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Expanding Global Financial Inclusion through Government to Person (G2P) Payments and Emergency Cash Transfers

In the framework of the fourth United Nations Conference on Least Developed Countries, UNDP –  in partnership with the United Nations Capital Development Fund (UNCDF), the State Planning Organization (SPO), the Turkish International Cooperation and Development Agency (TIKA), Vodafone and Visa – organized a seminar / workshop on “Expanding Global Financial Inclusion through Government to Person (G2P) Payments and Emergency Cash Transfers”, held at the Istanbul International Center for Private Sector in Development (IICPSD) premises on May 11, 2011. The event was attended by about sixty participants from the private and public sectors, civil society organizations and development practitioners, including from the LDCs, in an effort to strengthen South-South cooperation.

Ms. Ulrika Richardson-Golinski, Deputy Resident Representative, UNDP Turkey, gave the opening remarks, expressing her gratitude for the participation of various stakeholders in this important discussion about financial inclusion and the role of different actors such as the government.

Ms. Kori Udovicki, Director of the Regional Bureau for Europe and the Commonwealth of Independent States and Assistant Secretary-General, UNDP, talked about UNDP’s recent work on social exclusion in the region, including the forthcoming Regional Human Development Report, which explicitly recognizes access to financial services as a critical element of its multidimensional measure of social exclusion. Ms. Udovicki then addressed: 1) why scaling up access to financial services for the poorest was critical for broad-based, sustainable development; 2) what G2P transfers to low-cost savings accounts could do to markedly boost financial inclusion in a way that is a win-win for all actors involved (governments, providers of financial and telecoms services, payment recipients); and 3) how mobile phone-based branchless banking and routing remittance flows to G2P accounts could bring volumes towards commercially viable levels in poor countries.

Mr. Sahba Sobhani, IICPSD Interim Director, presented different mechanisms for transferring cash to the poor as part of a primer on G2P Payments and Emergency Cash Transfers being developed in collaboration with the UNDP Bureau for Crisis Prevention and Recovery. These include: 1) Government to Person (G2P) Cash Transfers, mostly used for social protection transfers (whether conditional or unconditional) and payment of wages/pensions to low income employees; and 2) Donor to Person (D2P) Cash Transfers, mostly used in emergency situations (e.g. Cash for Work), microfinance schemes, as well as livelihoods and microenterprise programming. Mr. Sobhani also explained the process of setting up cash transfers, from establishing recipients’ identity to communicating program, ensuring security, identifying partners, establishing the payment system (with a focus on electronic systems), resolving disputes, monitoring and evaluating.

Opening speeches were followed by a discussion on current global programs and the role of governments and international organizations, moderated by Mr. Balazs Horvath, Poverty Reduction Practice Leader, UNDP Bratislava Regional Center. Presentations were made by the following speakers:

  • Mr. David Morrison, UNCDF Executive Director, explained the significance of this event by addressing the fact that it brought major international organizations working on financial inclusion together. Mr. Morrison underlined that the main challenge of extending financial services to the LDCs was to establish operating financial systems in a context of underdeveloped infrastructure, limited financial institutions, unconducive regulatory environment, traditional approach to banking, and lack of coherence between different actors (public, private and donors). In this respect, Mr. Morrison made particular emphasis on financial literacy and women-controlled savings accounts, based on the experience of microfinance, and concluded by stressing the significant role of the private sector.
  • Mr. Thomas Debass, Director for Global Partnerships, US State Department, discussed the Haiti Integrated Finance for Value Chains and Enterprises (HIFIVE) project, aimed at improving the availability of financial products and services, especially in rural areas, and supporting the expansion of agricultural and other production sectors. Mr. Debass specified how HIFIVE and the Gates/USAID Challenge Fund are working together with financial institutions in Haiti, such as MFIs and credit cooperatives, to diversify financial products and extend their reach to agricultural and rural areas, using appropriate incentives and risk management activities. ICT solutions and value chain finance were also named as important components of financial inclusion, in addition with cooperation between strategic partners, such as the World Council of Credit Unions and Technoserve.
  • Mr. Yusuf Yuksel, Head of Income Distribution & Social Inclusion Department, State Planning Organization, Turkish Government, presented the Social Support Programme SODES, which aims to raise the socio-economic development level, enhance the human capital of the region, offer opportunities to the disadvantaged groups of society, and encourage children, youth and women to be involved in cultural, artistic and sports activities. From 2008-2010, over 20,000 people attended vocational training courses, 1,000 received microloans, 336,000 books were distributed, and over 32,000 students attended education support programmes, among other achievements.
  • Prof. Dr. Julide Yildirim Ocal, from Gazi University and the Center of Research for Advanced Technologies of Information and Information Security, presented Conditional Cash Transfer Programs in Turkey, which have benefited 4.3 million people from 2003-2011. One such program is the Social Risk Mitigation Project, aimed at improving children’s health, pregnancy care, and children’s education (especially girls).
  • Mr. Omer Kuyucu, Head of Unit at Vodafone, made a presentation on mobile banking experience in Africa and the Pacific, emergency cash transfer in Kenya and the potential for G2P. In Kenya, with the cooperation of Visa and Vodafone, mobile banking was introduced and people’s awareness of financial services increased to 80%, while 66% could access banking through mobile devices even though the banking infrastructure was very underdeveloped. In Tanzania, despite the high literacy rate of 70%, only 9% of the population had access to banking services and similar positive outcomes were achieved after the launch of mobile banking. Mr. Kuyucu identified regulatory environment, standardization of processes, availability and ease of use of end-user devices as critical for such projects to extend financial inclusion.

Mr. Henry Jackelen, Director of the Private Sector Division, UNDP, wrapped up the discussion by emphasizing the special role of the private sector in global financial inclusion, and underlining the use of technology and innovation as critical for improving the availability of financial services. Mr. Jackelen point out to the examples of Vodafone and Visa in this regard and explained that these cases showed how private sector can make a difference and revolutionize the life of the poorest.

Closing remarks were made by Ambassador Ertuğrul Apakan, Permanent Representative of the Turkish Government at the United Nations, who pointed out the special relationship between Turkey and UNDP, and how Turkey gained valuable experience through more than 50 years of cooperation with UNDP. He highlighted UNDP’s offering to Turkey to become a strategic partner in the region and the opening of the Istanbul International Center for Private Sector in Development (IICPSD) as an outcome of this agreement. Ambassador Apakan explained that the “Programme of Action for the LDCs for the Decade 2011-2020” makes significant reference to the critical role of private sector, and that the IICPSD will play a regional role in promoting the inclusion of private sector in development. He concluded the event by expressing Turkey’s willingness to establish a UN regional hub in Istanbul and how UNDP had already taken a step in this direction with the inauguration of the IICPSD by UNDP Administrator Ms. Helen Clark.

The event was followed by a lunch with participants at the Orient Express Restaurant at Sirkeci Station, famous for the Orient Express and Agatha Christie.