análisis del potencial impacto conjunto que los sistemas de protección social y mecanismos financieros tienen en los territorios rurales

1. SEGUNDO FORO
REGIONAL
“SISTEMAS DE
INNOVACIÓN PARA
EL DESARROLLO
RURAL SOSTENIBLE”
Santiago de Chile
Oct 19-21, 2016
A’kos Szebeni
Rural Finance Team
FAO Rome
Linking Social
Protection with
Financial Inclusion
Innovations to Promote
Sustainable Rural Development

2. Recent Trends in Social Protection Programmes (SPPs)
Recent Trends in Rural Financial Markets
Opportunities and Challenges in linking SPPs with the
Financial Inclusion Agenda
Operational Models of Linkages
Examples of Existing Initiatives
Key Takeaways
Content

3. Trends in Social
Protection
Programmes (SPPs)

4. Trends in Social Protection Programming
• Growing interest and resource commitments to social protection
programming globally and in LAC region, based on evidence of positive
livelihood impact across various indicators:
• poverty, food security;
• education, health and nutrition;
• economic and productive impacts
• Notwithstanding its proven effectiveness, social protection alone cannot
sustainably move people out of hunger and poverty and transform their
livelihoods.
Major Advances in Social Protection
Programmes (SPPs) in LAC and Globally

5. Trends in Social Protection Programming Paradigm Shift in Approach to Social Protection
Programming
• Paradigm shift towards increased attention to the complementary role of
social protection, financial inclusion and other market development
programmes
• This paradigm shift emerged in light of an evolving evidence base that
demonstrates how SP produces synergies with other policy interventions
in order to build human capital; strengthen livelihoods engagement;
reinforce social inclusion, and enhance local economy multiplier effects
• Unprecedented levels of coordination to achieve these synergies and
consequent elevated levels of expectation on magnitude and sustainability
of developmental impact of SPPs
Challenge and opportunity is to optimize the policy intervention mix to promote long-term,
sustainable transformation in livelihoods for rural households

6. Rural Financial Market
Dynamics

7. Source: FAOSTAT
Africa
Cereals
Fruits and vegetables
MeatsTotal production of different commodities in Asia, LAC and Africa (in thousands of MT)
Sustained increase in supply across the world motivated by robust
demand growth
Agricultural markets have been able to efficiently respond to
growing global demand

8. Source: Fuglie, K.O. 2012, “Productivity Growth and Technology Capital in the Global Agricultural Economy”, in Fuglie, K.O., S.L. Wang,
and V.E. Ball (eds.) (2012), Productivity Growth in Agriculture: An International Perspective, CAB International, Oxfordshire, UK.
Productivity gains have been the main source of output growth
Sources of agricultural output growth rate globally

9. A critical determinant of productivity has been long-term investment in
agriculture across regions
Source: FAOSTAT
Agricultural capital stock in Asia, LAC and Africa (in millions of 2005 USD)
Who is financing these investments?

10. Continued dominance of domestic private investments in total
agricultural capital stock
Source, ODI, 2012

11. Financial Sector not adequately catering to economic importance of ag. sector
Agricultural credit as a portion of total credit versus agricultural GDP as a portion of total
GDP in select LAC countries in 2010
Source: Centro de Estudios Peruanos, 2011

12. The dominant role of informal financial services in rural areas in Latin
America and Caribbean
Rural and agricultural HHs are dynamic and already availing a range of financial services from
informal sources, often at a higher cost and with less flexibility
RURAL CREDIT
MARKET
RURAL SAVINGS
MARKET
Sources of Financial Services in Rural Areas

13. Rural Financial Market Dynamics
• Rural and agricultural HHs are considered too risky by FIs due to low
asset base; inadequate risk mitigation mechanisms; lack of stable and
diversified income; and vulnerability to economic, environmental and
social shocks
• FIs lack domain expertise; internal operational processes and
understanding of broader value chains in which producers operate; FIs do
not understand the problems and needs of low-income rural HH, and how
to evaluate their creditworthiness
• Information asymmetries form a core bottleneck for the advancement of
financial inclusion
Key Challenges in Financing Agricultural
Households

14. • Growing body of empirical evidence produces consistent narrative:
financial inclusion reduces rural poverty and promotes sustainable
livelihoods of rural populations
• Rural financial market dynamics reveal sizeable opportunities for
profitable expansion of demand-driven, inclusive financial products and
services for rural and agricultural HH
• Pioneering FIs are demonstrating that the delivery of financial services to
rural and agricultural households is possible and profitable
Key Opportunities in Financial InclusionRural Financial Market Dynamics

