift the participation of young people from low-income communities?

Young people are constrained by formal regulatory systems and social norms from being included into the financial system. These constraints prevent young people from fully benefiting from what the financial sector has to offer, and therefore from achieving their ambitions. Young people throughout the Futuremakers Forum 2022 stressed the challenges of accessing the support of financial products and services.

“Young people are the ones who are creating businesses. We’re the ones who are starting to employ our peers, the ones who are innovating. And yet strict systems and structures, often outdated ... can hurt upcoming small businesses.” Futuremakers Participant Rhoda Kingori, in Kenya, provided her experiences of the financial system as a young entrepreneur during the panel discussion to examine these themes.1. Identification processes are lengthy and costly
Tamara van den Ban, Global Head Customer, Consumer, Private and Business Banking, Standard Chartered Bank, explained that: “The cost of regulation and complexity is a big hurdle for financial inclusion. We are all individually trying to solve for it and therefore, we make little progress towards helping billions of people.” Tamara elaborated that regulation currently requires lengthy and costly identification processes—which creates immediate barriers for some young people without the necessary identification. For those with identification, it drives up costs. Tamara hopes that a global, portable identity could be a possible solution.2. Young people’s inherent lack of financial history causes them to be discounted
Young Futuremakers Participants and entrepreneurs, Rhoda Kingori from Kenya and Vallerie Thomas in Malaysia, both highlighted that the inherent lack of credit history associated with being young was holding them back from being able to achieve. “The challenges young entrepreneurs have is they have no footprint, no historical data to support logical borrowing.” Pheodor Mundia Njoroge, Senior Global Sustainability Manager, Functions & Business Innovation, Unilever, acknowledged this reality, explaining “that's why the majority of finance in most markets for young entrepreneurs is through family and friends or community groups.”3. Social norms around women and girls cause barriers to them being included in financial systems
Meanwhile, Andy Woolnough, Executive Vice President, Global Advocacy at Women's World Banking, and Lindsey Block, Head of Partnerships and Capacity Building for Primark, both shared their firsthand experiences of working to support young women who were not able to own assets or control their own money. Andy explained that since the pandemic, “Around 11 million girls have dropped out of the school system.² Girls have no financial access, and so they're faced with a stark choice: work in low-pay or insecure employment, or go into an arranged marriage.”These experiences reflect the Futuremakers 2022 research which found that nearly a quarter of women entrepreneurs surveyed don’t control their money.¹