Understanding Youth Behaviour

Edition 2, 2015

Hierarchy and Family

Self-Identity

Money and Spending

Cambodian Youth Research

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Moneyand Spending

Content

1/ Youth Income Sources

5/ Influencersof spending

3/ Spending

10/ Emerging opportunities

7/ Access to financial services

2/ Want money? Speak to Mummy

9/ Making financial choices

6/ Saving and access to financial services

4/ Spending priorities

8/ Managing money

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The importance of youth’s money habits cannot be underestimated. Among the world population of 3.5 billion youth, there are 754 million youth in Asia. Their income, spending and financial capabilities have a huge and far-reach-ing impact on the economic develop-ment of Cambodia.

1 / Youth Income Sources

Youth have three major sources of in-come: family allowances, earnings from employment, and gifts and other funds received from parents and relatives. Around the world sources of income for youth vary often by age and their school enrollment status. In general, youth over the age of 15 diversify their income with small or part-time jobs. 1

However overall, youth’s primary source of income is from their parents.

Asian youth face several disadvantages preventing them from accumulating assets; such as the 8.3 million high youth unemployment rates in South-east Asia, 2 or ‘substantial proportion of young workers entering the labour

market as temporary workers’. 3

High numbers of youth employed in Cambodia buck this trend. Yet despite the recent growth in the garment industry and tourism sector, job op-portunities do not match the vast number of labour force entrants. Many youth remain in low produc-tivity and vulnerable employment. 4

According to a recent ILO report, 98.3% youth in Cambodia are em-ployed in the informal sector. So while youth participation in the labour force in Cambodia is 75.7%, 5

there is a high reliance on their fam-ily as a primary source of income.

2 / Want money? Speak to Mummy

The importance of Mother to young Cambodian’s lives cannot be underesti-mated. The primary controller of household income in Cambodia is the Mother. 6 As the parent who spends most time with children, her educational attainment and budgeting skills have a

huge impact on financial attitudes of youth. 7 In focus groups participants consistently stated “if you need more money you have to ask from your mother” (KC FGD 3). Fathers interviewed acknowledged that wives hold onto the household’s purse strings and their role is to give additional spending money or presents when they could afford to do so.

In Cambodia, the money young people can earn varies by season, as do their expense, which hampers their ability to save money. Those living in rural areas are more affected by seasonality than urban youth. We uncovered the peaks and troughs of youth income throughout the year to find the following generalizations.

In particular, wedding season in the forerun to Khmer New Year (Febru-ary- April) is the lowest economic point in the year for youth, as they spend money on gifts for friends and families. Several youth described the rising popularity of Valentine’s Day as an increasing expense as it is seen as a time to buy gifts for friends. Youth tend to receive cash from relatives

1 UNCDF, “Insights from UNCDF’s YouthStart Programme: Policy Opportunities and Constraints to Access Youth Financial Services.” (2013).2 ILO, “Global Employment Trends for Youth 2013: A generation at risk.” (2013) Yun, J. "The myth of Confucian capitalism in South Korea: Overworked elderly and underworked youth." Pacific Affairs

83, no. 2 (2010): 237-2593 IYun, J. "The myth of Confucian capitalism in South Korea: Overworked elderly and underworked youth." Pacific Affairs 83, no. 2 (2010): 237-2594 IAssad, R. and Levison, D. "Employment for Youth: A Growing Challenge for the Global Community." Background Research Paper for United Nations High Level Panel on the Post-2015 Devel-

opment Agenda (2013): 285 IAILO, Global Employment, 42, 1006 IIllo, J. "Who heads the household? Women in households in the Philippines." The Filipino woman in focus: A book of readings (1995): 235-547 Lusardi, A.and Mitchelli. O. "Financial literacy and retirement preparedness: Evidence and implications for financial education." Business Economics 42, no. 1 (2007): 35-44

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during Khmer New Year and those of Chinese descent will accept “lucky money” during February. One par-ticipant stated that she would receive from $30-$100 worth of gifts during this period. Rural respondents stated their dependency on casual labour also makes their income unpredictable. Largely there is greater reported spending during the first quarter of the year, saving potential at the end of the month, or in the latter half of April. Targeted product launches dur-ing this time would be most beneficial for companies.

