Done Right, Digital Finance Could Transform Humanitarian Response

UN Secretary-General Ban Ki-moon challenged conventional wisdom in his One Humanity: Shared Responsibility report to the General Assembly on the World Humanitarian Summit by asserting that “cash-based programming should be the preferred and default method of support.”

If “cash” is the future of humanitarian aid, then its benefits – more choice, dignity, empowerment and market resiliency – should be substantially greater for recipients and providers alike when delivered in the form of formal digital financial services.

A new report by UNCDF outlines how digital finance can be a high-leverage tool to improve humanitarian effectiveness in a number of ways. Take, for instance, how it can strengthen progress toward the Secretary-General’s widely-endorsed Agenda for Humanity:

  1. Changing People’s Lives: By providing choice, digital finance promotes the dignity and self-determination of the recipient—both at times of crisis and beyond.
  2. Humanitarian Effectiveness: Digital finance could allow multiple flows from different sources direct to a beneficiary, through a single channel, reducing leakage, offering efficiencies, cutting costs, and creating greater accountability.
  3. Reducing Vulnerability and Managing Risk: Digital finance can reduce vulnerability by giving people financial tools that allow them to use resources to buy what they need most and to better manage the risks they face.
  4. Transformation through Innovation: Digital finance can transform government and donor delivery of subsidies and support, even as it transforms people’s lives and businesses through greater financial inclusion, and can contribute to restarting local markets.
  5. Serving the Needs of People in Crisis: Digital finance can be more accessible, quicker, safer, and offer greater confidentiality to people, particularly women who face distinctive challenges in times of crisis.

Recognizing the transformative role digital innovation can play in humanitarian response, CGAP, MasterCard and UNCDF co-hosted a high-level panel at the recent World Humanitarian Summit in Istanbul – a convening of 5,000 global leaders from public, private and non-profit sectors aimed at discussing and committing to new measures to revolutionize the global humanitarian system.

Title of #innovate4humanity session at World Humanitarian Summit

Moderated by Walt Macnee, Vice Chair of MasterCard, and chaired by Judith Karl, Executive Secretary of UNCDF, panelists discussed the promise of digital finance to catalyse aid payments to recipients, and what it would take to get there. The panel – including the WFP’s Ertharin Cousin, IRC’s David Miliband, Mercy Corps’ Neal Keny-Guyer, a country representative from Nepal, and insights from Sierra Leone – discussed the opportunities and challenges of using digital finance to improve the efficiency and effectiveness of their cash-based programming.

The panelists addressed recent CGAP research showing that notwithstanding the promise and potential benefits of digitization, many hurdles remain to achieving this compelling vision. In a review of 12 different social and humanitarian payment programs, recipients—who are often new to formal financial services and “virtual” money in particular—often find themselves with unreliable access to their money, whether due to weak networks, service downtime, or insufficient liquidity at ATMs and agents who cash out their payments. Payments processes and user interfaces can be overly complex and not well explained to recipients before or after enrollment in the program, leaving recipients prone to mistakes or vulnerable to fraud. And when things go wrong, as they tend to do in any complex environments, channels for complaints and recourse are often weak or non-existent.

While these challenges might manifest themselves in different ways in different contexts, the effects are the same: these negative experiences not only undermine trust and confidence in digital finance and its providers, but can also result in actual loss and harm for the recipients. In those cases, the value recipients could find in the use of the service and their desire to use it quickly erodes, as does the promise and power of digital finance as a tool to strengthen the Agenda for Humanity.

If we want to use digital finance as a tool to strengthen the bridge from relief to resiliency, then we need to do more to make the bridge easier to cross for the recipients.

Using digital finance to provide people affected by crisis with the predictability, reliability, choice, convenience and value that they want and need can help in this regard.  But it is not enough.  A simple, but important shift in perspective is required.  Crisis-affected individuals should be viewed not only as victims and beneficiaries, but also as clients with a set of needs, wants and expectations about the digital transfers and other services they receive—whether those are provided by governments, donors, humanitarian and development agencies, or the private sector.

Such a shift in perspective would result in important changes in design and delivery of digital payments in humanitarian contexts.  At the same time, this shift could make humanitarian partnerships more effective and humanitarian investments more efficient. Doing so would provide theseclients” with more value and better pathways to empowerment while further stimulating local markets and economies.

Several commitments announced at the World Humanitarian Summit indicate that we’re headed in the right direction.  MasterCard, for example, committed to creating better and more practical identity solutions. Ericsson committed to create more open and shareable mobile wallet platforms, so that recipients have more choice and access and providers can leverage the digital rails to provide better and more inclusive digital financial services in humanitarian response. And the World Economic Forum committed to a collaborative effort to create principles for better public-private partnerships in humanitarian action, based in part on draft principles by humanitarian actors.

Putting the “client” at the center will help us ensure these and other efforts ultimately lead to more and better ways to solve the challenges and roadblocks along the way. Only then will digital finance become an effective tool to build a strong bridge from response to resiliency.



Digital social payments (DSPs) are a fast-growing, yet often overlooked, digital financial services (DFS) segment. Acknowledging and addressing the most common and consequential consumer risks should be a priority for any program or provider seeking to unlock the potentials of DSPs for the poor.

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