CGAP
Annual Report 2021

Government-To-Person Payments 

Government-to-person (G2P) digital payment systems, along with the cash-in/cash-out (CICO) networks that support them, are vital for distributing financial assistance to people in need. Working closely with The World Bank, CGAP provided G2P technical assistance to 15 countries across Africa, Asia, and Latin America to improve G2P delivery of relief and stimulus payments. This work is ongoing. Beyond this direct support, in the early months of the pandemic we published guidance on how countries could rapidly open G2P payments accounts while complying AML/CFT rules. We also coordinated a working group of peer organizations looking at onboarding to rapidly gather best practices amid the pandemic response.

The Challenge In Building Back 

COVID-19 has highlighted the importance of inclusive financial systems during times of crisis. Over the last year, millions of people who lost their livelihoods had to rely on savings, remittances, or government payments to survive. But we know that these and other financial tools are also important for helping people to meet their basic needs and thrive during times of relative peace and stability. “Building back better” means making these tools available to everyone. Over the last year, CGAP continued to shift its focus to understanding and supporting financial services that can help poor people, especially women, meet three basic needs: generating income, accessing essential services, and protecting basic standards of living. 

Generating Income

The increasingly digital financial sector is intersecting with other areas of the economy to create new opportunities for poor people to earn incomes. It also creates new risks. During FY21, CGAP launched a three-year project to test and scale up financial solutions for three types of workers who together make up the majority of the world’s poor: micro-entrepreneurs and their employees, women in rural and agricultural livelihoods, and the small but rapidly growing number of platform workers. In its first year, the project completed extensive landscaping research on these workers, their needs, and how well existing financial services are meeting them, laying the groundwork for piloting innovative solutions in the coming year. 

A growing number of financially excluded women are running businesses over social media platforms to improve their lives. This informal online commerce (IOC) is driven primarily by women as both buyers and sellers and it enables them to pursue livelihoods, often in the face of systemic and normative constraints. CGAP undertook research in three different markets to better understand the characteristics of IOC, map the personas of the women who engage in it, and provide guidance on how funders can support women in IOC. 

Protecting Basic Standards Of Living 

Low-income people are especially vulnerable to shocks, from climate change-induced flooding to health emergencies. While digital financial services have created opportunities for people to overcome these challenges, they also present complex risks that must be managed not just by consumers, but by governments, funders, and providers. During FY21, CGAP identified 64 specific consumer risks associated with digital finance and completed research for a market monitoring toolkit. When published later in 2021, the toolkit will guide supervisors in how to use tools ranging from phone surveys to AI-based social media analysis to monitor their markets for these consumer risks. It will also highlight how they can use different tools to gather and analyze gender disaggregated data as part of their monitoring efforts.

CGAP also identified three ways to empower consumers and elevate their voice in financial regulation. Throughout the year we worked with several partners to establish the WAEMU Digital Finance Consumer Protection Lab.  When completed it will be a learning forum for regulators, supervisors, digital financial services providers, and other market actors interested in applying market monitoring tools in the WAEMU region and taking actions to improve customer outcomes. Finally, we collaborated with authorities in Peru to set up systems to collect and integrate consumer feedback into financial regulation and supervision.

Expanding Critical Financial Infrastructure All The Way To The Last Mile 

Financial infrastructure that reaches everyone and promotes an open, safe, and competitive market for financial services is essential for financial inclusion.  

Modernizing government-to-person (G2P) payments systems. G2P systems facilitate payments to low-income groups and often women, making them important levers for closing the gender gap in financial inclusion. CGAP continued to champion “G2P choice”: the idea that when multiple payment providers are allowed to distribute payments and compete for transactions, it results in greater convenience, better service, and lower costs for beneficiaries. Thanks in part to our work, Indonesia committed to G2P choice reform as a high priority in its five-year development plan.

Expanding agent networks into rural areas. Agent networks are the bridge between the cash economy and digital financial services, including G2P payments, but they are notoriously difficult to establish and operate in remote areas. CGAP published detailed guidance on how to address these challenges and build viable rural agent networks, and we launched initiatives to expand networks in six countries: Colombia, Cote d’Ivoire, India, Indonesia, Morocco and Pakistan. 