Overall our findings reveal that youth receive a monthly “wage” and/or daily spending money. Those re-ceiving daily allowances received on average $2-$5/day for daily needs such as food, drinks or schooling. Monthly allowances vary dramati-cally depending on family financial status. Our survey of over 1300 youth in Phnom Penh shows urban mid-dle-class youth spend approximately $159.2/month Whereas interviewees from middle-income backgrounds living in the province estimated their monthly spend as $22/month lower, at an average of $137 per month.

Those who work emphasised the importance of “independent living”, stating phrases such as: “If I have my own salary, I can do what I want.” (See spending section on page 7 for a break-down of Youth Spending habits). Trend scouts revealed that steps towards financial independence start aged 17-19 for those in work, whereas students expect to be independent after gradua-tion aged 24 onwards. However, youth unanimously agreed that if their parents could afford to, they would supplement income if asked. Youth’s first outlet to find money would be their parent, fol-lowed by siblings, then friends. Family circles are clearly the financial safety net of young Cambodians.

Youth accountability for spending is relatively fluid, with respondents “telling parents” what is needed, and asking for supplementary income for larger items. Even less privileged youth from rural areas state “whatever I buy she [mother] will pay for it. I just go and choose my own style” (Female, aged 20, Kampong Cham province). Urban Mothers feel strong pressure to conform to children’s needs stating: “They told me: ‘Mom, my friends have this and that’, and I wanted my children to be the same to the other children, so

I bought for them. For my heart, I don’t want my children look inferior.“ Our evidence shows that while youth autonomously spend their allowances, they have a short-term view of finan-cial budgeting, and depend heavily on their parents to support their lifestyles.

3 / Spending The way youth spend their money is becoming increasingly important to consumer market researchers eager to tap into this lucrative market. Research shows a global trend of teenag-ers and young adults consistently spending a high proportion of their disposable income on their ‘own needs and activities’. 8 Socialisation is a high priority in this category, par-ticularly eating with friends, followed by luxury purchases.

Spending priorities and behaviours of youth appear to be similar worldwide. It is well documented that they are a high spending market segment but they lack adequate financial skills. On-going de-bates surround their high propensity towards immediate consumption 9

and low awareness of saving habits, 10 resulting in low youth financial literacy

8 Bachman, J., Staff, J., O’Malley, P. and Freedman-Doan, P. "Monitoring the future occasional paper series." (1996), 229 Alhabeeb, M. "Teenagers’ money, discretionary spending and saving." Financial Counseling and Planning 7 (1996): 123-13210 Loke, V., Choi, L, and Libby, M. "Increasing Youth Financial Capability: An Evaluation of the MyPath Savings Initiative." Journal of Consumer Affairs 49, no. 1 (2015): 97-126

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and limited use of financial services. Spending habits of young adults in the United States and other higher income countries are being mimicked by Cam-bodian youth, as a rising middle class is leading to higher levels of disposable income for young adults.

This section shall address what spending priorities are for Cambodian youth, the influencers of this spending, and finally the interaction between youth and financial services.

4 / Spending priorities

Youth consumerism is changing. Globally, the primary outlet for youth spending is on food and eating out. Reports show that the average East Asian household is spending 30-50% of their expenditure on food. 11

Teens in the United States spend 20% of their budget on food, a trend exploding by youth in Cambodia.

Another change in youth consumerism is their purchase choices. Purchasing

transport such as car or motorbike is still seen as a consumer goal but global trends show the financially pressed young generation are less likely to pur-chase a vehicle than in the past. 12

Instead, technological purchases have emerged as far greater priorities among modern consumers. ‘Children in the UK confirmed that technology was used as a symbol of fitting in for some children’ 13 and used as identifiers for social status and social acceptance.

