A few years ago, I read an article about government social protection programs and conditional cash transfer programs (CCTs) that provide funds to qualified households or individuals if they fulfill certain requirements (i.e., visiting health clinics or sending their children to school regularly). I was struck by the number of people who receive these government payments—estimated at 124 million in 33 countries—and that the majority of these payments are made outside of the financial system (around 75%). What an opportunity for using these payments as a vehicle for bringing more unbanked people into the financial system.
Today, this idea seems to be gaining traction. In May, the Ford Foundation, United Nations Development Programme, New America Foundation, Citi Foundation and Proyecto Capital released a report and hosted an event on linking CCTs to savings accounts through financial institutions to promote financial inclusion, asset building and poverty reduction. Inter-American Development Bank is also focusing on this topic.
For those of you with CCT programs in your country, you may find the report and webinar interesting.
Link to report: http://gap.newamerica.net/slcct
Link to webinar: http://newamerica.net/events/2011/next_generation_antipoverty
The report covers examples of current programs that enable, encourage or require savings behavior through CCTs as well as design, operational and policy considerations for linking CCTs to savings accounts. It also highlights the potential of savings-linked CCTs to empower women (as has been the case with women connected to financial institutions through microfinance products) and how scope and scale could lead to a business case for financial institutions to manage small-balance deposit accounts.
Credit unions in Ecuador already offer government payments, including CCTs, through the WOCCU WSG investment office in Ecuador, Red Transaccional Cooperativa (RTC). Are others offering these payment services as well?