Imagine a young primary school teacher named Ariana in rural Liberia. The Ministry of Education pays Ariana monthly, but her bank only has branches in the capital, over 10 hours away by bus. Each month, she spends days traveling to and from Monrovia and waiting in long queues at banks just to collect her salary. It costs her $2,227 Liberian dollars ($25) for transportation, lodging, food and bank fees — 15 percent of her salary.
As Ariana misses class to collect her salary, so do her students. Over time, some students lose interest in school, which may contribute to them dropping out and taking household-related jobs. In the long-term, the local economy loses out on better educated workers.
What if Ariana could collect her salary immediately and stay in her village teaching her students? The U.S. Agency for International Development (USAID) recently partnered with the Liberian government to make this happen.
In July 2016, USAID partnered with the Ministry of Education and Lonestar mobile telecommunications, with support from FHI 360, to roll out the first mobile salary payments to 67 teachers in Nimba County. The preliminary results are extremely promising:
- All recipients preferred receiving mobile salary payments as opposed to collecting cash in the capital.
- Teachers on average saved nearly 14 hours, as they were able to cash out at local agents in a matter of minutes.
- The cost of collecting salaries dropped by 90 percent, as teachers only paid a small fee to the local agent.
This very small sample offers a model of how digital payments can improve government service delivery, resulting in higher take-home pay for workers, improved transparency, and an increase in teaching hours by eliminating the need to travel to collect salaries each month. In tackling one of the major factors contributing to teacher absenteeism, the goal is that teachers — and students — will spend more time in the classroom, which is an important starting point to improve education outcomes.
USAID and FHI 360 are now working with the Liberian government to scale up these salary payments to reach more teachers as well as other civil servants, such as health workers, agriculture workers and police officers in remote areas. This effort is part of the Liberian government’s commitment to the Better Than Cash Alliance (BTCA), whose 50-plus public and private sector members focus on advocacy, research and catalyzing investment in digital finance. As a member, Liberia teams up with members such as Citibank, MasterCard, Visa, the Bill & Melinda Gates Foundation and many others to scale the benefits of digital finance in Liberia.
However, the challenges to scaling payments and building the digital infrastructure for financial inclusion are significant. In particular, at the village level, it is essential that small shopkeepers and other micro-enterprises act as mobile money agents and can manage liquidity to cover a significant volume of cashing-out when monthly salaries are paid. One can imagine a scenario on pay day when many teachers ask for cash from a village agent who is ill-equipped to provide large sums. This is why it is essential that customers can do more with their digital money, such as paying utility bills, taxes, school fees, transferring funds to distant family members and saving. If more merchants accept digital money, fewer people will immediately cash out, deepening financial inclusion. USAID is addressing this same issue by digitizing the local merchant acceptance network in India through the new Catalyst initiative.
We are seeing more and more public-private partnerships with governments collaborating with banks, mobile network operators and other key private sector actors to integrate digital finance and accelerate the achievement of educational objectives, such as lowering teacher absenteeism, keeping children in school, and ensuring schools have the necessary funding for supplies. One example of this type of partnership is in neighboring Cote d’Ivoire, where mobile operators partnered with the government to digitize 99 percent of school registration fees for 1.5 million students. These digital payments have greatly decreased leakage caused by bribery, theft and other security issues, and helped families to pay the fees that keeps their children in school.
As users of digital finance are increasingly able to do more with their mobile phones, these services lay a foundation for greater digital financial services, including savings, insurance and credit delivered over mobile phones. Customers utilize these new financial products and build a financial history, becoming economically empowered to invest in their families’ future, contribute more to the local economy, and improve the wellbeing of their communities.
Liberia’s electronic payment of teacher salaries is a step forward in creating a viable digital financial system. However, much work remains to be done to build a more inclusive financial system where low-income households can access safe and meaningful financial services that enable them to invest in their families’ futures.