Group discussions with 10 young female garment workers in Phnom Penh suggested that intra-employee hierar-chies are marked by a possession of a smartphone. 14 In Khmer culture the moto is still very important for youth. A strong statement of wealth and iden-tity, the moto physically allows youth to communicate with peers. Our findings show Cambodian youth spending priorities lie primarily in food, tech-nology and transport.

Nowadays Cambodians are spending 39% more of their income of leisure activities than 5 years ago, 15 and this

number is set to rise. Youth stated that as grocery prices rise, 16 and an abundance of low-cost options for eating out emerge there is a higher demand for restaurants and fast food/snack sellers. Eating meals is changing, no longer is it a family affair for youth in Cambodia, instead it is a social pastime compounded by conveni-ence. In addition to family meals, Cam-bodian youth are now eating up to 4 times a day, mostly away from home. This convenience trend of buying food away from home is driven by a desire to maximise leisure time, which is having a dramatic influence on food preparation time and methods of consumption.

This in turn affects their spending allocation, with food and drink being the primary expenditure for youth in Cambodia. Even in low-income house-holds, children are given some form of allowance for buying meals or snacks at school. Our team of young researchers kept a spending record over a two-week period, the results of which show that with an average of 19 instances of buying a meal/snack per week; their top priority is their stomach.

11 Brahmbhatt, M. and Christiaensen, L. "Rising food prices in East Asia: Challenges and policy options." (2008).12 “Why Are Young People Ditching Cars for Smartphones?,” The Atlantic, accessed April 10, 2015,

http://www.theatlantic.com/business/archive/2012/08/why-are-young-people-ditching-cars-for-smartphones/260801/.13 Bennell, P. "Promoting livelihood opportunities for rural youth." Knowledge and Skills for Development Paper (2007). Team leaders earning over $200/month often checker their smartphone and act as sources of information for those with less authority Indochina Research Ltd. “Media Index Study.” (2014), 192.14 Team leaders earning over $200/month often checker their smartphone and act as sources of information for those with less authority.15 Indochina Research Ltd. “Media Index Study.” (2014), 192.16 Brahmbhatt and Christiaensen, “Rising Food prices.” (2008).

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Branded restaurants and coffee shops such as Hi Tea and Browns Coffee in Phnom Penh, tap into upper class youth’s need to socially connect: those that offer an atmosphere where youth can leisurely socialise are rewarded by high popularity and high rate of customer return. There is also a rising copycat industry: mobile coffee shops are emerging on street corners around Cambodia catering to the low-end coffee market.

Similarly, in Cambodia, the symbolic use of branded technological goods such as iPhones is highly evident. Purchasing technology such as mobile phones con-

“THOSE WHO ARE NOT YET ACCESSING

THE INTERNET UNDER-STAND THAT THE NEED

TO CONNECT VIRTUALLY WITH FRIENDS IS A

PRIORITY ”

nects youth materially, symbolically and imaginarily to the global consumer com-munity. 17 They become linked to online networks and communicate with friends within this global virtual reality. The shift towards making a smartphone a priority over saving for a moto demonstrates this trend in spending priorities and reflects Cambodian youth’s financial constraints.

Despite the obvious financial advantage of saving for a lower cost item than a vehicle, investing in technology is central to youth’s lives. As previous round of G:LAB indicated, youth are now finding themselves online, and those who are not yet accessing the internet under-

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PHONE TABLET MOTO CAR HOUSE WEDDING OWN BUS

SAVING MONEY FOR?

17 Paek, H. and Pan, Z. "Spreading global consumerism: Effects of mass media and advertising on consumerist values in China." Mass Communication & Society 7, no. 4 (2004): 491-51518 Chiou, J., Huang, C. and Chuang, M. "Antecedents of Taiwanese adolescents' purchase intention toward the merchandise of a celebrity: The moderating effect of celebrity adoration." The Journal

of social psychology 145, no. 3 (2005): 317-334

stand that the need to connect virtually with friends is a priority. This need to connect is demonstrated heavily in the role peers have to play in the influence of youth consumer patterns, which shall be addressed next.

