Electronic G2P Payments: Evidence from Four Lower-Income Countries
Increasingly, governments and donors are looking to move their social cash transfer payments from cash to electronic and, in some cases, incorporate financial inclusion objectives into these payment schemes. This momentum toward electronic payments (e-payments) rests on the promise of improving transparency, decreasing costs, and reducing leakage on the one hand, and facilitating value-added services through financial access on the other. In 2012, the CGAP Focus Note "Social Cash Transfers and Financial Inclusion: Evidence from Four Countries" considered the case for financially inclusive social cash transfers by analyzing evidence from government-led cash transfer programs in four middle-income countries (MICs), in which the programs and the e-payments systems on which they relied were relatively mature and robust.
The Focus Note, which investigated the large social cash transfer programs in Brazil, Mexico, Colombia, and South Africa, looked at the value of e-payments for the different stakeholders involved: the affordability of financially inclusive services in social cash transfer programs for the government; the profitability of offering such services for the payment service provider (PSP); and the likelihood of recipients using the services for more than just receiving the transfer. The research found that, in the case of the cash transfers in these MICs, building inclusive financial services can be affordable to the government and profitable to the PSP if the government pays adequate fees, but recipients were not quick to adopt the services and use them for personal needs beyond receiving the transfers.
But what about the experiences in less-developed countries? In contrast to MICs, these countries typically have more difficult operating conditions stemming from less-developed transportation and mobile infrastructure, being at an earlier stage of development in the banking and payment systems, and having less experience administering social cash transfer programs, to name just a few. The transition from cash to e-payments will undoubtedly look different in Brazil than in Uganda. We wanted to further examine the opportunities and challenges in implementing electronic social cash transfers in less-developed countries from the perspective of the same three core stakeholder groups: program funders (government and/or donors), PSPs, and recipients.
This Focus Note presents the evidence gained from a comprehensive study of the experiences in developing and implementing e-payment schemes linked to financial inclusion in four lower-income countries—Haiti, Kenya, the Philippines, and Uganda. The research aimed to uncover (i) the development and evolution of the program; (ii) the current delivery and payment process(es); (iii) the costs and benefits to programs and providers of using e-payments; and (iv) the experiences of e-payment recipients and staff at the field level.
Through a comparative analysis of the four programs’ design and implementation experiences, this report offers six key findings and five specific lessons for cash transfer program managers and PSPs (particularly but not exclusively in lower-income countries) to consider when planning for electronic government-to-person (G2P) payments.