Moya c ultra_poorplenary_presenter2_final

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2012 AC Closing Plenary

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Moya c ultra_poorplenary_presenter2_final

  1. 1. New strategies in buildingassets for the ultra poor: Colombia’s Experience Carlos Moya SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  2. 2. New strategies for building assets for the ultra poor: Colombia’s experience1. Introduction2. Focus on the ultra poor3. Promoting savings for CCT recipients4. Other strategies to promote savings5. Complementary programs SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  3. 3. ColombiaArea: 1.2m km2Population: 46mRural Population: 25.7%GDP growth: Colombia: 5.9% Latin America: 4.3%GDP per capita: Population living in poverty: Colombia: USD$10,000 2008: 46.0% 2011: 34.1%Adult population without access Population living in extremeto financial services: poverty: 2006: 53% 2008: 17.8% 2012: 34% 2011: 10.6%
  4. 4. Key stakeholders Regulators Create an enabling and policy framework SupervisorsNew channels Others and products (Insurance com- Commercial Volume: panies, telcos, co Banks Downscale and mmerce) massify ARTICULATOR + Incentives Provider Other Microcredit Reach the Government NGO bottom of the Entities pyramid: Grassroots Multilateral R & D, knowledge Organizations sharing and finance & innovation Foundations SEEP 2012 Annual Conference 12/5/2012 Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  5. 5. Colombia’s experience:Banca de las Oportunidades Promoting financial inclusion through a public – private partnership: Government propitiates an adequate regulatory framework and business climate, and gives incentives (monetary and in kind) to the financial services providers Private operators (banks, financial companies, cooperatives and microcredit NGO), increase their geographic outreach and improve the supply of adequate products and services for the unattended population.
  6. 6. Factors for successful financial inclusion:Learning from Banca de las Oportunidades  Based on a win/win/win relationship  Interventions have to be led by a pro-market logic: Attractive for the suppliers, profitable and thus supply would be sustainable.  It is essential to include the private sector because they have the expertise on financial services provision and they have wide infrastructure: Leverage to have wider impact.  Incentives (co-finance and/or technical assistance) from the government catalyse innovation: Risk mitigation and learning best practices 12/5/2012
  7. 7. New strategies for building assets for the ultra poor: Colombia’s experience1. Introduction2. Focus on the ultra poor3. Promoting savings for CCT recipients4. Other strategies to promote savings5. Complementary programs SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  8. 8. Focus on the Ultra Poor:Colombia’s government programs 0.5 million 1.5 million families 2.5 million familiesAlthough Banca de las Oportunidades promotes financialinclusion for several type of beneficiaries, thispresentation focuses on the the ultra poor strategies
  9. 9. Focus on the Ultra Poor: Red UNIDOS Red UNIDOS is the Colombian government’s strategy to overcome extreme poverty. It provides preferential access to services to the country’s 1.5 million poorest families. The strategy involves specific programs to help these families overcome the main poverty traps, grouped in 9 dimensions: 1 IDENTIFICATION 6 HOUSING 2 INCOME AND WORK 7 FAMILY DYNAMICS ACCESS TO FINANCIAL 3 EDUCATION 8 SERVICES AND 4 HEALTH SAVINGS 5 NUTRITION 9 ACCESS TO JUSTICE SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  10. 10. Focus on the Ultra Poor: Familias en Acción CCT program of Colombia created in 2000 (G2P) National outreach 2.8 million beneficiary families Subsidies conditioned on nutrition and education indicators for families with children under 18 years old Average payment of USD$90 every two months (6 payments per year) SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  11. 11. New strategies for building assets for the ultra poor: Colombia’s experience1. Introduction2. Focus on the ultra poor3. Promoting savings for CCT recipients4. Other strategies to promote savings5. Complementary programs SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  12. 12. Evolution of CCT payment mechanisms – 2000 – 2007: Cash Transfers • • • ’ “ ” SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  13. 13. Linkage between CCT program andsavings account: Financial inclusion forthe poorestSavings account as an entry gate to otherfinancial services which allow graduation SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  14. 14. Payments through savings accountsDeterminant factors: Financial presence in almost ALL municipalities of the country: Bank agents are essential Design and development of Electronic Savings Accounts (Basic accounts): No frills & full fledged account only for lowest income population Simplified procedure to open low-balance savings accounts: Fewer Know Your Client requirements SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  15. 15. Payments through savings accountsOutcomes:  2.5 million beneficiaries already banked: with a savings account and debit card for withdrawals  Almost US $1 billion paid yearly through savings accounts  Convenience for beneficiaries to withdraw their savings: No long lines, no displacements to other municipalities, ability to withdraw anytime SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  16. 16. Currently: M-banking  Number of cell phones in Colombia > population and full mobile signal outreach  Advances in Colombia to create adequate business climate for M-banking  Banks starting to implement M-banking models, both to reach the unbanked and operate savings accounts  Opportunity to use M-banking for CCT payments: Lower costs, more efficiency, security and comfort SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  17. 17. Evolving towards M-bankingAt the beginning Then Now SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  18. 18. Promotion of savings culture• for CCT beneficiaries who opened accounts (project with Fundación Capital, supported by Ford Foundation) Objectives Tools • Transform part of informal Financial Education savings into formal financial (Aims to change financial savings behavior) • Increase savings and, in the Monetary Incentive to promote long term, accumulation of formal savings liquid assets Joint Intervention: Financial • Facilitate financial Education + Monetary transactions through secure Incentive and efficient means Project Evaluation Measuring impact of increasing savings on improving families’ wellbeing Evaluate the relative importance of Monetary Incentive vs. Financial Education to motivate savings
