Innovative Approaches to Delivery Mechanisms for Cash [Credit] Transfers Introduction

1. Innovative Approaches to Delivery Mechanisms for Cash [Credit] TransfersIntroduction

2. Why cash [credit] transfers? • Are cheaper to administer (>50% of value of food aid) • Reduce risk of dependency and disincentives • Allow individual choice • Can be invested or consumed • Have multiplier effects on income and employment • Stimulate markets by increasing purchasing power

3. What is the problem? • Getting cash to beneficiaries • What: • Cash, cheques, vouchers, direct transfers, debit cards, smart cards, mobile phones • Where: • Banks, post offices, pay offices, government offices, private firms, retailers • How: • Geographic coverage • Security • Identification

4. Why is it important? • Delivery may cost 2%-4% of total grants (>50% of admin budget) • Financial cost of badly-designed system may be even higher (fraud, losses) • Reputational costs to the grant-paying agency • Indirect benefits through access to financial services by non-beneficiaries • Not a sunk cost, but a potential source of growth • Beneficiaries • Surrounding communities • Financial system and overall growth

5. Objectives • To reduce costs to the beneficiary: physical, financial, opportunity • To reduce overall transaction costs (high α-value): <5% To minimise the risks: corruption, robbery • To maximise the dignity of the recipient: shelter, etc • To have universal coverage: transport, access • To ensure regularity and timeliness • To enhance the ability to scale up • To provide extra financial services: savings, credit • To provide opportunities for non-beneficiaries • BUT … trade-offs

6. Some examples Source: World Bank

7. Examples from southern Africa • Net1 UEPS – Serge Belamant, CEO • South Africa - social welfare payments (Limpopo, Kwa-Zulu Natal) • Namibia – NamPost • Malawi - MalSwitch • Visa CEMEA – Nick Essame, Head of Business Development, SA • South Africa – Sekulula card for social welfare payments (Eastern Cape, Free State, Gauteng, and Western Cape)

8. Access to major retail chain stores: Malawi<30km

9. Access to major retail chain stores: Malawi<20km

10. What next? • Share experience • Raise awareness of existing, available technologies • Assess readiness • DFID methodology (Scoping Report, July 2006) • ToR for country case studies • Spreadsheet model for projecting payment costs • Decision tree

11. Decision tree on developing enhanced payment strategies Source: DFID Scoping Report on the Payment of Social Transfers through the Financial System

12. Push and pull mechanisms • Pull • Full cash grant • Defined point (fixed/mobile; multipurpose/dedicated) • Particular time • Push • Sent to bank account • Range of locations (ATM/POS) • Time of choosing • Not necessarily full amount/multiple withdrawals

13. Enhanced financial services • Add-ons (grant provider/other institution • Micro-savings • Burial societies • Insurances • Micro-credit • Add-ins (basic transaction account) • No minimum balance • No initial fee • No monthly charges • Ability to receive and make transfers • Therefore may require subsidy