Figure 14: Concentration of Recipients Continually Receiving Bolsa Família since October 2003
Notes: This map shows the proportion of families receiving assistance from Bolsa Família. The majority of recipients are concentrated in the poorer northeast region of Brazil.
Source: D. Lima, 2013, “Concentração de beneficiários ininterruptamente desde outubro de 2003,” O Globo, May 2, 2013, http://infograficos.oglobo.globo.com/brasil/a-evolucao-do-bolsa-familia.html. Map used with permission of O Globo.
When Brazil’s Ministry for Social Development began its Bolsa Família (family allowance) program in 2003, it started by hiring the staff of NGOs and civil society organizations to work as enumerators. They traversed favelas, towns, and villages to identify and map every household living in extreme poverty. They used this map to design their conditional cash-transfer (CCT) program, through which they provide a regular cash stipend to families living in poverty, in exchange for the members of the family receiving regular medical checkups and keeping their children in school.
The map also helped the Ministry for Social Development staff make connections with other challenges these households faced. They could see where they needed to add health clinics or build schools in order for the families to meet the conditions of the transfer. They also saw that the largest proportion of participants in the program, as revealed in figure 14, lived in rural areas and earned most of their income from agriculture. For these families to be able to provide for themselves, so that they no longer needed stipends from the government, they would need to improve the productivity and income from their small plots of land.
The Ministry asked Banco do Nordeste to develop a lending product for small-scale producers receiving Bolsa Família payments. Working with the bank, it saw the need to ensure a market for the products for these farmers, so the Ministry arranged for the local schools to buy all the farmers’ produce to use in the school lunch program. Banco do Nordeste now has over 700,000 borrowers in its “AgroAmigo” program.
While primarily a safety-net program, governments can use CCTs to drive financial inclusion by paying the transfers through bank accounts set up for each recipient. Knowing that people are receiving regular cash infusions—from government transfers—into their accounts, financial institutions can develop additional products for these clients to help them build assets over time and borrow money, based on how they utilize their accounts.
The CCT model provides one of the largest investments by national governments to protect their poorest citizens against food insecurity and promote human capital development. Governments use cash transfers to reward parents for investing in the education and health of their children, while supporting increases in household consumption levels. This type of government intervention has proven to considerably reduce the number of people living in extreme poverty in a relatively short period of time and help break inter-generational poverty. In just 10 years, Bolsa Família lifted 36 million Brazilians out of extreme poverty.
Studies have shown that households enrolled in CCT programs not only spend more on food but also improve their diet by consuming higher-quality food. In addition, CCTs have proven to be effective in reducing child labor and gender disparities in education. In Cambodia, child labor dropped by 10 percent, and the school enrollment rates among girls increased in Bangladesh, Pakistan, and Turkey, helping reduce the gender gap in education. Recent pilots in sub-Saharan Africa are also showing promising results with orphans and vulnerable children affected by HIV/AIDS.
In Brazil and Mexico, the main characteristic of their programs is their wide coverage, reaching 46 and 25 million beneficiaries, respectively, and accounting for over 20 percent of the population in both cases. In other countries, like Chile and Turkey, programs focus exclusively on the extreme poor and socially excluded. Chile’s CCT program, “Chile Solidario,” targets about 5 percent of the population and is based on a customized approach where social workers team up with the beneficiaries to design action plans aimed at solving their households’ specific constraints. Together, they set up goals that help the family move out poverty. The cash transfers in this program are used as an incentive to collaborate with the social workers and take advantage of their services.
Studies of CCTs programs have provided clear evidence for short-term poverty reduction, as well as an increased use of education and health services among households, even when they did not use the services before the intervention. Other positive outcomes include reducing income inequality, as in Brazil, where Bolsa Família contributed to the recent sharp decline of the Gini coefficient.
CCTs can also contribute to providing access to basic financial services for the beneficiaries who are still part of the 2.5 billion unbanked adults. Governments can disburse transfer payments to savings accounts through electronic channels. This trend gives recipients an incentive to save a share of the amount received, while at the same time reducing significantly the cost of the payment delivery. Bolsa Família’s delivery costs, for instance, dropped from 14.7 percent of the grant value to 2.6 percent, when the program switched to electronic benefits cards.
As CCTs grow to cover large proportions of the population living in poverty, they place greater pressures on national budgets. Political support for these programs can diminish over time unless governments demonstrate how effective they are in assisting able-bodied recipients to move from government support to livelihoods that generate enough income for families to support themselves.
Fundación Capital works with 12 Latin American governments to help them link their cash transfers to the financial system and create incentives for recipients to build assets over time. It also works with financial service providers, including commercial banks, MFIs, and savings group promoters to help them develop financial products and services appropriate for those receiving government transfers. Their work includes the provision of financial-capabilities training for CCT recipients, including a program that employs a financial training app loaded onto tablets.
Working with government cash transfer programs, which reach millions of people, provides a way for financial institutions to build scale and profitability for accounts with small balances and transaction sizes. In India, part of the government’s social protection program includes the National Rural Employment Guarantee Act, which provides 100 days of employment for anyone willing to work in locally-designed public works projects. As part of the government’s push for financial inclusion, these payments have been paid through no-frills accounts set up in commercial banks. However, most of these banks do not have branches in the rural areas where the workers live. FINO Paytech, a local payment-solutions company that employs business correspondents, provides the last mile solution. The business correspondents use handheld devices, which link to the bank and to each recipient’s smartcard. They set up agent outlets in villages to provide convenient deposit and withdrawal services.
In Mexico, the government distributes a large portion of its cash transfers through BANSEFI, a state-owned bank formed to promote financial inclusion among those living in poverty. At our Summit in Mexico last year, the Mexican Minster of the Economy, Ildefonso Guajardo Villarreal, announced the creation of “Prospera,” an update of the Oportunidades cash transfer program. As a part of this program, BANSEFI partnered with MasterCard to deliver cash transfers electronically through an account that includes a line of credit, complimentary disaster insurance, and low-cost life and health insurance.
The Rwanda government has decided to use its cash transfer system as a key driver of its goal to become a cashless society. It has partnered with Visa to develop an interoperable mobile-payments system. Visa, in turn, has partnered with Kigali National Bank and Urwego Opportunity Bank (a microfinance bank) to provide mVisa as a distribution channel for their clients.
Government social protection programs: Build financial inclusion by distributing cash transfer payments electronically to bank accounts. In remote areas, work with NGOs to develop savings groups among CCT recipients. Eliminate disincentives and create incentives for CCT recipients to build assets over time, including incentives for retaining payments in savings accounts.
Financial service providers: Work with governments to become the distribution point for cash transfers. Provide additional financial services to those receiving CCTs.
|← Previous: 2015 Report > Agricultural Value Chains||Next: 2015 Report > Combining Conditional Cash Transfers and Livelihoods Training for the Poor →|
Table of Contents
- Executive Summary
- Where’s the Map?
- Global Data Show Diverging Paths
- Integrated Health and Microfinance
- Saving Groups
- Graduation Programs
- Agricultural Value Chains
- Conditional Cash-Transfer Programs
- Digital Finance
- Read the Full Report
- Get Your Copy
- Français (Coming soon!)
- Español (Coming soon!)
- Arabic (Coming soon!)