5 / Influencers of spending

While the mother is undoubtedly the gatekeeper to youth’s disposable income in Cambodia, the influence parents have over children’s spending is weakening. Cambodian youth enjoy relative consumption choice, however are more likely to depend on their family for funding to fulfil the purchase. Even so, the role of friends is crucial in understanding influencers of young people’s spending.

In absolute terms, Asia as a region still has the largest proportion of the world’s international luxury brand outlets, but growth is slowing. Access to media undoubtedly has a strong influence on youth’s purchasing motivations, and ‘impact of celebrity adoration was found in Taiwanese adolescents when it came to increasing their intent. 18 Chiou et al. (2005) explain Chinese consumer’s attraction to luxury products is based not solely on materialism, but by inter-

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personal factors. 19 Consumers in collec-tivist cultures purchase luxury goods to secure social recognition, construct a social identity and to show their status. 20 Celebrity endorsement of goods such as Sok Sophea endorsing Huawei smart-phones and KPop Star Rain promoting Anchor Beer can therefore increase their perceived value among youth.

A recent poll commissioned by the American Institute of CPAs (AICPA) and the Ad Council found that 78% of young adults relied on financial habits of friends to determine their own. 21

Similarly, Piper Jaffray found that in the United States ‘teens have cited “friends” as the strongest influence over their purchase decisions, but “Internet” is quickly rising in profile’. 22

Due to rapid consumption of the Inter-net in Cambodia, and the rising profile of peer friendships in youth’s lives, it is highly likely that social media will provide a strong influencer basis upon their purchases. The 3.5 million strong youth in Cambodia are predicted to act as a catalyst for domestic consumption, increasing consumer sophistication and demands for fast moving consum-er goods (fmgc) such as toiletries,

snacks and soft drinks. Media adver-tisements linking to Western con-sumption has helped shape consumer values of quality and innovation; 23

and the demand for internation-al-quality goods and services has seen local Cambodian businesses attempt to adapt to modern standards and a rise of international brands.

As “face” is an important value in Khmer society, it is likely that luxury goods and branded clothing would

provide the consumer with a high social standing among their peers, increasing their social value among youth in the Kingdom. In a survey of 1000 young people, 48% of respond-ents stated that they agreed with the statement “I like to own things that impress people”.

In contrast to their Western counter-parts, spending on fashion/clothing is a secondary priority for Cambo-

“IT IS LIKELY THAT LUXURY GOODS AND BRANDED CLOTHING WOULD PROVIDE THE

CONSUMER WITH A HIGH SOCIAL STANDING AMONG

THEIR PEERS.”

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19 ibid.20 Gao, L., Norton, M., Zhang, Z. and To, C. "Potential niche markets for luxury fashion goods in China." Journal of Fashion Marketing and Management: An International Journal 13,

no. 4 (2009): 514-52621 AccountingWEB "Survey Finds Friends Determine Millennials' Financial Habits”. Accessed April 10, 2015 http://www.accountingweb.com/article/survey-finds-friends-determine-millennials-finan-

cial-habits/222745.22 Piper Jaffray “Taking Stock with teens” (2013)23 Piper Jaffray “Taking Stock with teens” (2013)

WHAT DO YOU SPEND MONEY ON EACH MONTH?

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dian youth. Young adults display a demand for branded label products but conformity remains a significant mo-tivation to purchase certain clothing. Respondents stated that they prefer to “follow” others’ fashion choices. How-ever, the high cost of purchasing branded label clothing has pushed young Cam-bodians to satisfy more immediate needs. Rather than save for a branded product, they purchase fast moving consumer goods, reflecting an overall global trend of spending for immediate consumption and minimal saving. This leads to the question, how much finan-cial capability do Cambodian youth really have? And what is their attitude towards existing financial services?

