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Why cash transfer programme designs need financially-inclusive payment mechanisms


Advancing financially-inclusive payment mechanismsA working meeting between UNICEF Angola, Development Pathways and Banco Sol in Angola regarding the cash transfer programme

Sarah Langhan

Development Pathways has been working with the Government of Angola and UNICEF to design the country’s first cash transfer programme which will reach children across three provinces. The programme design has required the identification and selection of payment service providers (PSPs) through a competitive procurement process.

So what do we look at when we provide this kind of support? In any given country, we require several basic requirements including efficiency, transparency, reliability and scalability. We also ask for access to additional financial services. It is key that we reflect on why financial inclusion and selecting the right PSP are such an integral part of programme design. As the objective of any cash transfer programme is to get cash to beneficiaries, why are we concerned about the manner in which the cash is delivered? Does a financially-inclusive payment mechanism really matter?

This debate has gained traction over the last few years with several authors arguing that government-to-person payments and, more broadly, bulk payments, are an “on-ramp” to financial inclusion [1]. This is because they rest on a technological infrastructure and arrangements that enable beneficiaries to gain familiarity with digital financial services. Pickens et al. argue that, by requiring a “landing spot” to deposit and administer funds for the beneficiaries, digital cash transfer programmes may facilitate financial inclusion by allowing users to electronically make payments and store funds. The landing spot of social payments, a bank account or mobile wallet, is seen by PSPs as an opportunity to build a relationship with recipients and introduce them to a wide range of financial services. These include savings accounts, utility bill payments, international money transfers, credits and insurance [2]. Delivering payments directly into mobile wallets or bank accounts helps build familiarity with digital means of payment, thus paving the way to the adoption of more sophisticated products [3].

Academic debates are necessary to provide the impetus for change, but actually being at the centre of a practical cash transfer implementation faced with challenging operating environments (low levels of infrastructure, poor agent networks, challenging connectivity, prohibitive regulations etc.) requires one to ask several questions. The primary one being, why is it necessary to push for an electronic payment mechanism when delivering physical cash would be so much easier?

The answer does not lie within academic debate, the answer lies in the basic premise that as development practitioners, we cannot afford to leave anyone behind. It is no longer sufficient to design a cash transfer programme in isolation. Financial inclusion should be at the forefront of programme design. We have a responsibility to design programmes which provide the basic building blocks for inclusive social protection.

What does that mean in practical terms?

Ahead of a working meeting between UNICEF Angola, Development Pathways and banks in Angola regarding the cash transfer programme: Sarah Langhan with Glayson Ferrari Dos Santos, left, and Mario Manuel of UNICEF

As a starting point, we need to determine how the previously financially excluded can gain the opportunity to open a basic bank account or mobile money account into which cash transfers can be safely and efficiently transferred. At the same time, it is necessary to consider what other basic needs could be met through negotiated partnerships with digital financial service providers – banks, mobile network operators  and other non-bank PSPs. Synergies need to be explored and exploited at the early stage of programme design and deeper questions asked. Could the cash transfer programme spur collaboration between Government Ministries and be the catalyst for the national roll out of Identity Documents to beneficiaries and their families?  Could an e-Money solution, launched for the purposes of making the G2P payment eventually be used as the payment mechanism through which families could access essential services?

Whether or not these issues such as these are addressed satisfactorily as early as at the design phase and not as an afterthought will determine whether or not a programme reaches the most vulnerable in a society and has a long-term financial inclusion impact. As development practitioners we can, and must however, stretch this paradigm and leverage opportunities to level the playing field for those living in poverty. The role of key stakeholders such as central banks, financial intelligence centres and telecommunications regulators, often perceived as auxiliary to the cash transfer process, cannot be discounted. It is absolutely vital that all involved in designing and implementing cash transfer programmes seize the opportunity to work together to change the status quo and bring financial inclusion to the forefront of the development agenda.

The impact of development programmes and strategies will be truly transformative when they include measures to further financial inclusion and leverage digital financial services to bring basic services to the poor. For too long social cash transfers and financial inclusion have been seen as separate yet complementary policy initiatives. It is high time that digital financial services plus (DFS+) and cash plus should be seen as the standard approach to cash transfer programme design.

Meaningful financial inclusion involves not only access, but also the effective use of a suite of financial services products. Needs such as access to reliable and efficient alternative energy sources such as solar. On its face, the solar industry has little to do with financial inclusion. However, the expansion of reliable, affordable electricity in low-income, rural communities demands alignment with an innovative financial services component. Banks and non-bank PSPs are, by design charged with leading the way and setting the foundation for others to follow suit. Without the basic infrastructure of streamlined digital payments, solar companies and other national industries miss out on a critical market opportunity to contribute to a growing economy and to government targets such as, for example, universal energy access.

Sarah Langhan
Sarah joined Development Pathways as a Senior Payments and Financial Inclusion Specialist in June 2018. She brings considerable expertise in electronic payments, Government-to-person (G2P) payments, digital finance plus (DFS+), payment system law and regulation, AML/CFT, consumer protection and financial inclusion. She is an avid collector of antiques, art and old books.

Prior to joining Development Pathways, I had the privilege of working on a USAID-funded and Nathan Associates Inc. commissioned project examining the PAYG solar sector in Nigeria. The PAYG solar sector in Nigeria is operating in a highly complex market, which requires proactive dialogue and collaboration between multiple stakeholders at the confluence of clean energy provision, financial inclusion, and consumer protection. This USAID publication, The Digital Financial Services Landscape in Nigeria: Enabling Market Conditions for Pay-As-You-Go (PAYG) Solar Companies, provides a deep dive into the digital financial services industry in Nigeria, outlining the requirements for digital infrastructure readiness and the nuances behind current regulatory restrictions that are currently hindering this industry’s growth.

You can access the report by clicking here and read more about our work on the design and implementation of cash transfers here.


[1] See Klapper, L., and Singer, D. (2014) The Opportunities of Digitizing Payments, Prepared by the World Bank Development Research Group for the G20 Australian Presidency and Owens, J., 2013, Offering Digital Financial Services to Promote Financial Inclusion: Lessons We’ve Learned, Innovations.

[2] Pickens, M., Porteous, D., and Rotman, S., (2009) Banking the Poor via G2P Payment, CGAP Focus Note, 58

[3] Iazzolino G (2018) Designing Social Protection Payments: Progress and Prospects for Financial Inclusion.



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