Advancing interoperability in instant payments systems. When financial services are interoperable, they deliver more value to users. Capping off two years of research, CGAP published detailed guidance on how to build an interoperable system and helped actors to develop or improve such systems in Jordan, DRC, Yemen, and the West Africa region. 

Connecting innovators to financial infrastructure via open APIs. Our work to promote open APIs resulted in three partners — MTN, Wave Money, and Tilt Africa — launching APIs that enabled other companies to integrate financial services into a broad range of solutions, ranging from cross-border remittances to bike-hailing. Over 300 partners are now actively using MTN’s APIs in 12 countries across Africa, significantly broadening the uses cases for financial services.

Looking Ahead To 2021-2022 

Emerging Topics. Beyond CGAP’s ongoing project work, in any given year we conduct exploratory work on new topics to better understand their linkages with financial inclusion and identify knowledge gaps where CGAP (and others) can make a meaningful contribution. During FY22, CGAP is focusing its exploratory work on four areas:

1. Climate Change – it is abundantly clear that a climate transition is underway. It will require the world’s poor to adapt to both the physical changes in their local climate systems and the global transition to decarbonized economic systems. CGAP will engage with the wider climate change and financial inclusion communities to advance a joint agenda around the role of financial services in providing the tools the world’s poor will need to manage these transitions. 

2. Essential Services – as one of CGAP’s three priority impact areas, we will seek to build upon CGAP’s past work in the energy, water, and education sectors to better understand how financial services can play a role in expanding access to, and improving the quality of, essential services. We will identify a handful of priority areas in order to shape our own work and to raise broader awareness of opportunities and needs.  

3. Resilience – Building resilience is a complex and long-term undertaking and poor people face a range of economic, natural, health, political, social, and technological risks. Across all these types of risks, women are particularly impacted. We will continue to deepen our understanding of the most important risks that poor people face, how they manage them, and the role financial services can play in building their resilience.  

4. Fragile Countries – in 2020, fragile contexts were home to 23% of the world’s population and more than 75% of those living in extreme poverty. The COVID-19 pandemic, natural disasters, and conflict have likely made the situation worse. Our work will focus on beginning to understand the interconnections between fragility and financial inclusion within the local contexts of Ethiopia, Iraq, and Lebanon.  

1.  Basis of Accounting 

CGAP financial update is prepared on cash accounting basis.  

Revenue from donor pledges is recognized when written notification of a donor’s intent to process the grant is received. In most cases, pledges are fulfilled during the fiscal year in which they were made. Sometimes they are received in the following year(s).   

These (unaudited) financial statements are prepared on a historical cost convention and are denominated in United States dollars. 

2.  Contributions from Donors – Core and Designated 

Donor contributions (including pledges that have not yet been received but are being processed by the donor), interest income,
and foreign exchange gains comprise CGAP’s revenues. Per CGAP’s charter, all members are expected to contribute core funding to carry out CGAP’s operations. Once donors have made core (unrestricted) contributions, they can make in exceptional cases a contribution limited to a specific purpose (designated). Amounts of donor contributions to CGAP’s core funds can be found in the table on CGAP Member Donor Contributions. 

3.  Interest Income  

Interest Income is the interest received during the fiscal year on cash balances held.   

4.  Operating Expenses: Operating expenses are comprised of the following:  

Staff Salaries and Benefits of direct-hire CGAP staff. 

Consultant fees are costs related to hire of individual CGAP consultants. 

Travel are expenses related to delivery of corporate activities including inter alia participation in external events, CGAP-hosted meetings, etc.  

Contractual/Firm services related to hiring of external companies. 

Other Operating Expenses include all other expenses related to delivery of CGAP’s program, including those related to organization of CG and ExCom Meetings, office and building expenses. telecommunications, office supplies, etc.  

5.  Operating Reserve 

Operating Reserves are funds available for ongoing operations and future commitments. Given that CGAP does not generate revenue, an operating reserve is maintained to cushion potential effects of delays in member contributions and to allow an orderly wind-down of CGAP activities should members decide to discontinue CGAP's operations in its present form. Our practice is to target operating reserves at a level that would sustain at least 6 months of operating costs which is at the moment estimated to $15 million.