Youth savings still unprofitable

The Bank of Ghana (BoG) says commercial banks are shying away from offering banking services to the youth because they assume banking services are unprofitable.

The situation, it said, had been complicated by banks’ obsession with short-term gains, which are always absent in youth savings – offering banking services to people between the ages of one year and 18 years.

As a result, an official at the Banking Supervision Department of the central bank, Mr Ismail Adam, told the Daily Graphic on the sidelines of a stakeholders’ forum on youth savings that the banks in the country needed to look at the long-term benefits of the venture rather than concentrating on short-term gains.

That, he said, would help the banks to build a strong customer base that would later blossom into a profitable market in the future.

Although the central bank is concerned with the low numbers of youth with bank accounts in the country, Mr Adam said there was little it could do by way of policy and regulation to help whip up banks’ interest in that regard.

“It is more of social benefits against private gain. For them, everything they do should be profit-backed but that is not the case with youth savings; it is a long term investment,” he said.

The forum, which was on the theme: ‘Innovations in banking young people: Learning from YouthSave Project,” brought together stakeholders in the banking sector to deliberate on how to rope in more youth into the bank sphere.

It was organised by the YouthSave Consortium and facilitated by Youth Bridge Foundation, a non-governmental organisation committed to the welfare of the youth.   

Impact of legal limitations

Currently, the country’s laws have limited people below the ages of 18 years from opening and maintaining bank accounts.

The requirement is premised on the fact that the Constitution does not recognise people below 18 years to be adults hence their inability to enter into contractual agreements with third parties, an example being a bank in the case of account opening.

While admitting that age had been a limitation to the drive towards youth savings, the official at BoG’s Supervision Department said it should not be overemphasised to the detriment of the issue with monetary gain.

“They (banks) have this thing they call bottom line and once an activity does not help to improve that bottom line, then they tend to give it less attention,” he added.

He, however, explained that increased education on the need for savings could help solve the problem in the long term.

Issue with modelling

Mr Patrick Quantson of Stanbic Bank explained that banks could make some profits from youth savings, albeit minimal, if they modelled their systems to target that segment of the market.

Using Stanbic as an example, Mr Quantson said youth savings at the bank was done on a special accounts software that was less costly to operate and maintain.

“That way, we reduce the cost of operation and it makes it profitable to operate the youth savings,” he said.

Innovative savings culture

The Executive Director of Youth Bridge Foundation, Mr Seth Oteng, explained that financial institutions needed to be innovative in their service delivery to be able to attract customers from that age bracket.

That, he said, necessitated the stakeholder forum which would explore ways banks could attract and maintain young savers.