Keynote speech caroline pulver

Keynote speech caroline pulver

• 1.
  Social Cash Transfersand Financial Inclusion: Evidence from Africa and Latin America [email protected] Leveraging Opportunities to Encourage Financial Inclusion, Johannesburg, June 21, 2012
• 2.
  Social Cash Transfersand Financial Inclusion: Evidence from Four Countries • Various unconditional transfers reaching 9 million recipients South Africa’s Social (30% of population) Security Agency • Various payments methods: prepaid smart cards and magstripe cards linked to account • CCT program started in 1997 reaching 6 million households Mexico’s (20% of population) Oportunidades • Bansefi has various payment mechanisms, including cash, magstripe cards linked to accounts, smart cards Colombia’s Familias en • CCT program reaching 2.4 million families (11% of population) Accion • 1.8 million interest-bearing savings accounts opened by Banco Agrario • CCT program reaching 12.9 million families (30% of population) Brazil’s Bolsa Familia • 2 million recipients receive grants into simplified current account accessible via magstripe card 2
• 3.
  Updated Payments Categorization 3
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  Changes over timetowards electronic payments 4
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  Sought to addresskey questions from previous Focus Note 1. For government: Cost 2. For recipients: Usage 3. For providers: Business Case 5
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  Government Costs BRAZIL COLOMBIA MEXICO SOUTH AFRICA Average grant per recipient $71.0 $55.1 $118.2 $144.7 Average cost per payment $0.84 $6.24 $2.52 $3.50 As % of average grant 1.2% 11.3% 2.1% 2.4% Cash payment N/A $5.20a $2.35 N/A Limited purpose payment $0.88 $6.24 N/A $4.46 Mainstream financial account $0.60 N/A $2.84 $2.03 or $0.10b Rate used in conversion: 1 USD= (15 August 2011) 1.62 BRL 1784.5 COP 12.4 MXN 7.2 ZAR a. Under previous contract; included for comparison only since current contract has no cash payment as defined. b. $0.10 is the fee paid by SASSA to make a bulk electronic transfer into client bank accounts via the Automated Clearing Bureau; the 6 recipient then pays any costs associated with using the account directly.
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  Government Costs: maintakeaways • Case of Brazil & South Africa: • Evidence shows that move from cash to electronic payments can be less expensive for the programs • Evidence shows that it may be cheaper to use mainstream financial accounts from the start, rather than get stuck in limited purpose, closed loop systems • Case of Colombia & Mexico: Evidence shows that cost per payment increases if upfront development of new distribution network is included • Case of Colombia: Limited purpose instruments should be implemented in a way that makes it possible to easily transition to mainstream financial accounts later 7
• 8.
  Recipient Usage • Recipients welcome convenience of electronic payments over cash. Evidence from • Few recipients automatically use new bank research account to save or for much else beyond withdrawing benefits. • It will take time for entrenched behavior patterns to change; and it will require clear, consistent communication. How to adjust • Early expectations about rapid and automatic take up of financial services, especially our thinking savings, need to be recalibrated. • Main benefit to recipients from inclusive accounts may come from simply serving as a gateway to formal financial sector. 8
• 9.
  Business Case forProviders 9
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  Business Case forProviders: average balance needed Illustrative Financial Model: informed from 4 country experiences Revenue Average balance $10-15 Fee income of $0.97 per month is needed Interest recognized 5% for bank to break Transaction fees Rare even on account. Fixed costs Opening cost $10 Monthly maintenance $0.75 Dormancy rate 20-40% Variable costs Transaction pattern 1 withdrawal; 2 balance inquiries Unitary cost of each transaction $0.25-$3 10
• 11.
  Business Case forProviders: main takeaways • Business case depends on receiving a regular fee from government. If this fee is at an adequate level, the business case can be attractive. • Without fee, business case is challenging. Governments cannot assume that banks get sufficient revenue from interest on float or from cross-selling. • In time, a combination of increasing balances, more customer-initiated payment transactions and cross-selling may support a stronger business case. • An efficient widespread agent distribution network is key factor in reducing cost of opening accounts and servicing client transactions. 11
• 12.
  Overall Focus NoteConclusions 1. Design payment arrangements to integrate with other payment channels - path most likely to reduce cost and improve efficiency. 2. Even under-utilized accounts may be stepping stones to greater financial inclusion provided they are mainstreamed into country’s payment system. 3. Early expectations about rapid and automatic take up of financial services, especially of savings, need to be recalibrated. 4. Banks can sustain business case based on a regular government fee; where banks have to build new channels, it will be more viable if these channels can service the greater population. Don’t maroon recipients in high-cost “dead-end” solutions. Build on and support development of country’s general retail payment system. Social transfer program can function as a stepping stone in the move from cash to electronic and on to fully-inclusive formal financial services. 12
• 13.
  Advancing financial accessfor the world’s poor www.cgap.org www.microfinancegateway.org
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  A Seminar onFinancially Inclusive Payment Mechanisms for Social Protection Programmes Bankable Frontier Associates (BFA) in partnership with the Economic Policy Research Institute (EPRI) will deliver a 2.5-day seminar on payment mechanisms for social protection programmes. The seminar aims to provide decision makers responsible for new and existing social transfer programmes with a practical understanding of the range of payment options that are now available and how these can be incorporated into the design of new generation schemes. By attending delegates will:  Understand the leading practices of innovative schemes in different parts of the world;  Learn how to design payment arrangements that are efficient and promote financial inclusion.  Network with other policy makers who are considering financial inclusion as part of their social protection policy. 16-18 July, Mombasa, Kenya 23-25 October, Chiang Mai, Thailand Further information available from : [email protected] 14