6 / Saving and access to financial services:

Youth’s financial decisions will dictate the future of world economies. Young people are often criticized for lacking financial understanding or capabili-ties. 24 For a person to be financially capable, under the standard definition they require a combination of ‘knowl-edge, skills, attitudes, and behaviours

that people need to make sound personal finance decisions’. These capabilities encompass:

Access to appropriate financial services

Managing money: managing income and expenditure, and planning ahead

Making financial choices: choosing to save, invest and borrow

In the face of global economic fragil-ity, young Cambodians financial capability is increasingly important. Overall, they appear to be unaware of the risky financial environment they are in. ‘With 35 commercial banks and 39 microfinance institu-tions (MFI) in Cambodia’s financial market, it’s clear that the Kingdom’s appetite for financial products is increasing’. 25 Our findings show that like youth globally, young Cambodians find difficulties in money manage-ment. Cambodia faces challenges in providing sustainable financial access to youth: poor infrastructure, a high use of informal credit systems, low financial understanding, and a rela-tively young banking sector.

7 / Access to financial services

Youth are a globally under-represented market in access to financial services. Access to financial assets ‘is a key con-tributing factor to help youth make their own economic decisions and escape poverty’. 26 However a growing body of research shows 33% youth worldwide are less likely save in banks than adults and 44% less likely to save in formal financial institutions. 27 The youth population is projected to increase rapidly in Southeast Asia by 20% between 2005 and 2035. 28 Adequate access to financial services is critical for the economic development of Cambo-dia’s 3.5 million strong youth.

Our research shows that almost 93% of 15-24 year olds in Cambodia remain without access to a bank account. 29 Of the 7% of youth who have a bank account, 57% have an account with ACLEDA, while Canadia Bank and ANZ are starting to gain customers (ibid). This reflects a wider trend of ACLEDA domination in the banking sector. Cambodia’s microfinance sector has also ‘experienced rapid growth over the last five years, reaching 1.3 million

“ALMOST 93% OF 15-24 YEAR OLDS IN CAMBODIA

REMAIN WITHOUT A BANK ACCOUNT.”

24 Loke et al. “Increasing Youth Financial Capability.” (2015)25 Phnom Penh Post, 6th Sept, 2014: http://www.phnompenhpost.com/post-weekend/seeking-cambodias-emerging-middle-class26 UNCDF “Insights from YouthStart” (2013)27 ibid.28 Bennell “Promoting livelihood” (2007)29 Indochina Research Ltd. “Media Index”, (2014)

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borrowers and 1.1 million savers in 24 provinces’ and is among the strongest globally. 30 MFI reach has penetrated provincial areas, at times to the ex-pense of commercial banks. G:LAB edition 2 Results also revealed a severe lack of branding awareness of com-mercial banks and difference between MFIs. Only 5 banks: ACLEDA, AMK, 31

ANZ, Maybank and Canadia; were mentioned by the majority of 60 youth.

With 62% of bank branches in Cambodia located in Phnom Penh, banks represent a wealthy minority of youth. Our Online Youth survey results show that only 36% of urban youth have a bank account, and less than 1% in rural areas. Delivery of financial services to 15-24 year olds is still limited by urban/rural con-straints and remains a challenge to financial institutions.

As financial services are not easily available, cash is largely used for pay-ment. Our findings show that low financial knowledge demonstrates conventional banking is often out of reach for young people, or seen as “only for those with a job” (FGD Kampong Cham, 2015). Trend Scouts outlined perceived barriers to opening accounts as: provision of land titles or official documents, the belief that you must prove a cash flow, and the view “why put money in when I spend it all?” Focus group respondents also viewed banks as sources of loans, rather than for managing money. If banks and financial services want to market themselves to the younger generation, they will need to address stereotypes, make financial products to suit young adult’s needs and prove their relevance to everyday lives of youth.

