moya c ultra_poorplenary_presenter2_final

New strategies in building assets for the ultra poor:

Colombia’s Experience

Carlos Moya

SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions


1. Introduction 2. Focus on the ultra poor 3. Promoting savings for CCT recipients 4. Other strategies to promote savings 5. Complementary programs

New strategies for building assets for the ultra poor: Colombia’s

experience

ColombiaArea: 1.2m km2

Population: 46mRural Population: 25.7%

GDP growth: Colombia: 5.9%Latin America: 4.3%

GDP per capita: Colombia: USD$10,000

Adult population without access to financial services:

2006: 53%2012: 34%

Population living in poverty:2008: 46.0% 2011: 34.1%

Population living in extreme poverty:

2008: 17.8%2011: 10.6%

04/10/2023 SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions

Regulators and

Supervisors

Commercial Banks

Microcredit NGO

Multilateral Organizations

& Foundations

Other Government

Entities

Others (Insurance com-panies, telcos,

commerce)

Create an enabling policy framework

Volume: Downscale and massify

Reach the bottom of the pyramid: Grassroots

R & D, knowledge sharing and finance

innovation

New channels and products

Key stakeholders

ARTICULATOR+ Incentives

Provider

Promoting financial inclusion through a public – private partnership: Government propitiates an adequate regulatory

framework and business climate, and gives incentives (monetary and in kind) to the financial services providers

Private operators (banks, financial companies, cooperatives and microcredit NGO), increase their geographic outreach and improve the supply of adequate products and services for the unattended population.

Colombia’s experience: Banca de las Oportunidades

04/10/2023

Factors for successful financial inclusion: Learning from Banca de las Oportunidades

Based on a win/win/win relationship Interventions have to be led by a pro-market

logic: Attractive for the suppliers, profitable and thus supply would be sustainable.

It is essential to include the private sector because they have the expertise on financial services provision and they have wide infrastructure: Leverage to have wider impact.

Incentives (co-finance and/or technical assistance) from the government catalyse innovation: Risk mitigation and learning best practices



New strategies for building assets for the ultra poor: Colombia’s

experience

Focus on the Ultra Poor: Colombia’s government programs

1.5 million families 2.5 million families

0.5 million

Although Banca de las Oportunidades promotes financial inclusion for several type of beneficiaries, this presentation focuses on the the ultra poor strategies

Red UNIDOS is the Colombian government’s strategy to overcome extreme poverty. It provides preferential access to services to the country’s 1.5 million poorest families. The strategy involves specific programs to help these families overcome the main poverty traps, grouped in 9 dimensions:

IDENTIFICATION

INCOME AND WORK

EDUCATION

HEALTH

NUTRITION

HOUSING

FAMILY DYNAMICS

ACCESS TO FINANCIAL SERVICES AND SAVINGS

ACCESS TO JUSTICE

1

2345

678

9 SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions

Focus on the Ultra Poor: Red UNIDOS

CCT program of Colombia created in 2000 (G2P)

National outreach

2.8 million beneficiary families

Subsidies conditioned on nutrition and education indicators for families with children under 18 years old

Average payment of USD$90 every two months (6 payments per year)

Focus on the Ultra Poor: Familias en Acción




New strategies for building assets for the

ultra poor: Colombia’s experience

– 2000 – 2007: Cash Transfers

Evolution of CCT payment mechanisms

Year Mechanism Challenges

2000 – 2005 Cash transfers, paid at bank branches

•Travel time and cost for mothers to collect payment•Long lines •Demand for liquidity surpasses branches’ capacity

2005 – 2007 “Extended cashiers” introduced to pay at some municipalities without bank presence

Transport cash in helicopters to recipients in rural municipalities

2007 Prepaid cards in 7 main cities

Beneficiaries could withdraw cash at ATMs, but the network collapsed because it reached maximum transaction level

2009 - 2011 Savings accounts In some cases, agents lacked liquidity on payment days because of huge demand for cashout

Since late 2011

M-banking solutions Coordination, Fare fees


Linkage between CCT program and savings account: Financial inclusion for the poorest

Savings account as an entry gate to other financial services which allow graduation


Determinant factors:

Financial presence in almost ALL municipalities of the country: Bank agents are essential

Design and development of Electronic Savings Accounts (Basic accounts): No frills & full fledged account only for lowest income population

Simplified procedure to open low-balance savings accounts: Fewer Know Your Client requirements

Payments through savings accounts


Outcomes:

2.5 million beneficiaries already banked: with a savings account and debit card for withdrawals

Almost US $1 billion paid yearly through savings accounts

Convenience for beneficiaries to withdraw their savings: No long lines, no displacements to other municipalities, ability to withdraw anytime

Payments through savings accounts


Number of cell phones in Colombia > population and full mobile signal outreach

Advances in Colombia to create adequate business climate for M-banking

Banks starting to implement M-banking models, both to reach the unbanked and operate savings accounts

