In a country like Bangladesh where nearly one-third of the population live under the poverty line, social safety net programs serve as a critical support mechanism for the less fortunate among us. These programs range from allowances for the elderly and lactating mothers to income support for the rural poor during lean seasons and incentives to keep children at school. Collectively, the social safety programs constitute a few billion dollars of financial support for the poor every year.
Traditionally, most of these payments have been cash transfers channeled through various government bodies. Many of these programs have historically been plagued by a series of inefficiencies at various points in the process. Ineligible people are reported to be signed up (creating what is commonly referred to as ‘ghost workers’), conditions that need to be fulfilled by the beneficiaries are inadequately checked, and frequent encumbrances at the point of payment collection are a common phenomenon.
The problems described are not unique to Bangladesh. Many countries have extensive social safety net programs, and in many of those countries a similar set of challenges exist. However, there is a growing body of knowledge at the global level on how some of these challenges may be best attacked. The progress and increasing affordability of technological innovations have been making a contribution towards addressing some of these challenges. pi STRATEGY has been actively involved in this domain around the world (Bangladesh, Solomon Islands, India, Nepal). This article chronicles its experience with one such project in Bangladesh and highlights other systemic benefits that may be realized.
In Bangladesh, among the 31.5% of the population that live under the poverty line, half of them are extreme poor who are often termed as the poorest of the poor. Bangladesh is also vulnerable to natural calamities that force poor households further into poverty. To cushion the negative effects of vulnerabilities of the poor, the Government of Bangladesh introduced the Employment Generation Program for the Poorest (EGPP) in 2008. It was then reconstituted to provide short-term employment during agricultural lean seasons to poor and vulnerable households. With a budget of more than $150 million, it is one of the largest social safety net programs in Bangladesh. Over the years this large-scale program has experienced a number of challenges. Irregularities in recording attendance at work sites have been observed in large scale that eventually led to payment to the ghost workers or payment to the beneficiaries without work having been performed. Moreover, payment through hand-to-hand cash transactions on weekly basis with manual processing and record keeping left considerable exposure to misappropriation, payment mismanagement, and abuse in individual payment cases. To address these challenges, a concerted effort was initiated by a set of design partners (pi STRATEGY, World Bank, Ministry of Disaster Management, and CGAP) and implementing partners (Bangladesh Post Office, bKash, ITCL).
During early stages of this engagement, multiple scenarios were explored quite extensively to identify the best solution. A number of options (bio-metric, smart card, mobile phone) were conceptualized, designed, and assessed for implementation. This led to selecting two best options: a card-based solution and a mobile-based solution.
The card based option included a PoS device and a smart card also known as Postal Cash Cards (PCC), a service offered by Bangladesh Post Office. In this option, a beneficiary would record attendance by swiping her card using the PoS device in the field; the data is instantly transmitted through a mobile network and recorded in a central server. Subsequently, the server generates an attendance report to be approved at multiple levels in the government authority. Based on this report, a beneficiary receives her payment from nearby post office branches. In the mobile-based option, a beneficiary received a 4-digit code via SMS everyday. She entered the code on a special-purpose mobile app on the supervisor’s mobile handset (a smartphone). The code is then transmitted to the central server over a mobile network. The server then generates an attendance report for approval by relevant authorities. Based on the attendance report, payment is made to beneficiaries’ mobile banking accounts. The beneficiary can then cash-out the payment (either a partial or the full amount) at her convenience from a nearly mobile banking agent.
Both of these solutions were tested separately through multiple pilots covering around 15,000 beneficiaries across different parts of Bangladesh. This initiative crystalized the value proposition for digitizing safety net programs across three dimensions: reducing operational costs from the government perspective, enhancing convenience (and reducing costs) from the beneficiary perspective, and reducing the scope for leakage at the systemic level. Learnings from this initiative informed not only the scale-up plan for the EGPP program, but also catalyzed interest among other safety net programs.
The government of Bangladesh runs about 15 cash transfer programs similar to EGPP, with an allocated budget of around $1.5 billion. A separate study conducted by pi STRATEGY in collaboration with the Access to Information (A2I) program of the Prime Minister’s Office reveals significant cost savings opportunity both from government and consumer sides. The study finds digitization of enrollment and payment system of government-to-people (G2P) programs could save up to $15 million annually for the government (excluding the systemic benefits of leakage reduction, which typically generates significantly larger saving opportunities). Whereas, the Time-Cost-Visit (TCV) analysis for the consumer side suggests, the digitization of the G2P payments could save 91 million hours, $20 million and 60.4 million visits for the consumers annually.
There is no one best way to digitizing G2P programs. The experience in one country may differ widely from that of another country. For example, when we compare the Bangladesh experience with that of the Solomon Islands (where pi STRATEGY helped their Central Bank identify strategy options for G2P digitization), we see a differing set of channels in use. Whatever the path, one thing is clear: because social safety net and G2P programs are often quite large (budget, number of beneficiaries), even small improvements can generate meaningful value propositions for all parties. And the story is not limited to cost savings alone, it transcends into far more important domains of accountability, transparency, and perhaps most importantly, people’s confidence in their government.
This article was written in 2015.
pi STRATEGY