E-Payments in Low-Income Settings: Cutting-Edge or High Risk?
Ten kilometers from her home, Hadiza stands in a long queue to see the bank agent in her small market town in Kenya.The bank agent is one of only two near her village and she chooses to wait in line for the one she trusts the most. She learned earlier in the day from her neighbor that her monthly cash transfer from the World Food Programme (WFP) had been deposited into her bank account, which provides her with a store of cash value and a debit card she can use at bank branches, ATMs and with agents. She knows that she could withdraw her stipend any day and even leave some money in her bank account, but after several months of inconsistent and delayed payments and insufficient cash at agents when payments did come, she chooses to withdraw all her cash immediately. Reinforcing her decision is that the program only covers the cost of one withdrawal fee per payment cycle. Despite the convenience, lower cost and minimal “leakage," or loss of funds often due to inefficiencies or corruption, WFP’s Cash for Assets (CFA) program offers Hadiza by providing inclusive electronic social cash transfers, she never takes advantage of the product offerings.
Photo by Saiful Islam
Hadiza’s experience is not unique among recipients of electronic social cash transfers from a government or donor to the poor, which are currently on the rise in even the most difficult environments such as post-earthquake Haiti. Heralded as having great potential for advancing the effectiveness of social and foreign assistance, programs tend to expect e-payments to increase efficiency through more transparency, reduced leakage and faster payment to recipients than cash or in-kind counterparts. Payment providers see the opportunity as an entry into a new market segment, at scale in some cases, that will lead to further government- or donor-supported work, and/or as a business case based largely on the fees collected per payment made. Financial inclusion strategists also view electronic social cash transfers as a potential gateway for the world’s most vulnerable and excluded to receive the financial services they need to improve their lives.It is a rather alluring win-win-win scenario for the program, provider and recipient, based on a compelling theory that has gained an enthusiastic following in recent years, particularly given the rise in new technology that has facilitated product and channel innovations.Yet limited evidence to date suggests that while innovative approaches are emerging, hitting this “trifecta scenario” is difficult at best.In four case studies released this week, we explore in depth the experiences of four social cash transfer programs – Ti Manman Cheri in Haiti, CFA in Kenya, the Pantawid Pamilyang Pilipino Program (4Ps) in The Philippines and Social Assistance Grants for Empowerment (SAGE) in Uganda – on the cutting edge of designing and implementing e-payments in low-income settings. Their stories are all different, shaped by their unique contexts and program objectives. Yet they do share one common element: they have all struggled on their journey to get e-payments up and running smoothly.An unprepared agent network outside of Port-au-Prince, a lack of mobile network in northern Uganda, limited bank networks and payment infrastructure in remote areas of the Philippines and challenges channeling the cash for the transfers in Kenya are but some of the unanticipated and underestimated challenges faced by the programs. Unexpected hiccups during program implementation have also shaped the experiences of recipients, many of whom previously had little to no exposure to banks or mobile payments. Lacking program literacy – understanding the process of getting the money, using the payment method and taking advantage of recourse mechanisms when needed – for example, recipients struggled along with the programs as obstacles to making convenient and efficient payments arose.
Photo by Joseph Molieri
To overcome the obstacles both at the program and recipient levels the programs have had to make many modifications along the way. Ti Manman Cheri, SAGE and the 4Ps decided to forgo e-payments to portions of recipients to ensure money got to them reliably. On the other hand, CFA has stuck to its original objectives and electronic payments, continuing to pay 100% of its recipients through bank accounts as it works to improve the timeliness of CFA social cash transfers and customer recourse options.Evidence from the cases also suggests that some issues may be resolved given flexibility, patience and time, such as when comparing the functioning of the well-established 4Ps launched in 2008 to the very new Ti Manman Cheri which began in 2012. As payments become more reliable and recipients are then able to consistently “practice” withdrawing their payments regularly, electronic payment usage may increase. In order to work out the growing pains adequate infrastructure must still be in place to ensure the payments can in fact be made, something that was not always fully assessed ahead of program implementation.E-payments in low-income, low-infrastructure cities and towns are complicated and hard to both design and implement. As a result, some of the envisioned benefits -- particularly effective financial inclusion of the poorest -- are not fully realized at best, and impeded at worst. Regardless, the push for e-payments is stronger than ever. By telling the stories of people in these programs along with cross-cutting considerations and lessons revealed in a forthcoming focus note, we hope these and similar programs can continue their push for e-payments, right up to the cutting edge, without toppling over it.