March 1, 2017, was a milestone in the story of financial inclusion in Bangladesh. On that day, 10 million low-income mothers received their first digital payment from Mayer Hashi (Mother Smile), a long-standing government-run program that offers financial aid to the parents of primary school students. As Bangladeshi Prime Minister Sheikh Hasina observed at the time, “This is perhaps the largest digital payment service of its kind in the world.” Interestingly, Mayer Hashi made its digital transformation in a matter of months, whereas governments around the world have often struggled to move away from cash at this scale. We have been closely following developments in Bangladesh and asking: What factors are behind Mayer Hashi’s success? Could they hold lessons for other countries?
There are many good reasons for countries to digitize government-to-person (G2P) payments. Digital transactions are more transparent and traceable than cash-based ones, and as such they are less susceptible to clerical errors and fraud. They are also faster. But there are just as many challenges. In some countries, too few recipients may be enrolled in a mobile money service to support a switch to digital delivery. In others, a lack of mobile money agents may make it too difficult for recipients to convert digital payments into cash, rendering the payments useless. The government departments involved in a payments program may also be unwilling or lack the skills to support a transition away from cash. These challenges are well known to the financial inclusion community.
One common barrier that receives less attention, however, is the operational capacity of the government’s digital financial services (DFS) provider. Digitizing a large G2P program can put a lot of strain on a DFS provider. It must be willing and able to adapt its business model to the needs of the program, to test and deploy new technology rapidly and to think and innovate like a startup. In Bangladesh, Mayer Hashi partnered with mobile financial services platform SureCash, and SureCash’s operational capacity proved crucial to the digitization process. Here are three key challenges that any G2P program is likely to face in going digital and how having the right DFS partner led to success in the case of Mayer Hashi.
Gaining support for digitization at all levels of government
Often, digitization initiatives run into resistance because they increase transparency and reduce the ability of middlemen to benefit from their position of power in administering cash-based programs. In Bangladesh, several leaders in government and the private sector spearheaded Mayer Hashi’s digitization initiative: the prime minister; the minister, secretaries and deputies of the Ministry of Primary and Mass Education; and representatives of Rupali Bank and TeleTalk. SureCash built strong relationships with these leaders. Their steadfast commitment helped drive the digitization process forward when it encountered resistance at the middle level of government. To help gain the support of rank-and-file government workers, SureCash was careful to present digital payments as a highly visible digitization program benefiting vulnerable populations, rather than paint it as an effort to curb corruption. This likely gained cooperation from some who may have otherwise not supported the effort. This approach may be applicable in other countries.
Incentivizing grassroots partners to play their part
For Mayer Hashi, rolling out digital payments required the support of mobile money agents and teachers. The program needed 400,000 primary school teachers to identify low-income mothers who qualified for financial assistance, help program applicants fill out know-your-customer forms and open linked bank accounts and assist with disbursement paperwork. These teachers mailed hard copies of recipient lists to SureCash, which digitized the data and sent them back to the teachers for verification. This process reduced the error rate to 5 percent, bringing it below the level considered acceptable for the first round of enrollments. SureCash rewarded teachers with a small fee for each record correctly entered into the database of eligible recipients.
Agents were another crucial partner. They had to set up operations in expectation of transaction volume increases. SureCash raised commissions and offered agents a subsidy for an initial period to ensure agents’ support even during the ramp-up phase. This was crucial to eliminate or drastically reduce the instances of agents not having float or cash to complete a transaction — situations that would have damaged trust in the program, especially among first-time users.
Ramping up operations to the scale of a G2P payments program
SureCash had to handle more than 10 million account application forms in just a few months. To do this, it got creative with technology solutions. It imported 45 high-speed scanners capable of processing 60 pages per minute and set up a form processing center staffed by up to 240 people in peak periods. It also upgraded its character recognition software to a custom solution that not only recognized the text in scanned documents, but also color-coded its level of confidence in the scans to flag problematic areas, speeding up human validation.
Lessons for other countries
In all three of these success factors, SureCash played an important role. Mayer Hashi’s experience with transitioning to digital payments is a reminder that the success or failure of digital G2P payments hinges on more than an enabling mobile money market. It requires governments to be highly selective in choosing a DFS provider with the ability to help build government trust, align the incentives of other players like mobile money agents and rapidly scale up to meet the demands of a large-scale payments program.