Savings & CCTs: The Next Generation of Anti-Poverty Programs?

On Tuesday, May 3, the Global Assets Project at the New America Foundation hosted a discussion on how savings-linked conditional cash transfers (SLCCTs) might be the next promising anti-poverty tool. Conditional cash transfers (CCTs) direct funds toward qualified households or individuals if they fulfill certain requirements like visiting health clinics or making sure their children attend school regularly. By linking CCTs to savings accounts, governments can offer a path to savings and financial inclusion to the poor and help break the inter-generational cycles of poverty. At the public forum, a report was released that summarizes the key ideas and insights that emerged from a two-day expert global colloquium on SLCCTs, held last November at the Ford Foundation in New York City.  In particular, the report examines the conceptual framework behind SLCCTs, provides the state of the field along with country case studies, outlines challenges, and proposes a way forward.

Frank DeGiovanni of the Ford Foundation gave opening remarks, and the panel included Shari Berenbach, Director of the Microenterprise Development Office at USAID, Alberto Chaia, a partner at McKinsey and Company’s Mexico City Office, Selwyn Jehoma, Deputy Director-General for Comprehensive Social Security for the South African Government, and Fermin Vivanco, Investment Officer at the Inter-American Development Bank. The panel was moderated by Jamie Zimmerman, Director of the Global Assets Project at the New America Foundation, and Henry Jackelen, Director of the Private Sector Division, Partnerships Bureau at the United Nations Development Programme, provided concluding remarks.

DeGiovanni of the Ford Foundation explained two major shortcomings that currently exist with CCTs: 1) beneficiaries are not connected to mainstream financial systems and 2) many programs are not currently designed to help parents increase their own assets in the medium term, the next two decades of their lives, often causing mothers to become dependent on the cash transfer. This is a lost opportunity to promote financial inclusion for poor families, DeGiovanni stated. Poor families need not only income, but assets to help break the cycle of poverty, including human, financial and physical capital to be able to seize opportunities and gain economic security, he said.

Ms. Berenbach shared that the U.S. Government and USAID in particular is very interested in exploring ways to use new technology to create greater efficiency in delivering resources to those unbanked and other vulnerable populations. She highlighted CCTs as particularly exciting for bilateral and multilateral agencies and governments because of the scale at which CCTs can effectively help the poor. Mr. Chaia shared his experience with Oportunidades in Mexico, one of the very first CCT programs, in overcoming the challenge of distribution. He emphasized the need to leverage the governments’ investments by linking CCTs with savings and other financial products that can ultimately benefit poor families as well as financial institutions who were otherwise unable to reach these populations. Mr. Jehoma emphasized the opportunity social grants or cash transfers provide in building human capital, and explained how the South African Government is exploring how to help beneficiaries graduate from income support to other opportunities of economic activity like microenterprises, as well as better access to education and employment opportunities. Mr. Vivanco spoke of the wide opportunities that exist in linking savings to CCTs and working with MFIs and financial intermediaries to reach poor and vulnerable populations.

Mr. Henry Jackelen of the United Nations Development Program provided concluding remarks in which he discussed the evolution of how development programs dealt with the poor: starting from a “victim paradigm” where beneficiaries were given training and other resources, and shifting to a “client paradigm” that gave beneficiaries the ability to conduct business on their own terms, which required understanding the household as a micro-conglomerate with complex cash flows. Now, Mr. Jackelen says, we are starting to use a “citizenship paradigm” with programs such as Bolsa Família encouraging citizen engagement with the government at the ‘bottom of the pyramid.’

Participants