> Posted by Meghan Greene and Sonja E. Kelly, Manager and Fellow, CFI
The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”
What’s in a number? Part of the Center’s Financial Inclusion 2020 work is to think about how global trends affect financial inclusion demand—we’ve been doing so in our Mapping the Invisible Market work and in our exploration of the client perspective.
In this work, it can be useful to think in terms of age. In our demographic work we examined how a person’s stage in life might affect his or her demand for financial services. We also discovered that many developing countries have rapidly aging populations. But just how rapidly the populations are aging depends on the definition of old. When calculating dependency ratios (the ratio of those who are dependent to those who are in the working age population), the UN recommends the following definitions:
- “Child” is a person under the age of 15
- “Youth” is a person aged 15-24
- “Old age” is age 65 and above
These standards are often invoked in country comparisons. But are they really appropriate? If “older adults” are 65 and over, what does that mean in very poor countries, especially in Africa where the life expectancy is under 55 years? If we calculate “older adults” as age 60 and up, then they make up over one-fifth of the global population. If we calculate the same group as 75 and up, they are less than one-tenth of the global population.
Indeed, the age delineations seem to break down when we look at particular contexts. For example, the National Corrections Institute, a U.S. prison research organization, defines “elderly” as 55 or older because an incarcerated person’s body ages faster than someone not in prison.
As we look at differentiating by age in our work with financial inclusion (or in any work for that matter), how do we move forward meaningfully? In defining “old,” age is certainly one factor, but so is culture, health, lifecycle stage, income, and a host of other factors.
Tim Nourse, of Making Cents International, concurs that broad age groups, while convenient, mask important nuances. That’s why Making Cents (which uses the 15-24 age range for youth as a starting point for discussions) recommends segmenting the market further through market research. One of Making Cents’ emerging guidelines for youth financial services is:
“Develop products and services that reflect the diversity of youth: The youth market contains sub-segments related to age (legal age), life cycle stage (marital and parental status), gender, education, employment status, and vulnerability. These differences should be taken into consideration in product design and delivery.”
What becomes important, as Tim points out, is not the age that we choose as a dividing line, but rather what the age represents. We have age cutoffs for several reasons. First, and most obviously, there are legal definitions to be considered, especially when it comes to youth and informed consent. Second, however, we choose age as a dividing line based on the major life events that we predict in the lives of individuals. Someone who is considered a “youth” becomes an “adult” at age 25 because on average people are making major life changes at that point: marriage, children, and even the first steps in a career become realities. We use age 65 because this is another major transition point—people in formal employment often shift from earning money to using money they have saved or relying on non-work related sources of income. Our work on demographics discusses the need to use a lifecycle approach to financial services. If we truly listen to the needs of clients beyond their birth dates, we will be in a better place to develop the financial services that can help them most.
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Data source for figures: UNECE Statistical Database, compiled from national and international (Eurostat and UNICEF TransMONEE) official sources
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