15. Opportunities for
Linking SP with
Financial Inclusion
Agenda

16. Linking Social Protection with Financial
Inclusion
• Evidence suggests wide-spread opportunities to strategically link social protection
programmes with financial inclusion interventions to (1) promote synergies; (2)
optimize economic multiplier effects; and (3) institutionalize durability of
development impact
• Strategic coordination, sharing of data and experiences between SP and FI can
alleviate key constraints in the advancement of both agendas and mutually
reinforce outcomes; wealth of HH level information generated by SPPs can help
mitigate the information asymmetries that cause financial exclusion
• Operationalizing linkages requires complex coordination, public and private buy-
in, awareness raising, and technical assistance
• FIs have to undergo a process of transformation to develop requisite domain
expertise; tailored financial products and services; supporting internal
information, IT and delivery systems

17. • Increase income and stabilization effect: incentive led to an increase of 18% in HH
income, a reduction in volatility and increased food security (Sadoulet et al. 2001)
• Higher liquidity resulted in greater multiplier effect: the multiplier effect increased
from 0.24 to 2.77 with added credit and TA elements (Yúnez et al. 2014; Sadoulet et
al. 2001)
• Incentive programmes increase demand in credit: increase in HH income and
reduction in volatility increased the expected return on credit more than the
substitution effect in increased liquidity. Probability of availing credit increased by
15-25% (Hernández, et al. 2012; Winters et al. 2009).
PROAGRO Productivo
Mexico
Linking Social Protection with Financial
Inclusion
Critical for FI: rural HH transition to “bankability”

18. Linking Social Protection with Financial
Inclusion
Three simplified models of linking SP with
financial products and services
Financial inclusion
limited to using
financial product as a
tool for delivery of SPP
SPPs accompanied by
specific financial
products and services to
reinforce the benefits of
social protection
Integrated financial
inclusion and SP
programming through
complex and mutually
reinforcing frameworks
to promote sustainable
rural livelihoods
Potential Synergies
Complexity

19. Examples of
Existing Practices

20. Examples of Existing Practices
• Electronic payment mechanism (i.e. mobile, payment cards) facilitates delivery of
social transfers that is more successful in reaching the poor, in particular in
remote rural areas and in areas with incomplete infrastructure
• Accessing transfers through unique identifiers ensures that transfers are
disbursed to the right person (important in targeting vulnerable sub-groups)
• Cost-effective alternative for delivery that maximizes outreach and safety while
reducing fraud - i.e. Brazil Bolsa Familia programme – after introduction of
electronic delivery, administrative cost of delivering millions of grants reduced
from 14.7% to 2.6% of total grant value disbursed (Lindert et al. 2007)
• In and of itself, electronic delivery does not advance financial inclusion; may create
opportunities for deepening relationship with payment services provider (FI)
Government-to-Person (G2P) transactions
facilitated by mobile payments

21. Examples of Existing Practices
• “Jóvenes con Oportunidades” is a youth savings component added in
2003 to Mexican national social protection programme “Oportunidades”
• Connect CCTs with savings mobilization; Government deposits regular
quantitates of cash to the saving accounts of high school students from
beneficiary HH
• After finishing their studies, young adults can use money to invest in
further education, health insurance, and/or income generating activities
• Can also continue using it as a personal savings account linking them to
the formal financial market and potentially deepening their relationship
with FI
“Jóvenes con Oportunidades”
Mexico

22. Examples of Existing Practices
BRAC Graduation Model
CGAP/Ford Foundation
Implementation
Carefully targeted and
sequenced intervention
with integrated and
mutually reinforcing
components:
• Social Protection
benefits (CT and
other asset transfer)
• Livelihood and skills
training
• Financial services
• Community
mobilization
Source: IADB

23. Source: Fundacion
Capital

24. FAO’s Role

25. Rural Finance Team Approach
Policy Support and Programme Design
Assisting public and private stakeholders in
formulating strategies, policies and interventions
that aim to enhance access to finance for farmers
and rural HH with broader interventions striving to
fight rural poverty and promote sustainable food
security
Supply & Demand Side Capacity Building
Research and Global Experiences
03
01
02
RURAL
FINANCE
TEAM
Providing training, financial literacy and mentoring
to beneficiaries on the demand side; providing
technical assistance to FIs for gauging markets,
designing financial products and services tailored
to the needs of recipients
Wealth of experience in R&D of agricultural
finance and investments; and global portfolio
allows for mainstreaming best practices and
innovative methodologies throughout project
programming

26. Growing interest and resource commitments to social protection
programming globally and in LAC region, based on evidence of positive
livelihood impact
Paradigm shift towards increased attention to the complementary role of
social protection, financial inclusion and other market development
programmes and a and a recognition that coordinated efforts are needed to
facilitate the graduation of poor rural HHs
Rural financial market dynamics offer sizeable opportunities for profitable
expansion of demand-driven, inclusive financial products and services
Opportunities to strategically link social protection programmes with
financial inclusion interventions to (1) promote synergies; (2) optimize
economic multiplier effects; and (3) institutionalize durability of
development impact
Strategic coordination, sharing of data and experiences between SP and FI
can alleviate key constraints in the advancement of both agendas
Operationalizing linkages requires complex coordination, awareness
raising, and technical assistance on both supply and demand side
Key
Takeaways

27. THANK YOU FOR YOUR ATTENTION!