Research & Analysis

Social Cash Transfers and Financial Inclusion

In a number of countries, two separate, but potentially complementary policy agendas have emerged in the past five years: governments have sought to increase the use of electronic means form government payments and to promote greater financial inclusion. While the two agendas have by no means converged yet, in practice they have often been translated into a single headline objective: to increase the proportion of recipients of government social cash transfers who receive payment directly into a bank account.

CGAP's "Banking the Poor via G2P Payments" (Pickens, Porteous, and Rotman 2009) argued that this convergence held great potential to achieve several benefits. On the one hand, electronic payments were seen as likely to reduce the cost of payment for government and make delivery more convenient form recipients, compared to the prevalent cash-based schemes, which require recipients to be in a particular place at a particular time to receive payment. On the other hand, a bank account was seen as the portal into the wider world of formal financial services, such as savings, insurance, and credit. Using these services appropriately would enhance developmental benefits from social cash transfer schemes. There was clear evidence that social grant recipients saved out of their grant, often using informal means, even though the reasons for this were not fully understood.

Related Reports:

CGAP G2P Research Project: Brazil Report
CGAP G2P Research Project: Colombia Report
CGAP G2P Research Project: Mexico Report
CGAP G2P Research Project: South Africa Report

Tag: Payments