NexThought Monday: Designing New Financial Products for ‘Bolsa Familia’ Beneficiaries: CGAP’s research explores how conditional cash transfer recipients manage money
Fernanda and Maria are both beneficiaries of Bolsa Familia in Brazil, one of the largest conditional cash transfer (CCT) programs worldwide. However, in spite of being part of the same group of recipients, their financial habits are very different. Closer examination of their financial lives and those of the 13 million other households receiving Bolsa Familia, shows huge variations in the way they manage their money. Although commonly grouped under the single heading of Bolsa Familia recipients, this part of Brazilian society is actually a collection of sub-groups with different financial needs and wants.
For example, Fernanda is 45 years old and lives in Restinga in the state of Rio Grande do Sul in Southern Brazil. She has five children, two under the age of 18, and is the proud grandmother to a toddler, age two. She receives approximately US$50 monthly from Bolsa Família in addition to US$150 she earns working as a cleaning lady. Fernanda suffers from hypertension and while her prescription is partly covered by the health service, she sometimes runs out of medication. She is also heavily in debt; because she could not meet her debt repayments, she was blacklisted by the credit bureau two years ago. She has a “Conta Facil”, a simplified bank account offered by Caixa, which ensures free access to basic banking services for low-income families. However, as is understood of G2P beneficiaries the world over, Fernanda limits her usage of the Conta Facil to withdrawing the entire Bolsa benefit every month. Fernanda bought her home via the “Minha Casa Minha Vida” public housing scheme launched by the federal government in 2009 for low-income families. She pays US$30 per month in mortgage payments. She is very proud of her new home and dreams of being able to renovate it.
Maria, on the other hand, is 32 years old and lives in Complexo do Alemão in Rio de Janeiro. She sells confectionary in Rio’s central area and has owned her home for eight years. She receives US$75 from Bolsa plus US$500 from her confectionary business. Like Fernanda, she opened a Conta Fácil, and while she knows she can use her debit card, she feels more comfortable handling cash. She and her husband have a store card from CasasBahia, which they used to buy their TV in installments. She wants to have a savings account in order to buy her 11-year-old daughter a computer and would like the bank to help her choose the right financial products for her family.
During the last couple of months, we have been involved in efforts in Brazil to improve our understanding of Bolsa Família recipients. Our goal is to counteract the prevailing wisdom held by banks in Brazil that welfare recipients are a singular block of very poor people to whom it is difficult to provide financial services. Our team has been undertaking preliminary field research via household surveys in three different sites in the country: Maceió and Penedo in the State of Alagoas in the North East; Restinga, a small town on the outskirts of Porto Alegre; and Favela Morro do Alemão in the State of Rio de Janeiro.
In our conversations with women like Fernanda and Maria, we have so far been able to distinguish what seem to be four distinct segments of Bolsa recipients:
The first group is composed of beneficiaries who live exclusively on Bolsa Família benefits. Members of this group tend to live in extreme poverty, are poorly educated and have limited financial literacy.
Fernanda is part of a second group we can call ‘misinformed’, made up of beneficiaries who have some additional income, beyond Bolsa, but who have limited knowledge about financial products. This lack of information makes them feel insecure. However, once they become financially aware, this group exhibits an interest in products such as simplified accounts, credit cards, savings, microcredit and microinsurance.
A third group can be considered the ‘aware’ – Maria fits this category. Members have additional income, are better educated and use services and financial products offered by banks or other financial institutions. They budget to manage their finances and are aware of their consumer rights. They are often skeptical of traditional banks.
The fourth and final group we have called ‘fearless’. These households are extremely open to trying new products. They are early adopters, but often lack understanding of the implications of cheap credit thereby taking decisions without assessing the financial consequences or their ability to repay.