  19. 19. Mothers’ (beneficiaries’) opinions  “I learned to have entrepreneurship to create my own business, I learned that savings is the most adequate way to achieve goals and life projects and to improve my wellbeing”  “I’m doing savings plans to be able to finish my house”  “It is important to know how to manage the money borrowed to avoid (negative) consequences”  “I learned that it is important to make a good analysis of credits and conditions to avoid future failures”  “Because I learned here a lot about why it is important to save for our future and unforeseen needs”  “Because in the courses we learn that it is important to save for the future”.  “We learn to save and to assure a future for our families” THEY ANSWERED AS “VERY LIKELY” WHEN ASKED ABOUT THE POSSIBILITY OF LEAVING PART OF THE SUBSIDY RECEIVED FROM CCT - FAMILIAS EN ACCION IN THEIR BANK ACCOUNT.
  20. 20. New strategies for building assets for the ultra poor: Colombia’s experience1. Introduction2. Focus on the ultra poor3. Promoting Savings for CCT recipients4. Other strategies to promote savings5. Complementary programs SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  21. 21. Savings GroupsPromotion of savings culture and access to basic financialservices for the population in extreme poverty, in remote areas ofthe country. Results: Promotion of savings culture Practical Financial Education Construction of social capital Social CohesionConcept NumberVillages 34Groups 2,000Total Members 31,200Av. Assets / member US $60Average credit size US $50 GRADUATION: Project with funding from AFI to graduate group participants to the formal financial system with adequate savings products.
  22. 22. Technical Assistance on microsavings Technical Assistance has been given to 6 banks and 12 cooperatives to help them design and develop adequate savings products for the low income population and microentrepreneurs (US$4.7m)
  23. 23. Financial education programs Programs to improve capacity of lowest income population to manage their personal finances, providing complete information about the benefits and principles of using financial services (savings, credit, microinsurance) and basic concepts such as budget and financial planning  Microfinance Opportunities: Bring to Colombia the Financial Education Global Program of Microfinance Opportunities  Program to promote Savings Culture among CCT recipients: Financial Education to enhance savings habits  Project with Central Bank (Banco de la República) and Ministry of Education to include financial education on school  Design strategies for massive outreach (radio, TV and cell phone) to reach more people at low costs.
  24. 24. New strategies for building assets for the ultra poor: Colombia’s experience1. Introduction2. Focus on the ultra poor3. Promoting Savings for CCT recipients4. Other strategies to promote savings5. Complementary programs SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  25. 25. Microinsurance Promote the development and use of adequate instruments to mitigate the adverse effect of economic shocks, natural disasters and emergencies, for the lowest income population. Demand study to identify the needs of the population in extreme poverty and determine the elements to design an adequate microinsurance that suits them Pilot project to give life and funerary microinsurances to 50.000 families in extreme poverty (Red Unidos): Currently under implementation, with perspective to expand to 1.5 million beneficiaries of Red Unidos, based on results. Development of specialized microinsurance products: crops, property and against disasters SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  26. 26. Credit: Village BankingMethodology that uses mutual / group guarantees to increaseaccess to credit for unbanked low income people living inremote areasMain results to July 2012Groups formed 2.000Number of municipalities 54Participants 42,000Average credit per participant ($) US$ 200Average savings per participant($) US $30 SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  27. 27. Lessons learned  It is important to establish a National Policy for Financial Inclusion, with commitment at the highest level for its implementation  Public - Private Partnership: Commitment by both government and network (private operators) is key to achieve specific goals  Must be a win – win - win scenario: Attractive business for the supply side and adequate and affordable products for the demand side and consequently for the government  Follow up goals achievements and impact assessment: Data is necessary for policymaking  Important to involve major actors (such as commercial banks) in order to have a strong impact and transform the market SEEP 2012 Annual Conference 12/5/2012 Building Inclusive Markets: Impact Through Financial and Enterprise Solutions
  28. 28. Contact Informationcmoyafranco@hotmail.com Web Siteswww.bancadelasoportunidades.gov.cowww.dps.gov.cowww.anspe.gov.cowww.fundacioncapital.org Building Inclusive12/5/2012 Markets: Impact Through Financial and Enterprise Solutions 2012

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