Understanding and Evaluating the Risks of Formal Savings Accounts for OVC Populations

Savings accounts in the formal financial system versus informal savings provide security for savings and can serve to incorporate OVC populations within the formal financial framework, enabling them to access other financial services. FSPs can employ several methods to reduce the possibility that vulnerable clients will face abuse from or be taken advantage of by adults in their life. Increasing children's control over savings account operations can allow them to open savings accounts with any trusted adult, mitigating potential for abuse. Designing savings accounts with withdrawal restrictions for specific purposes can also reduce the risk of misuse, such as requiring documentation from schools to accompany withdrawals for school expenses. FSPs can also use innovative methods to encourage savings while ensuring that clients can maintain access to their savings at little or no cost. For example, bundling a simple savings account with a fixed deposit account can provide a way for clients to accumulate larger sums of money over longer periods of time. Providing financial education enables young clients to understand the requirements and components of their savings accounts, allowing them to make informed decisions about their account usage. FSPs looking to provide products to OVCs should incorporate elements of account design that can make their products safer and more accessible to OVC populations. These elements include low withdrawal fees and minimal or no balance requirements. FSPs can also use mechanisms like feedback mechanisms to detect and address issues associated with account misuse and other user satisfaction problems. The YouthSave project, which seeks to extend access to financial products and complementary non-financial services to youth, found that the project was least successful in engaging youth who are very poor, girls, and out-of-school youth. The study highlighted the importance of further refining products and delivery to attract low-income clients, pointing to the need for extremely careful design and outreach when creating products for children and youth affected by HIV. The Savings Innovation and Expansion for Adolescent Girls and Young Women Project, offered by Women's World Banking and Xacbank in Mongolia, found that girls receiving financial education along with savings accounts saved four times more than those who opened only a savings account. Financial education training programs can provide orphans and vulnerable children with the ability to make informed decisions about their account usage, and can be offered in conjunction with a savings account to provide young clients with the ability to understand the requirements and components of their savings accounts.