We found the banking sector does enjoy high credibility among the youth population. In our ranking assessments, banks are consistently seen as the safest place to keep money and gain returns on investment. However attitudes towards banks and behaviours are widely different. When probed, respondents admitted to preferring to hide savings at home rather than keep them in banks.

There is confusion among youth about the importance of access to financial services. Trend Scouts also revealed that had never heard of importance of credit ratings.

However there is also opportunity to in-crease youth access to financial services via mobile technology, financial educa-tion and increasing financial awareness.

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DO YOU HAVE A BANK ACCOUNT?

30 CDRI "Cambodia in 2012: Key Trends and Policy Priorities From the Cambodia Outlook Conference." Cambodia Development Review 16, no. 1 (2012): 1-24. Accessed April 12, 2015. http://www.cdri.org.kh/webdata/cdr/2012/cdr12-1e.pdf

31 Youth appeared unable to differentiate between banks and MFIs in discussions.

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In particular the MFI sector in Cambodia is very strong and has a wide potential to reach into the rural areas.

Without strong financial skills among youth, high loan use may be a risky option for the financial sector. The question remains to be answered, can young people create achievable finan-cial goals to pay off loans?

8 / Managing money

Youth financial planning and budget management is a problem worldwide. According to Impact Leaders, one third of Australian 18-34 year olds have no savings and many struggle with high debt. 32 In the United States, 20% of young renters overspend their monthly income by $100, relying on credit to fulfil their purchases. 33 Research shows con-nections between youth savings and improved outcomes in other develop-ment areas such as improved economic and social wellbeing in later life, 34 so the question remains, why is youth saving and budgeting so low?

A growing body of evidence suggests today’s young adults are not equipped with adequate financial skills. 35 The MasterCard Index of Financial Literacy reveals that youth in Vietnam and My-anmar perform most poorly in Asia Pacific in basic money management, which includes skills such as day-to-day budgeting and setting aside money. 36 As this study did not include Cambodia, we tested some of our respondents’ financial attitudes and behaviours to work out their saving capabilities.

Many of our respondents declared that they did not earn enough money to warrant a bank account, and argued they “never have enough money”. Most youth lack discipline to save regularly or if they do, it is for short-term goals such as discretionary spending.

However, in interviews with young people, it was discovered that youth have a desire to save for their long-term goals (especially to run their own business), but not the necessary skills to do so. The desire to run one’s own business is Cambodian youth’s biggest aspirations. From garment factory workers to university students, unan-

imously 70 people interviewed stated they wanted to run their own business.

We asked over 60 young Cambodians what they would do if they won $1000? Surprisingly the top 5 categories ranked were:

1. Use it to set up own business2. Pay off school loans3. Give to family4. Buy a moto (scoopy)5. Buy iPhone6/Go travelling

Young adults interviewed optimistically elaborated that for them, the meaning of financial responsibility is to earn money from their own business. Yet self-assessed knowledge of personal finance and managing money is low. This suggests there is a need for improved financial education for young Khmer.

Of particular note is youth reliance on family members to “top up” their income sources should they run out of money, meaning that young Cambodians will always be given money if the family can afford to do so. This therefore reduces their perceived urgency of the need to save.

“YOUTH HAVE A DESIRE TO SAVE FOR THEIR

LONG-TERM GOALS, BUT NOT THE NECESSARY

SKILLS TO DO SO.”

32 "Gen Y Struggles with Saving, Financial Planning: Study." ABC News. November 20, 2013. Accessed February 28, 2015. http://www.abc.net.au/news/2013-11-20/new-research-generation-y-finan-cial-planning-debt/5105552.

33 White, M. "Today’s Young Adults Will Never Pay Off Their Credit Card Debts | TIME.com." Business Money Todays Young Adults Will Never Pay Off Their Credit Card Debts Comments. January 1, 2015. Accessed April 6, 2015 http://business.time.com/2013/01/17/todays-young-adults-will-never-pay-off-their-credit-card-debts.

