A global poverty alleviation group has come up with suggestions on how financial services providers in developing countries can tap into the huge youth savings market.

The Consultative Group to Assist the Poor (CGAP), a global partnership of 34 leading organisations that seek to advance financial inclusion, said in its latest report that with almost half the world's population today under the age of 25, youth finance represented a largely untapped business opportunity.

“Despite this potential, there are surprisingly few examples of providing youth savings in a profitable manner. Few financial service providers, especially in developing countries with large young populations, target youth specifically as a segment,” said CGAP, which is based at the World Bank in Washington.

Its new report examines the business considerations for financial service providers offering savings products to young people. The Business Case for Youth Savings: A Framework analyses the different factors that financial service providers need to consider when entering or being active in the youth savings market and how to make it profitable.

Based on interviews with a dozen financial service providers, the CGAP report outlines key "decision points" at the market, institutional, and client-segment levels that affect the cost and revenue streams of offering youth savings products.

Practical considerations for financial service providers covered in the report include how to control marketing and transaction costs and how to choose a particular youth segment. Case studies from Mongolia, Nepal and Germany illustrate how specific financial service providers have approached the business case for youth savings.

"The goal of this report is to provide financial service providers with practical guidance to make sound business decisions when it comes to youth savings," said Tanaya Kilara, Financial Sector Analyst at CGAP. "In doing so, we want to encourage financial service providers to consider youth as a viable segment for the long term,” she said.

“While financial service providers are beginning to realize the business potential that this largely unbanked population segment holds, there is a need to evaluate the circumstances under which serving this segment makes business sense."

Barbara Magnoni, co-author of the report, noted: "The youth of today will be tomorrow's adults in need of financial services. "Offering formal financial services to young people now will pay off in the long run for financial service providers."

CGAP's research on savings focuses on business models targeting low-income customers. To better understand the needs of youth as a specific client segment, CGAP conducts research as part of the YouthSave Consortium project, a partnership that aims to develop sustainable savings products for low-income and vulnerable youth and assess saving performance and development outcomes.

CGAP is developing innovative solutions through practical research, while employing a pragmatic approach to responsible market development with an evidence-based advocacy platform to increase access to the financial services the poor need to improve their lives