In 2017, Zambia’s Girls Education and Women’s Empowerment and Livelihoods (GEWEL) project introduced digital grant payments through a new government-to-person (G2P) payments model that allows beneficiaries to choose among six different financial service providers. Three years later, we can see the benefits that this new model has brought to beneficiaries, GEWEL and the financial market in Zambia.
Together with the World Bank, GEWEL evaluated the perceptions and behaviors of payment recipients, providers and the program in the first and third years of the project. A comparison of these evaluations shows that it takes time to implement choice into a G2P program. But once implemented, the benefits include increased convenience for recipients, efficiencies for government and a more inclusive financial services market.
G2P choice benefits recipients
The evaluations show that when given the choice, recipients tend to select the provider with the closest, most convenient access point. Recipients report that this reduces travel expenses and frees up time to spend with family or on income-generating activities. From the first year to the third year of the project, the average recipient reduced the time they spent accessing their payment from six hours to two hours. Travel expenses also declined significantly in the second evaluation, with 82 percent of recipients reporting that they didn’t spend any money on travel.
Some recipients further reduced their expenses by choosing a provider with a lower cash-out fee. During the second evaluation, about 20 percent of recipients chose United Bank for Africa (UBA) even though other providers likely had access points closer to their homes. It seems that these beneficiaries valued UBA’s low cash-out fees, which are only about a fourth of the price charged by the mobile money providers.
For women and other vulnerable groups that are more likely to experience discriminatory treatment by provider staff and agents, the ability to choose a provider that treats them with respect, provides good customer service and has convenient business hours is especially important. Choice can also allow women to choose the payment method that works best for them, whether it is a mobile wallet or a bank account and a debit card.
As one Zambian official told us: “We receive very few complaints from beneficiaries regarding their payments. This is because they have chosen their preferred provider themselves, and providers are competing to provide the best customer service to beneficiaries.”
G2P choice benefits the government program
Zambia’s Ministry of Community Development and Social Services, which implements the GEWEL project, used to struggle to procure payment service providers — a challenge familiar to many governments around the world. It sometimes took years to contract a provider.
GEWEL introduced a simplified procurement process that does not require the ministry to request and evaluate proposals. Under the new process, the ministry simply puts out basic requirements and invites any regulated provider to join at any time. To participate, a provider simply needs to sign a memorandum of understanding with the ministry. In the future, these memoranda will be upgraded to service-level agreements. This has brought significant efficiency gains.
Choice also gives government programs flexibility when one provider drops out or doesn’t comply with the service standards. In Zambia, one of the project’s payments providers lost its banking license due to insolvency. Because GEWEL worked with several providers, it simply asked beneficiaries to select another provider. The transfer was managed quickly without disrupting payment cycles.
Because GEWEL pays market-based fees instead of a negotiated fee, it has been able to reduce the cost of payments delivery from 4 percent to 2.8 percent of the payment value.
GEWEL also shows how a government program can benefit from competition among providers. Fierce competition among mobile money providers in Zambia led to a reduction in withdrawal fees. Because GEWEL pays market-based fees instead of a negotiated fee, it has been able to reduce the cost of payments delivery from 4 percent to 2.8 percent of the payment value.
Finally, it is worth mentioning that by offering choice, governments can avoid monopolies and reduce leakage.
Government programs often choose the provider with the highest number of access points and the best financial offer, which is typically the provider with the strongest market power. It is also problematic to assign communities or regions to particular providers because programs seldom have up-to-date information about every beneficiary’s preferences or proximity to financial access points.
Allowing recipients to choose is not only a more customer-centric approach, but it can avoid reinforcing monopolies and protect program officers from being lobbied by providers.
G2P choice can have a positive impact on market development
Choice can also contribute to the development of a more inclusive financial services market. In settings where governments choose a single provider through a competitive procurement, there is often pressure on competitors to offer their services at an unsustainably low fee.
In the GEWEL project, where providers offer payments services at their regular rate, there is a growing interest to participate in the distribution of GEWEL grant payments and offer payments services to ultra-poor women. Some providers are working on products specifically designed to serve lower-income customers like GEWEL recipients.
The Zambian model shows that choice can create incentives to provide better customer service and develop products tailored to this customer segment.
Impact from G2P choice takes time and effort
Zambia’s GEWEL project teaches us that G2P choice is better for recipients, the government and the financial services market. However, we also learn that these benefits don’t materialize immediately. It takes a long-term investment and full commitment by the government program and its funders.
Governments implementing choice must ensure recipients are well informed about their options. They also need to identify and address any barriers that may keep recipients from making their own decisions (e.g., women being steered by their male household members or by field workers). They must also onboard program staff and incentivize them to promote the new payments system — for example, by shifting to a choice-based payments model for paying salaries so that staff can also experience the benefits of choice.
Zambia’s GEWEL project is clearly leading the way and illustrating to other government programs that choice can make G2P payments more impactful. Choice takes time and effort, but it’s well worth it.