Fudacion Capital Workshop Johannesburg, 21 June 201221 June 2012Ingrid van Niekerkivanniekerk@epri.org.zaEconomicPolicyResearchInstitute
Social Grants and the role of FinancialInclusion in Social InclusionSocial Inclusion – Developed in 1980’s in social policy debates of French social government • People living on the margins of society without access to social insurance • European Debate - Social Exclusion not just about Poverty - everybody has the right to participate in society and have the opportunity to reach their full potential.
– Social exclusion more than poverty • inadequate rights wrt of housing, and access to services such as education, health and other services ---------------------2.Multiple factors associated with social exclusion3.Dynamic nature assoc. with exclusionary process4.People are denied their social rights5.Policy failure
Key differences between LA andAfricaAfrica -constituted and legislated SP as a basic human right – Policy makers and civil society resist attempts to instrumetalise SPLatin America –Instrumentalist approaches to SPExceptions- Bolivian universal pension, Brazilian Bolsa Familia.
Spanning two continentsLA – Instrumental Approach - SP is an investment in pro-poor and inclusive growth. – Mexico – Opportunidades – programme helps poor families to invest in human capital – family grantAfrica – SP is rooted in anti-poverty programmes with a strong social focus. – South Africa – Child Support Grant – reduce child poverty - individual child grant
Child Support Grant extension toreduce child poverty
The Child Support Grant reduces SouthAfrica’s poverty gap by 38%
Conditional vs UnconditionalPrior 2000 – Most African grants were unconditional and mainly pensions (non- contributory)After 2000 – marked shift to child grants and conditionalitySouth Africa – resisted a punitive conditions – Strong civil society movement – Activists and legal experts
Coverage of Conditional CashTransfers (Source-Fabio Verras)
Financial InclusionGovernments make regular payments to almost 170 million people worldwide.But in most countries only about a ¼ lands in financially inclusive bank accounts. Source: Mireya Almazan, Gates Foundation, Nov 2010 (from CGAP 2009 Focus Note)
G2P Payment approaches andevolution to electronic systemsCash – Have to queue to access physical cashLimited Purpose Account – Often no additional funds may be depositedMainstream Account – Store of funds, ease of access, deposit additional funds (Source: Chris Bold-CGAP)
Traditional Government to personpayments systems (G2P)
South Africa:Sekulula Debit card accounts• Sekulula Debit Card is a basic transaction bank account product targeted specifically at the needs of social grant recipients in South Africa.• Features: • No minimum balance requirement. • SASSA pays $1.50 per month per account; includes two free withdrawals per month at ABSA ATM’s or usage at POS with ABSA merchants • Usable at any other bank ATM for fee or VISA POS• Take-up: More than two-thirds of grant recipients in main province;• ABSA actively cross sells other financial services to its recipient client base;• Accounts are also offered to non-recipient clients as well.• Now phasing outSource: BFA (2006,2008)
Recipient Responses to accountEase of access and convenienceWithdrew money immediately - No savingsMinimal use of the financial instruments
South Africa – easier to transition to concept of financial inclusion – Compel banks through the banking charter – Acting on ensuring people’s rights – Relatively sophisticated banking system • New Technologies easily and quickly embraced • Strong competition amongst the banks
Changes over time towardselectronic payments (CGAP Chris Bold)
Does this mean South Africa is onits way to financial inclusion?Beneficiaries still withdrawing whole grant – 90 day clause ? – don’t need the money ?Government was facing high cost of delivery, lack of control of databaseAppointed New payments service provider (CPS/Grindrod Bank) Combination smartcard, biometric data
Social Protection Plus????Small Pilot on financial inclusion (1500hh)Aim of project: incentivize youth and caregivers to save in a bank account/unit trust fund, encourage high school completion, tertiary education, economic activity.Randomized control trial with two treatments – T1- financial incentive and financial literacy, linked to Fundisa unitrust account. – T2 – in addition career guidance and counselling
Mexico using cross ministerial approachColombia –holding an auction to sell a subsidy to open agents in rural areas.
Points to consider………What role for policy-makers in incentivizing the development of products to financially include recipients of social cash/electronic transfers?Can branchless banking provide a low cost solution to financial inclusion?What role for mobile delivery systems? Tcho- Tcho Mobile wallet system in HaitiWhat role for stimulating competition amongst the providers?
TrueSocially and FinanciallyInclusiveBankAccount