This post is written by Nimrah Karim, SBI Associate Consultant based in Karachi, Pakistan.

Last week, a few SBI staff members visited Hala, a small town of 160,000 situated in the heart of Sindh, Pakistan. Our car weaved through narrow passages to reach the neighborhood of one of our focus group participants. We observed donkey carts navigating puddles, a herd of cows causing a traffic jam for rickshaws and pedestrians alike, and within alleyways, rows of small stores with male shopkeepers either tending to customers or chatting casually amongst themselves. As we traversed Hala’s winding backstreets—thriving with simple trade and services activities common to small, peri-urban towns —I reflected on the purpose of our visit. We were on our way to conduct focus group discussions (FGDs) with groups of women, to understand whether local recipients of one of the largest government cash transfer programs in the world could benefit from financial services offered by way of alternative distribution channels.

The FGD participants were beneficiaries of a grant of US $12 per month, disbursed by the Benazir Income Support Program (BISP) to adult female members in Pakistan’s poorest households. BISP has used various implementing parties to deliver payments to beneficiaries. A majority of transfers have been disbursed via money order, dropped off by postmen to beneficiary households. BISP has also piloted alternative delivery mechanisms, including disbursement of funds through magnetic-stripe enabled smart cards, mobile phones, and branchless banking agents. To date, BISP has allocated cash transfers to 3.2 million families, with an aim to increase outreach by two-fold by the end of 2012.

Our research seeks to uncover whether there is a compelling value proposition to convert these one-way distribution flows into a financially inclusive account. The account in question would offer customers the ability to save and store funds safely and also afford them transactional capability—such as options for paying bills, making person-to-person fund transfers, and eventually, paying for merchandise and services through their account. A body of research on pioneering programs in Mexico, South Africa, India, and Brazil suggests that G2P payment recipients use financial services if available to them. In theory, it sounds perfect: G2P programs successfully reach millions of the poor and financially excluded through various channels. Why not go a step further and use these platforms to reach this very segment with financial services? Continue reading →