Financial Inclusion and the Future of Social Protection Policy

The economic impacts of the COVID-19 pandemic have resulted in major setbacks in addressing global poverty levels. The UN predicts significant delays in reaching a number of the Sustainable Development Goals and the World Bank reports a two-decade reduction in eliminating extreme poverty. In this context, almost every country in the world has expanded, adapted, or developed new social protection measures. Some 1.3 billion people were assisted through this expansion of social protection over the course of the pandemic, from stimulus cheques to caregiver benefits to supports for informal workers (Gentilini et al., 2020). By far the most popular form of support were direct cash transfers (CT), with many governments expanding coverage or eliminating conditionalities entirely.

Like many observers, I was initially hopeful that these expansions would provide opportunities to address the significant gaps in our social protection systems, particularly as the most vulnerable (women, informal workers and migrants) are often excluded. Unfortunately, this does not seem to be the case. Pandemic specific transfer programs lasted, on average, only 3.3 months, with only 7% extended beyond this (Gentilini 2021). Prior to the pandemic, some 4 billion people lacked social protection coverage. The limited duration of these measures, coupled with the long-run effects of disrupted employment, means we are effectively back to where we started—even as the pandemic shows no signs of abating in much of the world.

What has emerged instead are significantly different approaches to adapting the welfare state in a context of continuous and ongoing livelihood crises.     

On the one hand, we have seen the emergence of coalitions of civil society and labour groups who have called for lasting structural improvements and funding commitments through progressive taxation policy. Researchers have indeed found that the pandemic has shifted attitudes around social protection, addressing concerns around dependency, and providing models for the design of longer-term solutions. As Ursula Huws (2020) has argued, the pandemic has provided a once in a generation opportunity to remake the welfare state and address exclusions of the past. On the other hand, we have a highly influential, and certainly better funded, coalition of financial institutions, technology companies and development institutions who see this as an opportunity to further the inclusion of the poor into financial markets.

Consider global accounting firm Deloitte’s response to both the pandemic and the rise of militant protests over police brutality in the United States:

The challenges created by the global pandemic and recent racial and social injustice events have increased awareness of inequities and financial instability across the globe. They highlight the need for financial institutions to make a global commitment to advance financial inclusion to meet the needs of an underserved market.

This idea, that financial inclusion is a panacea to multiple forms of inequality, is shared by a range of international institutions, philanthropies and financial technology companies. It is an alliance that Gabor and Brooks (2017) describe as a fintech-philanthropy-development complex (FPD), which has long advocated for the inclusion of the ‘unbanked,’ into financial markets and the development of digital payment systems to reduce reliance on physical cash. What unites these actors is a belief that poverty is best addressed by changing the behaviours of the poor, by encouraging them to save, invest and make savvy financial decisions.

One of the problems with this approach is that it has been difficult to demonstrate the developmental impacts of financial inclusion. As Mader (2018) has argued, one could convincingly argue that economic growth, improved education and rising income levels lead to financial inclusion rather than the other way around. For this reason, there is a growing interest in hitching the financial inclusion agenda to social protection measures, particularly cash transfer payments. This has been supported through a shift from cash to electronic payments described as Government to Persons payments (G2P). Positioned as an efficient and cost-saving solution for developing countries, the G2P strategy has provided openings for financial technology companies to benefit from government tenders, gain access to new clients, and gather credit data in the process.

Existing distribution systems have long used financial and banking infrastructure, and in some cases biometric registration systems, but this has not led to what advocates describe as ‘financial deepening’. In short, many transfer recipients simply use their accounts as a mailbox, withdrawing all their funds soon after they are deposited. In South Africa, where I have conducted fieldwork on CT distribution, around 85% of transfers are withdrawn in cash in the first five days of the month. In a context of rising food costs, most people spend their money on necessities such as food, transportation, and health. As Bernards (2019) has argued, the process of constructing financial markets among the poor has been challenging as the reason that the poor may need credit is the same reason that they are a bad credit risk, namely low wages and economic precarity.