Opportunity to use M-banking for CCT payments: Lower costs, more efficiency, security and comfort

Currently: M-banking


Evolving towards M-banking

At the beginning Then Now


http://www.definicionabc.com/wp-content/uploads/ahorro.jpg

Objectives• Transform part of informal

savings into formal financial savings

• Increase savings and, in the long term, accumulation of liquid assets

• Facilitate financial transactions through secure and efficient means

Tools

Financial Education (Aims to change financial

behavior)

Monetary Incentive to promote formal savings

Joint Intervention: Financial Education + Monetary

Incentive

Project Evaluation

Promotion of savings culture• for CCT beneficiaries who opened accounts (project with

Fundación Capital, supported by Ford Foundation)

Measuring impact of increasing savings on improving families’ wellbeing Evaluate the relative importance of Monetary Incentive vs. Financial

Education to motivate savings

“I learned to have entrepreneurship to create my own business, I learned that savings is the most adequate way to achieve goals and life projects and to improve my wellbeing”

“I’m doing savings plans to be able to finish my house” “It is important to know how to manage the money borrowed to avoid

(negative) consequences” “I learned that it is important to make a good analysis of credits and

conditions to avoid future failures” “Because I learned here a lot about why it is important to save for

our future and unforeseen needs” “Because in the courses we learn that it is important to save for the

future”. “We learn to save and to assure a future for our families”

THEY ANSWERED AS “VERY LIKELY” WHEN ASKED ABOUT THE POSSIBILITY OF LEAVING PART OF THE SUBSIDY RECEIVED

FROM CCT - FAMILIAS EN ACCION IN THEIR BANK ACCOUNT.

Mothers’ (beneficiaries’) opinions


1. Introduction 2. Focus on the ultra poor 3. Promoting Savings for CCT recipients 4. Other strategies to promote savings 5. Complementary programs



Concept Number

Villages 34

Groups 2,000

Total Members 31,200

Av. Assets / member US $60

Average credit size US $50

Results: Promotion of savings culturePractical Financial EducationConstruction of social capital Social Cohesion

Promotion of savings culture and access to basic financial services for the population in extreme poverty, in remote areas of the country.

Savings Groups

GRADUATION: Project with funding from AFI to graduate group participants to the formal financial system with adequate savings products.

Technical Assistance has been given to 6 banks and 12 cooperatives to help them design and develop adequate savings products for the low income population and microentrepreneurs (US$4.7m)

Technical Assistance on microsavings

Programs to improve capacity of lowest income population to manage their personal finances, providing complete information about the benefits and principles of using financial services (savings, credit, microinsurance) and basic concepts such as budget and financial planning

Microfinance Opportunities: Bring to Colombia the Financial Education Global Program of Microfinance Opportunities

Program to promote Savings Culture among CCT recipients: Financial Education to enhance savings habits

Project with Central Bank (Banco de la República) and Ministry of Education to include financial education on school

Design strategies for massive outreach (radio, TV and cell phone) to reach more people at low costs.

Financial education programs


1. Introduction 2. Focus on the ultra poor 3. Promoting Savings for CCT recipients 4. Other strategies to promote savings 5. Complementary programs



Demand study to identify the needs of the population in extreme poverty and determine the elements to design an adequate microinsurance that suits them

Pilot project to give life and funerary microinsurances to 50.000 families in extreme poverty (Red Unidos): Currently under implementation, with perspective to expand to 1.5 million beneficiaries of Red Unidos, based on results.

Development of specialized microinsurance products: crops, property and against disasters

MicroinsurancePromote the development and use of adequate instruments to mitigate the adverse effect of economic shocks, natural disasters and emergencies, for the lowest income population.


Methodology that uses mutual / group guarantees to increase access to credit for unbanked low income people living in remote areas

Credit: Village Banking

Main results to July 2012

Groups formed 2.000

Number of municipalities 54

Participants 42,000

Average credit per participant ($) US$ 200

Average savings per participant($) US $30


It is important to establish a National Policy for Financial Inclusion,

with commitment at the highest level for its implementation

Public - Private Partnership: Commitment by both government and

network (private operators) is key to achieve specific goals

Must be a win – win - win scenario: Attractive business for the

supply side and adequate and affordable products for the demand

side and consequently for the government

Follow up goals' achievements and impact assessment: Data is

necessary for policymaking

Important to involve major actors (such as commercial banks) in

order to have a strong impact and transform the market

04/10/2023 SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions

Lessons learned

Contact Information

[email protected]

Web Siteswww.bancadelasoportunidades.gov.co

www.dps.gov.co

www.anspe.gov.co

www.fundacioncapital.org

04/10/2023 Building Inclusive

Markets: Impact Through Financial and Enterprise Solutions 2012

mailto:[email protected]

http://www.bancadelasoportunidades.gov.co/

http://www.dps.gov.co/

http://www.anspe.gov.co/

http://www.fundacioncapital.org/

moya c ultra_poorplenary_presenter2_final

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