34 "Youth Savings in Developing Countries Trends in Practice, Gaps in Knowledge: A Report of the Youthsave Consortium." 201035 Lusardi and Mitchelli "Financial literacy." (2007) 36 Mastercard “MasterCard Index of Financial Literacy.” (2013)

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Our research indicates that those from a lower socio-economic background (household income $300 or below) are more likely to be aware of their spend-ing than their richer counterparts. Those from lower socio-economic backgrounds typically worked to supplement their income, or to fund university tuition.

However consistently youth were un-aware of how much money they were carrying on them, or how much they spent. In focus groups, typically only 1/6th respondents would record their saving goals, and negligible numbers of participants recorded spending. As

youth do not see the need to make a record of their spending, it could be argued that they have little financial control, are unaware of the conse-quences, such as bad debt.

9 / Making financial choicesBeyond turning to their family for larger purchases, young Cambodians have a growing array of options to borrow cash. MFIs encourage loans for businesses, small-loan companies have taken off, and traditional infor-mal lending groups such as tong tines are widely available in Cambodia. This means that today’s youth are growing up in a culture of high financial risk.

Alongside an emerging middle class in Cambodia, is a rise in consumer loans. Research shows ½ of the rural Cambo-dian population, and 1/3 of Phnom Penh population has a loan. 37 Nation-wide growth in loans has sustained a ‘32 percent average in the past 2 years’. 38

Reactions are mixed with regards to parents taking out loans to support children’s needs, although all respondents are acknowledge the widespread use of this. Attitudes towards stigmatization of loans appear to be changing among

the younger population, as people become more aware of family financial difficulties.

Cambodia’s credit-hungry young consumers are increasingly looking towards financing institutions to fund purchases of motorbikes, mobile phones and home appliances. The aggressive expansion of financial leas-ing companies such as GL Finance in 2012, and Aeon Microfinance in 2014 have seen loan sizes increase dramati-cally, and in the case of Aeon, loan applications increased fivefold in just one year. 39 The Cambodian credit bu-reau estimate that credit loan balances will triple to $14 billion by 2020, driv-en by a young migrant population with a hunger for economic opportunity. 40

After probing, many respondents admitted to regularly using informal lending systems such as borrowing money from a friend or group. Loans are still kept a secret in Cambodia, with 26% of survey respondents out of 1300 stating they would not seek out advice or tell anyone if they owed someone money. Less than 10% of respondents admitted to using finan-cial leasing companies, however our Trend Scouts argued that this is set to

37 Indochina Research Ltd “Media Index.” (2013)f38 Meng, C. "Consumer Loans in Cambodia: Implications on Banking Stability." (2014) 39 Phnom Penh Post, 6th September 201440 Credit Bureau of Cambodia “Outlook.” (2014)

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DO YOU PLAN YOUR SPENDING?

FGD WITH 18-24YR OLDS

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rise in the future, as making purchases in monthly instalments is being pushed towards young consumers.

Youth are often more vulnerable to the riskier elements of informal credit sys-tems. Ignorance about the ‘laws gov-erning inheritance and debt… [and] lack of knowledge can lead to the unin-formed being taken advantage of ’. 41

With a lack of access to quality banking

products and services, many turn to available but costly alternatives. These include pawnshops, payday loans, car title loans, pyramid schemes, loan sharks, rotating credit associations, and savings clubs. 42 The rise in pawn-shops available in Phnom Penh, illus-trates the high demand for “fast-cash” among Cambodians. Nationally tong tines (all buy in, bid for loans) and lending groups are widely used.

