This document summarizes a workshop on social grants and financial inclusion in South Africa. It discusses how social grants in Latin America take an instrumental approach to reduce poverty, while in Africa grants are seen as a basic human right. In South Africa, the Child Support Grant reduces poverty by 38% and resistance to punitive conditionality led to grants remaining unconditional. The document also outlines South Africa's transition to electronic grant payments through debit cards and a new payment service provider to reduce costs and improve controls, with the goal of true, socially and financially inclusive bank accounts for recipients.

1. Fudacion Capital Workshop
Johannesburg, 21 June 2012
21 June 2012
Ingrid van Niekerk
ivanniekerk@epri.org.za
Economic
Policy
Research
Institute

2. Social Grants and the role of Financial
Inclusion in Social Inclusion
Social Inclusion
– Developed in 1980’s in social policy debates of
French social government
• People living on the margins of society without access
to social insurance
• European Debate - Social Exclusion not just about
Poverty - everybody has the right to participate in
society and have the opportunity to reach their full
potential.

3. – Social exclusion more than poverty
• inadequate rights wrt of housing, and access to services
such as education, health and other services
---------------------
2.Multiple factors associated with social exclusion
3.Dynamic nature assoc. with exclusionary process
4.People are denied their social rights
5.Policy failure

4. Key differences between LA and
Africa
Africa -constituted and legislated SP as a basic
human right
– Policy makers and civil society resist attempts to
instrumetalise SP
Latin America –Instrumentalist approaches to
SP
Exceptions- Bolivian universal pension,
Brazilian Bolsa Familia.

5. Spanning two continents
LA – Instrumental Approach - SP is an
investment in pro-poor and inclusive growth.
– Mexico – Opportunidades – programme helps poor
families to invest in human capital – family grant
Africa – SP is rooted in anti-poverty
programmes with a strong social focus.
– South Africa – Child Support Grant – reduce child
poverty - individual child grant

6. Child Support Grant extension to
reduce child poverty

7. The Child Support Grant reduces South
Africa’s poverty gap by 38%

8. Conditional vs Unconditional
Prior 2000 – Most African grants were
unconditional and mainly pensions (non-
contributory)
After 2000 – marked shift to child grants and
conditionality
South Africa – resisted a punitive conditions
– Strong civil society movement
– Activists and legal experts

9. Coverage of Conditional Cash
Transfers (Source-Fabio Verras)

10. Financial Inclusion
Governments make regular payments to almost
170 million people worldwide.
But in most countries only about a ¼ lands in
financially inclusive bank accounts.
 Source: Mireya Almazan, Gates Foundation, Nov 2010 (from CGAP 2009
Focus Note)

11. G2P Payment approaches and
evolution to electronic systems
Cash
– Have to queue to access physical cash
Limited Purpose Account
– Often no additional funds may be deposited
Mainstream Account
– Store of funds, ease of access, deposit additional
funds
(Source: Chris Bold-CGAP)

12. Traditional Government to person
payments systems (G2P)

13. South Africa:
Sekulula Debit card accounts
• Sekulula Debit Card is a basic transaction bank account product
targeted specifically at the needs of social grant recipients in South
Africa.
• Features:
• No minimum balance requirement.
• SASSA pays $1.50 per month per account; includes two free
withdrawals per month at ABSA ATM’s or usage at POS with
ABSA merchants
• Usable at any other bank ATM for fee or VISA POS
• Take-up: More than two-thirds of grant recipients in main province;
• ABSA actively cross sells other financial services to its recipient client
base;
• Accounts are also offered to non-recipient clients as well.
• Now phasing out
Source: BFA (2006,2008)

14. Recipient Responses to account
Ease of access and convenience
Withdrew money immediately - No savings
Minimal use of the financial instruments

15. South Africa – easier to transition to concept
of financial inclusion
– Compel banks through the banking charter
– Acting on ensuring people’s rights
– Relatively sophisticated banking system
• New Technologies easily and quickly embraced
• Strong competition amongst the banks

16. Changes over time towards
electronic payments (CGAP Chris Bold)

17. Does this mean South Africa is on
its way to financial inclusion?
Beneficiaries still withdrawing whole grant
– 90 day clause ?
– don’t need the money ?
Government was facing high cost of delivery,
lack of control of database
Appointed New payments service provider
(CPS/Grindrod Bank)
 Combination smartcard, biometric data

18. Social Protection Plus????
Small Pilot on financial inclusion (1500hh)
Aim of project: incentivize youth and
caregivers to save in a bank account/unit trust
fund, encourage high school completion,
tertiary education, economic activity.
Randomized control trial with two treatments
– T1- financial incentive and financial literacy,
linked to Fundisa unitrust account.
– T2 – in addition career guidance and counselling

19. Mexico using cross ministerial approach
Colombia –holding an auction to sell a subsidy
to open agents in rural areas.

20. Points to consider………
What role for policy-makers in incentivizing the
development of products to financially include
recipients of social cash/electronic transfers?
Can branchless banking provide a low cost
solution to financial inclusion?
What role for mobile delivery systems? Tcho-
Tcho Mobile wallet system in Haiti
What role for stimulating competition amongst
the providers?

21. True
Socially and Financially
Inclusive
Bank
Account