Promoting Financial Inclusion Among Government Payments Recipients

This post was written by Maria Luisa Hayem of Inter-American Development Bank's Multilateral Investment Fund.

Last Thursday, during After Hours Seminar #54, “Government Payments and Savings: The Last Mile Approach,” experts from Inter-American Development Bank’s (IBD) Multilateral Investment Fund (MIF) and the Citi Foundation presented their approach to promoting financial inclusion among government payments recipients in Latin American and the Caribbean (LAC).

This regional initiative, launched earlier this year and expected to benefit at least 200,000 government payments recipients, will support the development of savings products targeted particularly to the low-income recipients of conditional cash transfers. By focusing on the two main savings products, liquid and contractual, the program will contribute to the short-term liquidity management and capital accumulation of low-income people in the LAC region.

This “last mile” approach involves financial intermediaries, payers or non-payers of government transfers, and the recipients of these payments. On the one hand, financial intermediaries will be able to expand their client base and implement cross selling strategies to ensure sustainability. On the other hand, recipients will have the opportunity to save in secure instruments and learn about the benefits of savings.

Moreover, for those financial intermediaries who are currently payers, the implementation of technology will allow them to reach populations in remote areas in a more efficient and low-cost manner and will prevent conditional cash transfer recipients from traveling long distances to pick up payments.

The panelists discussed the key elements that have to be considered when developing savings products for this target population, such as the right pricing and accessibility when it comes to liquid savings and the appropriate mechanisms to ensure frequent and regular deposits to build capital through contractual savings.

This initiative brings together various actors in this area including IDB/MIF, Citi Foundation, Corporación Andina de Fomento, New America Foundation, and the International Development Research Centre. These organizations provide leadership, guidance, and technical advice to the program.