Opportunities: Savings Groups, Conditional Cash Transfers and Financial Inclusion

Jong-Hyon Shin

Fundación CapitalSeptember, 2014

Fundación Capital• Mission: Poverty reduction through innovation, asset building and in

particular, financial inclusion.• Proyecto Capital: financial inclusion for the beneficiaries of CCTs • Outreach: 11 countries in Latin America and soon in Africa • Partners: Governments, Financial Institutions, Communities• Donor: Ford Foundation

Savings groups• Started in Niger, Africa in 1991• Reach the poor, the young and the distant • 65 countries, 9 million, 90% in Africa• Simple, cost effective, volunteer replication, eliminate money lender • Increase in investment (business, agriculture, education) and asset

(house, furniture, electro domestics)• Challenges: -Subsidy needed for program operation -Massive scale up

Financial inclusion • Access to financial services (bank accounts, loans, insurance ), basis of

economic development.• 2.5 billones, 50% of adults, out of formal financial system.• Financial inclusion, global priority of the public and private donors (CGAP,

2013).

• Linking CCTs to financial inclusion, gaining increasing traction. • Challenges: G2P Bank account used as a simple path-through; 90% of

100 millones government mandated bank accounts in India, in state of dormancy (CGAP, 2013).

Conditional Cash Transfers (CCTs)• “Most successful anti-poverty program in Latin America”• Started in Mexico in 1997 (18 countries in Latin America, +30 in the

world)• Goals: i) alleviate immediate poverty, ii) break inter-generational poverty• Impact : school attendance, nutrition & health• Challenge: No increase in human, physical and financial assets

Total outreach of CCT program in Latin America

Country Population (million)

CCT(million) %

Brazil 201 15 7.49

Mexico 123 6.5 5.28

Perú 29 3.2 10.90

Colombia 47 3 6.39

Ecuador 15 1.9 12.67

Chile 17 1.1 6.74

Bolivia 10 0.87 8.77

Rep.Dom. 10.28 0.85 8.23

Guatemala 15.1 0.76 5.06

El Salvador 6.2 0.12 2.02

Paraguay 6.3 0.09 1.44

TOTAL 479.88 33.49 6.98%

Brazil

Mexico

Perú

Colombia

Ecuad

orChile

Bolivia

Rep.Dom.

Guatemala

El Sa

lvador

Paragu

ay0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,00045%

19%

9% 9%

6%3% 3% 3% 2%

0% 0%

DilemmaLong term poverty alleviation elusive:

Increased budget & increased poverty in Oportunidades, CCTs in Mexico (1997-2012)

Why SGs+CCTs+FI?

SGs

CCTs Banks (FI)

-Scale up-Human resources-Financial

resources-Solidarity in place

-Asset building-Exit strategy-Cost effective-Time efficient

-Scale up -New market creation

-Better services -Customized products

-Safety-Long term saving-No limit in savings-Long term loan-Bank history-Better services-Active account

-Discipline in payment-Scale up-New market creation.

Structure of PROSOLI

Findings: SGs+ FI• The more mature is the SG, the more open to bank• SGs respect the bank policy.• SGs can distinguish the services of banks and groups.• SGs and banks are not only complementary but indispensible.

Pilot: SGs+CCTs+FIGoal: Train 200 government employees working in CCTs so that they can form 200 SGs with 5,000 members. 50% of them will open bank accounts.Duration: Agu., 2014-Feb., 2015 (6 months)Organizatios: Fundación Capital, PROSOLI (Dominican CCTs), Banks ADOPEM,

Bank BHD LEON