One young researcher stated that the benefits of taking part in a savings group rather than saving with a bank is that you “trust your friends… if there is a problem we can go to their hometown to collect the debt”. Widespread re-ports of moneylenders “running away” demonstrate the risks apparent of in-formal lending. Similarly in reports from Trend Scouts, many admitted to having been personally victims of scams or pyramid schemes, and each of them knew someone who had lost money due to a scam. Often youth were tricked into the validity of the fraud group through advertising bom-bardment or the temptation of luxury giveaways like a holiday in Dubai.

10 / Emerging Opportunities

As money becomes increasingly availa-ble in Cambodia there appears to be an emerging opportunity for credit cards marketed towards youth. From our findings we can extract that consumer attitudes are highly positive towards ‘buy now, pay later’ options. For the

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41 Miles, G and Miles, S. "The Butterfly Longitudinal Research Project: The Chab Dai study on (Re-) integration." (2011) 5342 Caskey, J. Fringe banking: Check-cashing outlets, pawnshops, and the poor. Russell Sage Foundation, (1994)

WHO WOULD YOU TALK TO IF YOU OWED SOMEONE MUCH MONEY?

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youth market with smaller incomes, spreading the cost of large purchases such as buying a moto, are highly ben-eficial. Reducing reliance on informal lending and building good credit with financial responsibility is a valuable lesson for young adults. With a positive credit rating youth financial opportu-nities can increase; whether they want to pay for a laptop, buy a house or take out a small business loan. We predict that credit cards will increasingly be a popular option among youth for purchasing expensive items.

Innovation within the sector is stepping into the mobile point of sale market. Phnom Penh has started to see the rise of multi-function machines for paying electricity and water bills. It is likely that using credit cards would be one step easier for young consumers to au-tomatically pay essential bills or top up their phones. Credit cards would also reduce the barriers to money manage-ment and this mobile form of payment would save youth time. Finally, al-lowing Internet users to manage their credit cards online would increase access and availability of credit to the youth market. Young people would benefit greatly from accessing their money online, anytime, anywhere.

With credit cards being given as prizes at Raffles Design School to the top

3 students; their stretch is currently only to the young elite. Access to this elite “club” is limited. However banks and MFIs can realise the potential for increasing access to credit across the country. In particular, migrants paying for emergencies and rural youth with less access to bank accounts would benefit greatly from being able to make immediate large payments without lengthy fund transfers.

Providers need to ensure that cardhold-ers are aware of the benefits of credit: to increase access to credit, anywhere. Advertising simplified pricing structures has proven to work well for electronic payments system Wing (which has over 200,000 users since 2012) and can be easily replicated within the market.

The pro credit market does have potential pitfalls for young users. Youth can be susceptible to high debt-loads if they are not held responsible for their money management or if lacking adequate budgeting skills.

In discussions with youth we discov-ered that linking spending to rewards could increase young people’s engage-ment with credit cards, and reinforce positive financial behaviour, reducing risk. Through use of financial servic-es young people can increase their financial capabilities and become more

aware of their spending habits. Indeed it is never too early to put youth on the road to financial independence.

As outlined above, evidence suggests that promoting youth budgeting and savings may have the potential to provide positive impacts on youth develop-ment and financial inclusion. Working towards financial capabilities while youth are still young will help them to become productive and economically active members of society as adults.

Enhancing financial innovation and increasing access to youth-tailored products and services, such as university loans, or current accounts with small deposits may be one way to increase youth’s capability. Mobile financial solutions are especially helpful for those with limited time and limited funds, such as rural youth. Youth are aware of their low financial capabilities but seem in great need of education on money-management. Delivering simple money management lessons would be of great benefit to youth. A tendency to overspend, in a climate of informal credit systems and an increasing credit market, may be of high risk unless adequate financial education is included with increased access to services.

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G:LAB

Graphic art, iconography and page layout: Melon Rouge Agency

All rights reserved, 2015

This Research has been initiated and executed by

Researchers:

Martien Van Dijk

Karl Johan Remoy

Nicole Dulieu

For more information, please contact:

Karl Johan Remoy- kj.remoy@gmail.com

Craig Bowman- cbcraigbowman@gmail.com