CCTs & Financial Inclusion in Latin America: An Empirical Study

Conditional cash transfers
Financial Economics

Conditional Cash Transfers (CCTs) have been an essential tool for public policy in its fight against poverty, and the trend has been for an increasing number of programs, geographic coverage, number of beneficiaries, and funding.

Currently, there are 25 CCT programs operating in 19 countries across the region. These programs have evolved since the first days of CCTs, exploring different delivery methodologies in order to meet the specific needs and contexts of each country. Many of the 25 programs combine different payments modalities, from cash or paycheck distribution to the opening of bank accounts.

There’s been a tendency towards payment methods that are more efficient and inclusive, either by linking to the financial sector or through the use of new technologies. However, cash and checks still persist in 12 of the programs - especially in the case of remote areas or areas that lack infrastructure and services - and only a small  number of programs offer full access to a wide range of financial services.

But beyond delivery methodology, some other barriers still limit the financial inclusion of the CCT recipients. Many recipients withdraw all the money as soon as they receive the transfer, which can also lead to a lack of liquidity in the ATMs. There’s also a tangible lack of trust towards the financial system, related to the low quality of customer service and care. In order to address all this, a good communication and the development of financial capabilities is essential.

In spite of these difficulties, the fact of being linked to a financial institution can still increase the possibilities for the recipient of accessing new financial services, or at least help them to discover and get to know new products. Therefore, it can be expected that, in general, CCTs delivered through bank accounts can incentivize formal savings in the long run and, to a certain extent, also promote financial inclusion.

Consistently, though there are few programs using bank accounts with widespread availability, many economies have incorporated some of the dimensions of financial inclusion into their CCT programs, advancing saving or mobile banking. For all this, we believe that CCTs have contributed to advancing financial inclusion in the Latin American region.

To date, there exists much empirical evidence about the short term impact of CCTs on poverty, consumption, health, child development, and the general well-being of recipients. There also exist a large number of empirical studies analyzing financial inclusion, and its positive effects on the economy. However, the majority of studies that analyze the relationship between financial inclusion and CCTs have been theoretical or based in microeconomics, focused on the impact of particular programs on specific economies. The current investigation constitutes an alternative to the lack of macroeconomic studies, and is based in a comparative review of the financial inclusion data of 16 Latin American countries from 2000 to 2013.

It is particularly difficult to evaluate financial inclusion in Latin America for two reasons; the limited information available to fill the gaps in information, and the lack of consensus regarding which variable or indicator is best suited to represent the complexity of financial inclusion.

With respect to the second point, the literature usually studies financial inclusion in a multidimensional manner, with the dimensions commonly relating to access, use, and depth of the financial sector. However, variables such as barriers to access and quality of the financial system are now being incorporated more and more.

With respect to the traditional dimensions of use of and access to the financial system, the number of bank accounts, bank branches and ATMS per resident are frequently used as a variable proxy, while penetration of the financial systems is frequently measured via the ratio of private credit to the GDP of a specific economy.  Given that there is are gaps in the information for all years of the variables to access and use in Latin America, for our work we used the ratio of private loans to GDP.

Although the measure is far from perfect (credit could be concentrated in the hands of a few large borrowers, implying a deep financial sectors but one where access or use is scarce), this is the only variable currently available for a study of this type and it is highly correlated with the variables of use and access in our sample. CCTs were chosen as an independent variable, measured in monetary flow injected by the conditional transfer programs in different countries in the sample were taken. Control variables such as education, poverty, income, population and inequality were also introduced.

The primary result of the investigation showed that the impact of the principal independent variable was positive and statistically significant in all models, whether working with the amount assigned in the annual budget or the amount actually executed each year. This corroborates the hypothesis that a higher rate of CCTs is related to a greater rate of financial inclusion. Moreover, the analysis suggests that the impact would be even greater if the number of CCTs in the region offering financial services was increased.

It should be noted that the information available on CCT programs in the region is still very limited. For this reason, our results are presented as a first pass that should be furthered with  future research, when more data are available and further study can be done based on larger sample sizes.

Equally, these results do not purport to confirm that simply offering financial services linked to CCTs is sufficient to increase financial inclusion. As mentioned, the mere fact of access to financial services, without the necessary financial education to make effective use of them, is a barrier to financial inclusion. As such, measurements of access and training should be considered as part of future CCTs programs.

