New Report says Electronic Payments can lift Millions out of Poverty; Peru, Kenya, Colombia, and Republic of Philippines First Governments to Make Commitments.
The U.N. Capital Development Fund (UNCDF), U. S. Agency for International Development (USAID), The Bill & Melinda Gates Foundation, Citi (NYSE: C), Ford Foundation, Omidyar Network, and Visa Inc. (NYSE: V) announced today the launch of the Better Than Cash Alliance. The new initiative will call on governments, the development community and the private sector to adopt the use of electronic payments for programs that support people living in poverty-and provide resources to those who commit to make the transition.
Already, the governments of Peru, Kenya, Colombia, and the Philippines, along with development organizations USAID, the United Nations Development Programme, the World Food Programme, Mercy Corps, CARE USA and Concern Worldwide, have committed to digitize their disbursements and payments to people living in poverty, thereby becoming eligible members for technical and financial support from the Better Than Cash Alliance.
"We know that electronic payments can empower people and help include them in economic life," said Christine Roth, Deputy Executive Secretary of the U.N. Capital Development Fund, which serves as the secretariat for the Better Than Cash Alliance. "Yet, while there are many benefits in shifting away from cash, the effort requires leadership, resources and technical expertise. By offering these services to governments, private sector and development community organizations, we believe we can accelerate the shift to electronic payments."
According to a report commissioned by the Better Than Cash Alliance and released by specialist consultancy Bankable Frontier Associates (BFA), people living in poverty around the world exist in a cash-only economy that can prevent them from breaking the cycle of poverty.
Today, some 2.6 billion people live on less than US$2 per day and 90 percent of them lack access to formal financial services. Due to the minimal volume of individual transactions, oftentimes these services are difficult and expensive to provide at scale. The report found that, as a result, most poor households are forced to subsist almost entirely in an informal, cash-only economy making it difficult for them to access financial services that create an ability to save for the future, build assets and move out of poverty.
"We've all heard the adage 'cash is king,' but for too many women and men in the world, living in a cash-reliant world is a tremendous burden," said David Porteous, the lead researcher behind the BFA study. "Cash-only economies often make it too difficult to find a path out of poverty - it means it is hard to build up savings, cash offers too many opportunities for corruption, and women are often at risk when they have to carry their life savings in cash or gold rather than in an electronic account. For these many varied reasons, it is so important to begin the journey to electronic payments."
Across the globe, governments, the private sector and the development community make billions of cash payments to people living in poverty, including disbursements of salaries, payments to vendors, pensions, social welfare stipends, cash-for-work programs, and emergency relief payments. According to the new research, which was commissioned by the Better Than Cash Alliance, these programs can play a pivotal role in driving a strategic shift to electronic payments. To access the report, visit resources.
For governments, development community organizations and companies, the shift from cash to electronic payments can result in significant cost savings and dramatic increases in transparency, security and economic growth. A recent report by the World Bank found that governments can cut up to 75 percent of costs through electronic payment programs.
"UNCDF is pleased by the opportunity to serve as secretariat for the Better Than Cash Alliance," said Roth. "Each of the founders played a critical role in bringing the initiative to fruition. USAID convened the founders and many new member governments and NGOs. Visa and Citi have brought invaluable expertise based on their global electronic payments leadership. Ford Foundation has been essential in securing government commitments from Latin America. Omidyar Network's focus on impact investing gave the Alliance the focus on providing the right support to facilitate the transition. The Bill & Melinda Gates Foundation brought forward a pioneering perspective on the importance of digital payments to expanding financial access."
To encourage other governments, members of the development community and private sector companies to join the Better Than Cash Alliance, founding members of the Alliance will host a global leaders forum - coinciding with the United Nations General Assembly and Clinton Global Initiative on September 24, 2012 in New York. To learn more about the event, visit leadersforum.