G2P payments

Banking the Poor via G2P Payments

Posted by MohiniBhavsar on Aug 10, 2010
Banking the Poor via G2P Payments data sheet 2348 Views
Mark Pickens, David Porteous, Sarah Rotman
Publication Date: 
Dec 2009
Publication Type: 
Report/White paper

Governments make regular payments to at least 170 million poor people worldwide—far more
than the 99 million or so who have active microloans. In this Focus Note, we look at government-to-person (G2P) payments, which include social transfers as well as wage and pension payments. With appropriate experimentation, these payments have the potential to become a vehicle for extending financial inclusion and improving the welfare of poor people. Yet in most countries, far fewer than one-quarter of G2P payments to the poor land in a financially inclusive account—i.e., one that enables recipients to store G2P payments and other funds until they wish to access them and make or receive payments from other people in the financial system, and one that is accessible, in terms of cost and distance.

The first section of this Focus Note reviews the state of G2P payments today, including how we arrived at a figure of at least 170 million poor G2P recipients and a country example (Colombia) showing that several types of G2P payments reach the poor. The second section looks at the early experience with providing financial services to poor G2P recipients. We find that 45 percent of G2P programs launched in the past 10 years use an electronic payment mechanism that creates a foundation on which a financially inclusive account can be offered. Examples where this is already being done (Brazil, India, and South Africa) are discussed. The third section deals with five common concerns of policy makers and social development program managers. Recommendations to government, the financial industry, and donors are
summarized in the conclusion.