Finally, the latest publications by Global Findex note that, though the number of individuals with a bank account is increasing around the world, it appears that a large proportion of these accounts are not being used. This important number - of bank accounts that are empty or show no activity - raises serious questions about the effectiveness of the financial inclusion of users. In this sense, the levels of financial inclusion measured by the variable of use would be misleading and only reflect an increase in the number of bank accounts.

To overcome these biases of information, different multidimensional indicators of financial inclusion have recently begun to be developed. However, for the moment, these new measures suffer from discontinuity in their publications or lack of a larger body of research. Therefore, studies on the impact of CCTs according to these indicators will have to wait until information on these figures over a longer time is available.

Published by Fundación Capital – 12y13/07/2016


AGUILAR, Mercedes Ruiz-Giménez. La Agenda 2030 de Desarrollo Sostenible: una oportunidad para el cambio que nos compromete. Temas para el debate, 2016, no 254, p. 22-25.

ALTER, Adrian. Financial Inclusion and Development in the CEMAC. International Monetary Fund, 2015.

ATKINSON, Adele; MESSY, Flore-Anne. Promoting Financial Inclusion through Financial Education. OECD Working Papers on Finance, Insurance and Private Pensions, 2013, no 34, p. 1.

BOLD, Chris; PORTEOUS David; ROTMAN, Sarah. Social Cash Transfers and Financial Inclusion: Evidence from Four Countries. CGAP Focus Note No. 77 February 2012.

BURGESS, Robin; PANDE, Rohini. Do rural banks matter? Evidence from the Indian social banking experiment. Evidence from the Indian Social Banking Experiment (August 2003)., Vol, 2003.

BURJORJEE, Deena M.; SCOLA, Barbara. A Market Systems Approach to Financial Inclusion. 2015.

CEPAL 2016. Programas de transferencias condicionadas- Base de datos de programas de asistencia social en América Latina y el Caribe. [Online]

CHIAPA, Carlos, et al. Entregando las transferencias monetarias condicionadas a traves de cuentas de ahorro: Una oportunidad para la inclusion financiera. 2015.

CULL, Robert; EHRBECK, Tilman; HOLLE, Nina. Financial inclusion and development: Recent impact evidence. Focus Note, 2014, vol. 92.

HERNÁNDEZ, Leticia, No puede haber inclusión financiera sin educación: Bansefi. El Financiero. 17 de marzo de 2016. Recuperado de:

KING, Robert G.; LEVINE, Ross. Finance, entrepreneurship and growth. Journal of Monetary economics, 1993, vol. 32, no 3, p. 513-542.

KPODAR, Kangni; ANDRIANAIVO, Mihasonirina. ICT, financial inclusion, and growth evidence from African countries. International Monetary Fund, 2011.

LEVINE, Ross. Finance and growth: theory and evidence. Handbook of economic growth, 2005, vol. 1, p. 865-934.

MALDONADO, Jorge Higinio. Los programas de transferencias condicionadas: ¿hacia la inclusión financiera de los pobres en América Latina?. IDRC, 2011.

MOLINA-MILLAN, Teresa, et al. Long-Term Impacts of Conditional Cash Transfers in Latin America: Review of the Evidence. Inter-American Development Bank, 2016.

PERALES, José Antonio Sanahuja. La Agenda 2030 y los Objetivos de Desarrollo Sostenible: hacia una ética universalista del desarrollo global. Razón y fe: Revista hispanoamericana de cultura, 2015, vol. 272, no 1405, p. 367-382.

RAJAN, Raghuram G.; ZINGALES, Luigi. Financial dependence and growth. National bureau of economic research, 1996.

SAMANIEGO, Pablo; TEJERINA, Luis. Financial inclusion through the bono de desarrollo humano in Ecuador. Inter-American Development Bank, Technical Notes, Washington DC, 2010.

TEJERINA, Luis, et al. En busca de eficiencia e inclusión financiera en el pago de transferencias de ingreso: Un estudio sobre la costo-efectividad de los mecanismos de pago en el programa Bono 10,000 en Honduras. Inter-American Development Bank, 2014.

TEJERINA, Luis; PIZANO, Vania. Programas de Transferencias Monetarias Condicionadas e Inclusión Financiera. Inter-American Development Bank, Technical Notes, Washington DC, 2015 (en prensa).

UNIT, Economist Intelligence. Global Microscope 2015: The enabling environment for financial inclusion. New York, 2015.

Share this