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> Posted by Haset Solomon, Associate, the Smart Campaign, and Sonja E. Kelly, Fellow, CFI
Click for complete and full-size infographic
Earlier this year we shared a puzzle: microfinance institutions reported that they had age caps on credit products, but we couldn’t figure out what data or rationale was backing them. Leveraging the Smart Campaign’s endorser network of over 2,000 microfinance institutions, we set out to get to the bottom of this puzzle. What we found in our survey surprised us.
Consistent with our research in the Financial Inclusion 2020 (FI2020) publication Aging and Financial Inclusion: An Opportunity, 61 percent of respondents indicated that they have age caps at their microfinance institutions. Indeed, it is common-place for institutions to place age caps on their credit products. The practice is not limited to one country or region – respondents to the survey came from 45 different countries across every region. As we analyzed the survey, we figured there is either a global phenomenon of discrimination against older people or everyone has a very good reason for their actions that we have been missing.
When asked what the age cut-off is at each respondent’s institution, the responses ranged between 55-80 years, and the average age was 65. Our research earlier this year, however, found that this age cut-off is not always consistently applied within each institution. New customers may have an earlier age cut-off, whereas customers with an existing relationship with an institution may be given an additional few years to apply for a new loan.
So, why do institutions impose these age caps on credit products? We received two competing answers:
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> Posted by Danielle Piskadlo, Manager, Investing in Inclusive Finance, CFI
#185709770 / gettyimages.com
My proudest moments as a parent are when my 2-year-old son finds change lying around the house and runs excitedly to put it in his piggybank. We never consciously did anything to encourage this behavior. I like to think it is due to some small part of my DNA shining through.
The recent CFI and HelpAge report, Aging and Financial Inclusion: An Opportunity, highlights that most people expect to use accumulated savings and assets to fund their retirement, but in reality end up relying primarily on support from family, friends, and the government.
I’ve blogged in the past about how much trouble people have with saving. And it seems financial intuitions for their part use every imaginable mechanism to make it easy (pension contributions at 7/11, behavioral nudges for opting employees into retirement plans), fun (prize-linked savings, lotteries, and games), or obligatory (compulsory savings as a loan requirement) for their clients to save.
I have always believed that the ability to save is a key piece of financial security, and that building the financial capability to save at a young age has a profound impact on financial security throughout a person’s life, even into the retirement years. Recent research undertaken by CFED to “deepen our understanding of youth financial capability and explore the behaviors, types of knowledge and personality characteristics that help children and youth achieve financial well-being in adulthood” supports that belief. The research included an extensive literature review of consumer science, developmental psychology, and related fields to explore the factors that comprise youth financial capability, as well as how and when these abilities are developed.
(click to enlarge)
> Posted by Sonja Kelly, Fellow, CFI
Since the release of our paper, Aging and Financial Inclusion: An Opportunity, I have been considering the challenge of market segmentation using the life course. This is not unexplored terrain at the Center for Financial Inclusion. Beth Rhyne articulated a life course approach during our Looking Through the Demographic Window project, which we have captured in the infographic embedded at right. I have been hearing from microfinance institutions that some efforts are underway to segment clients by their life stage, though this remains a relatively untouched area in the industry. For a great example of segmentation, however, I only had to look to the spam filter on my email.
Most of the emails that get caught in my spam filter are about body image. I receive messages advertising dieting pills, on the one quick fix to reduce belly fat (you won’t believe which celebrities use it!), and how to get toned abs within a week. This makes sense—I work out regularly, and I (try to) watch what I eat. The emails are tailored to me.
In chatting with my colleagues, I find that they also receive targeted emails. Some women in our office who are older than me receive emails for walk-in tubs. Singles get emails that point them to dating websites. Some of the younger men in our office get emails that refer to “satisfying” their girlfriends. And the spam filters of older men in our office collect emails about (ahem) performance-enhancing pills.
These are, of course, gross generalizations—the life course cannot possibly be reduced to dieting, walk-in tubs, and bedroom performance. But why is it that the email caught in my spam filter is more skilled at customer segmentation using the life course than my financial institution’s product line? Even more than being successful at segmenting a potential client base, spam marketers are successful at moving this potential client base to action, according to MailChimp. They have a simple message and a call to action. Their “click rates,” or the rate at which people click on links, are higher than average.
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