Why payment systems matter to financial inclusion: Examining the role of social cash transfers

Abstract

There is growing realisation that financial inclusion and social inclusion are part of the same effort. As a result, financial inclusion has become a policy priority for many governments, seeing this as a complement to financial stability, and viewing financial exclusion as a risk to financial integrity. Advances in understanding the drivers of poverty and developments in technology provide new opportunities to governments to address the fight against poverty and meet the objectives of financial inclusion. One of the most successful tools in the fight against poverty is social protection via cash transfers. These regular payments of money, provided by the government, assist in decreasing chronic or shock-induced poverty and reduce economic vulnerability. Where social cash transfers are national public policy, the objective is to provide safety, transparency and cost efficiency in the delivery of the cash transfers. Government agencies delivering the cash transfers seek the means to lower the processing costs, reduce fraud and leakage, as well as improve access for the financially underserved. For the recipient, there is a need for safety and control over the funds, convenient access and reliable payment methods. As a result there is a strong argument in favour of leveraging the technological advances in financial services with government payment programmes to promote financial inclusion.