Research Spotlight
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Looking Beyond Universal Financial Access
Over the course of the past year, Guy Stuart, CFI Fellow and CEO of Microfinance Opportunities, conducted focus groups and observed transactions to answer the question of whether the conversion of cash transfer welfare payments from cash to electronic form serves as an on-ramp to financial inclusion. Stuart’s answer in brief? No.
Stuart focused his research on Colombia and Pakistan, countries with robust cash transfer programs for the very poor that transitioned from cash to electronic channels. While the programs were well-intentioned, Stuart found that there were significant barriers to active use of the accounts into which payments were channeled and very little access to additional products. Stuart’s findings call into question the dominant narrative that G2P payments lead to financial inclusion.
In Pakistan, only about a third of the recipients, all women, actually went on their own to collect their payments. The other 2/3rds relied on male relatives to collect the payments on their behalf. The dominant use pattern also involved provision of customer PIN numbers to banking agents, a violation of safety protocols. In Colombia, where the women recipients managed their transactions themselves, few had ever stored funds in the accounts. While there may be evidence that G2P electronic payments lead to increased efficiency for governments and new customers for financial institutions, there is little evidence that the improved channel translates into financial inclusion for recipients.
To test these findings, CFI held a roundtable with subject matter experts at the beginning of July. Rather than disprove Stuart’s conclusions, roundtable attendees agreed that there were few if any examples of G2P payments translating into financial inclusion. Rather than give up on the goal of financial inclusion, however, attendees expressed confidence that G2P electronic payments could eventually create value for customers. A better understanding of value for stakeholders, a more competitive marketplace, and greater attention to customer needs, for example, could each make a difference in moving recipients to active use of the accounts and additional products.
The drive toward electronic G2P payments will continue, and overall that is a positive thing. Nevertheless, like the attendees at our roundtable, we are hoping that increased attention to the challenges will provoke governments and international organizations to pursue realistic and actionable goals.
Government to Person (G2P) Payments: An On-Ramp to Inclusion?
Read more from the Fellows
(as featured on the CFI Blog):
• “G2P and Gender: When will Pakistani women be able to withdraw their own money?” (Stuart)
• “Rental Properties: A popular pension plan for aging entrepreneurs?” (Stickney)