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Accessible, Robust, Integrated: Identifying Good Payment Programs

In recent years, governments in lower- and middle-income countries have been expanding social protection and safety net programs, and are steadily shifting from in-kind assistance to cash transfers. In fact, nearly 38 percent (or 718 million) of the total estimated number of social safety net recipients in developing countries are enrolled in cash transfer programs and, increasingly, these cash transfers are digitized.

Governments and humanitarian agencies are realizing the possible efficiency gains of digitizing cash-based assistance: reduced administrative costs, better control of leakage, and increased transparency are among the most substantial. While cash disbursements still dominate in low-income countries and among the poorest populations, by 2014 the majority of cash transfer recipients globally — 62 percent — were already receiving their benefits into an account or a mobile wallet.

At the same time, some cash transfer programs and practitioners see digital cash transfers as a way to encourage the use of formal financial services among the un(der)banked. According to the Global Findex 2014, there is an opportunity to link as many as 160 million unbanked adults to formal financial services by shifting government-to-person (G2P) transfers and wage payments into accounts.

Yet, to date, digital payments have not necessarily equaled greater financial inclusion. Evidence from digital G2P payment programs around the world cannot prove that opening accounts or wallets and transferring payments into these has an immediate financial inclusion effect. The challenges of converting digital payments into greater financial inclusion are significant. Global Findex data revealed that 31 percent of accounts in low-income countries and globally seem to be mailbox accounts used for only one or two withdrawals per month. Similarly, CGAP research in India found that 99 percent of the accounts opened for G2P disbursements were showing only one monthly transaction: a withdrawal of the total amount of the benefit transfer.

Women process rice, Bangladesh
Women process rice, Bangladesh. Photo by Mohammad Moniruzzaman, 2011 CGAP Photo Contest.

At CGAP, we have explored and identified various reasons for the failed financial inclusion promise of digitizing social protection payments. These include use limitations of the account itself, insufficient recipient and agent training, negative and risky experiences by recipients trying to access and use these accounts, and the missing value proposition to intermediaries, which translates into low-quality products and customer service.

As part of our test-and-learn agenda on more financially inclusive digital payment programs, CGAP has been supporting the Inter-agency Social Protection Assessment (ISPA) initiative in developing a Social Protection Payment Delivery Tool. This tool provides practical guidance for social protection program managers and policy makers in designing and implementing programs that are more meaningful for recipients and encourage more sustainable and inclusive markets.

As such, the Social Protection Payment Delivery Tool assesses a program’s performance based on three aspects that we believe are critical for making these programs more inclusive:

  • Accessibility focuses on the recipient experience and assesses his or her ability to access or use funds conveniently, at low cost and reliably. It addresses common consumer risks, such as network or service unreliability, insufficient agent or automatic teller machine liquidity, complex user interfaces and payment processes that move recipients to ask others for assistance and share personal information, and inefficient grievance and redress mechanisms that leave recipients in limbo or without any option when facing a problem.
  • Robustness identifies the level of security and reliability of the payment delivery mechanism by evaluating potential sources of leakage, mis-targeting or fraud that targets the recipient, and agents or other players involved in the payment delivery. An essential element for good governance between the program and the payment service provider is effective internal monitoring and quality management systems.
  • Integration looks at an individual program’s relationship to the broader social protection and financial systems, its role in facilitating communication and coordination across the different players, and to what extent it is creating conditions for enabling broader financial inclusion of the recipients.

For me the strength of the tool lies in its ability to facilitate a discussion and coordination among the actors involved in the payment delivery process. The assessment not only surveys the immediate stakeholders (i.e., the social protection policy-maker and implementer, the payment service provider and the recipient). It also surveys the financial sector regulator, program funders and others who play a different but essential role for designing a sustainable payments system that works for poor and vulnerable populations.

The full potential of the tool will begin to be realized as more practitioners implement it and share their findings and experiences. Even more important will be pinpointing those interventions that helped programs improving their results. Only from such real-life examples will we be able to create a rich set of good practices and recommendations that can be shared with programs around the world.  

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