In response to this, the World Bank and Gates Foundation launched the G2Px initiative in early 2020. The initiative is aimed at going beyond fiscal savings and using cash transfers to accelerate financial inclusion. If previous distribution models relied on governments opening bank accounts for recipients, the G2Px model is aimed at developing a payments architecture that allows recipients to choose where and how they would like to access their funds. By doing so, financial service providers come to see recipients and not governments as their clients, which will provide stronger incentives to develop financial products for these markets. In short, the G2Px approach is about promoting innovation in the Fintech economy by expanding market opportunities for these companies among the poor.

Improving social protection systems can, of course, be facilitated by digitization initiatives that allow states to get money to people fast. But, once again, the G2P paradigm envisions no real material changes in the amount people receive, the conditions attached to them or in the wages they earn. Rather, the stated aim of G2P advocates is to “transform the relationship between citizens and the state.” This involves fundamental changes in how social welfare works. The G2P approach envisages clients with access to an array of financial services rather than citizens with a right to universal social protection. At the ideological level, this is not significantly different from the hoary old arguments about welfare and dependency. In its new guise, welfare recipients are financial subject who should save, invest in suitable financial services, and practice good economic behaviour to get themselves out of poverty.

We are witnessing a fundamental realignment in global development policy. While cash transfers have long been seen as an effective solution to poverty and livelihood shocks, they are now seen as a tool to advance the financial inclusion agenda. While this is not an entirely new phenomenon, the pandemic has provided openings to reinvent poverty finance and accelerate financial deepening across these markets. This is seen as a ‘win-win-win’ situation for governments, the poor and finance capital, but it contains significant risks. As the South African case demonstrates, the privatization of the CT distribution infrastructure provided opportunities for business to use welfare payments as collateral on loans, further entrapping the poor in debt relations (Torkelson 2020). It also provides the FPD complex with valuable opportunities to advance financial literacy initiatives and gather data on how people spend their money.

This approach stands in stark contrast to the push among a range of civil society actors for a more robust and comprehensive social protection systems. In Nambia and South Africa, for example, there is renewed interest in implementing a basic income grant and interest in developing progressive taxation policy in the form of a wealth tax. Informal worker organization WIEGO has called for adaptive and gender responsive social protection system that recognize that women’s care work often lowers their average incomes. As the anthropologist James Ferguson reminds us, what is important about cash transfers is not only the fact that they have been an effective anti-poverty tool, but that they generate new political claims and hold the potential to fulfil redistributive goals. These goals, however, confront a well-funded and influential development industry that, despite limited evidence, positions financial inclusion as the key to addressing poverty. The stakes are simply too high for this position to win out over more equitable and transformative demands. 


Bernards, N. (2019). Tracing mutations of neoliberal development governance:‘Fintech’, failure and the politics of marketization. Environment and planning A: economy and space51(7), 1442-1459.

Gabor, D., & Brooks, S. (2017). The digital revolution in financial inclusion: international development in the fintech era. New political economy22(4), 423-436.

Gentilini, U. (2021). A game changer for social protection? Six reflections on COVID-19 and the future of cash transfers. World Bank Blog.

Gentilini, Ugo, Mohamed Almenfi, Ian Orton, and Pamela Dale. (2020). Social Protection and Jobs Responses to COVID-19: A Real-Time Review of Country Measures. Washington, DC: World Bank.

Huws, U. (2020). Reinventing the welfare state: Digital platforms and public policies. London: Pluto Press.

Mader, P. (2018). Contesting financial inclusion. Development and change49(2), 461-483.

Torkelson, E. (2020). Collateral damages: Cash transfer and debt transfer in South Africa. World Development126, 104711.

Christopher Webb is a postdoctoral research fellow at the London School of Economics and a Research Associate at the Centre for Social Change at the University of Johannesburg. He tweets at @Cee_Webb.

Photo: Jan Chipchase.

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