From the Wires
CGAP-DFID Report Finds Government Payments Could Help Kick-Start Financial Services for the Poor
By: PR Newswire
Feb. 2, 2010 10:00 PM
Pioneering programs in
"Government-to-person payments for school tuition, food, even salaries
reach over 170 million people in the developing world. Often these transfers
are made in cash or with a debit card that can only be used to withdraw
funds. By using payments on a card, cell phone or a no frills bank account,
governments could empower people with access to financial services well
beyond the receipt of a government payment," said CGAP CEO
"Today, tens of millions of poor people have to spend a considerable
amount of time and money just traveling to a bank branch to collect a cash
payment from the government. Making these payments electronically will not
only make it much more convenient for people to access their money, but will
also lower administration costs for governments and reduce the risk of fraud
and corruption," said UK Minister for Trade and Development
The report says that governments could make significant cost savings by
switching from paying a grant in cash over the counter at a bank teller
window to delivering the payment electronically into a financially inclusive
account accessible via agents equipped with point-of-sale terminals. For a
hypothetical social transfer program that pays monthly
Nearly half of all government payment programs launched in the past 10 years use an electronic payment mechanism, which could be the foundation for a financially inclusive account, says the report.
Although financial institutions are often skeptical about the business case for serving poor people, the report outlines how they can increase their chances of success in this market by using cost-effective delivery channels, achieving scale quickly, and developing quality products that serve the needs of poor people. As a result, branchless banking channels -- mobile phones or card-based solutions, often with merchants acting as cash-handling agents -- are likely to play a prominent role in delivering government payments to recipients in the future.
CGAP's Technology Program aims to improve the lives of millions of poor people. We do this by helping financial institutions and others to expand access to financial services through the innovative application of technology. The program is co-funded by the Bill & Melinda Gates Foundation. To read the program's mobile banking blog, visit http://technology.cgap.org.
CGAP is an independent policy and research center dedicated to advancing financial access for the world's poor. It is supported by over 30 development agencies and private foundations who share a common mission to alleviate poverty. Housed at the World Bank, CGAP provides market intelligence, promotes standards, develops innovative solutions and offers advisory services to governments, microfinance providers, donors, and investors. More at http://www.cgap.org.
The Department for International Development is the UK Government's
department that manages
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