«DIREC TIONS IN DE VELOPMENT Human Development Public Disclosure Authorized The Cash Dividend The Rise of Cash Transfer Programs in Sub-Saharan Africa ...»
Once again, these descriptions may obscure the real potential effects of the transfer. For instance, Ethiopia’s PSNP-DS transfers covered more than 10 percent of needs for many households. Recent evidence in PSNP communities suggests transfers cover about 40 percent of annual food needs (World Bank 2010a).
Some programs indexed transfer size to inflation, such as Malawi’s Food and Cash Transfers (FACT) and Dowa Emergency Cash Transfers (DECT) programs, and others, such as Kenya’s HSNP, have planned to do so. Budget constraints are a major factor keeping other programs from doing so. In the presence of price volatility or high inflation, not indexing Design and Implementation of Cash Transfers in Sub-Saharan Africa 105 transfers to a basket of prices—particularly local food staple prices—can undermine the program’s effects (see box 3.3).
Knowledge gaps related to transfer sizes. These ad hoc comparisons provide limited information about relative transfer sizes across SubSaharan Africa’s CT programs. Clearly, having additional information about transfer sizes that is comparable across programs would be useful, perhaps through multicountry studies using household data. Information about transfer size in relation to eligible households’ pretransfer consumption or expenditure would be helpful when examining the relationship between transfer sizes and key outcomes.
In CCTs and UCTs alike, the influence of a transfer of a particular size on beneficiary behavior will depend on the elasticity of a given outcome, such as investments in education or health, with respect to the transfer size. Although some limited analysis on such issues has been completed in programs in other regions, only a few studies have examined these elasticities of demand within Sub-Saharan Africa. Results from CTs in Sub-Saharan Africa will provide useful information regarding these questions in the near future.
Finally, the size and structure of transfers may have the potential to alter household composition, particularly given the fluid nature of household membership in many Sub-Saharan African countries. Evaluations should be designed in such a way as to determine the potential effect of the transfers on practices related to household composition, such as child fostering. The effect of transfers on household composition needs to be understood because it may, in turn, affect intrahousehold bargaining, household investments, the welfare of specific household members, and outcomes for those members.
Cash Payment Systems Cash payment systems must take into account methods of distributing cash, transfer mechanisms, frequency of cash transfers, and recipients of transfers.
Distribution of Cash In terms of the technology used to deliver cash, payment mechanisms in Sub-Saharan Africa range from the basic to the relatively sophisticated.
Some beneficiary groups receive payments at a designated time, whereas others may receive payments whenever they choose to retrieve them.
106 The Cash Dividend Paypoint distribution, used in Ethiopia, Malawi, Mozambique, and Zambia, among others, requires beneficiaries to arrive at a designated place to retrieve their transfers within a short time frame (for example, on a certain day). Those paypoints often vary their location to increase security. The location and day of the distribution are usually announced only shortly before the transfer day.
Other simple payment methods include the following: retrieval of transfers at local offices by beneficiaries who have had program booklets filled out by CT personnel (Eritrea’s RBF); delivery through the post office or post bank systems (Ghana’s LEAP, Kenya’s CT for OVC, and Lesotho’s Old Age Pension); distribution by community committees (Burkina Faso’s Pilot CCT-CT and Tanzania’s CB-CCT); and payment by a community leader such as a teacher or health worker, who must travel to a nearby urban area to retrieve the money before distributing it to beneficiary households (Zambia’s multiple SCTs).
Other programs, such as those in South Africa, use more sophisticated methods, such as direct deposit into beneficiaries’ bank accounts. Pointof-service machines have also been used to distribute cash to beneficiaries in Sub-Saharan Africa. The point-of-service devices rely on both smart cards and fingerprint verification to identify beneficiaries. They are portable and work offline but must be taken to connect into a mobile network to update financial records. This method is being used in Kenya’s HSNP, which provides transfers to nomadic households in areas where bank branches are unavailable. Similar operations are used in parts of South Africa and Namibia.
Many payment arrangements require coordination and support from personnel involved with distribution. For example, the point-of-service agents for Kenya’s HSNP are selected by Equity Bank; they must be local shopkeepers with a trusted record and enough liquidity to finance transfers for approximately 100 individuals each month. When intermediary agents pay cash to beneficiaries, a bank account for the point-ofservice agent is automatically paid the amount of the transfer plus a fee.
The agent must then retrieve any cash from an Equity Bank branch. The point-of-service machines are also able to function as miniature automated teller machines (ATMs) for beneficiaries and others. No fee is charged to beneficiaries for their first four cash withdrawals per month (HSNP n.d.).
Other innovative transfer mechanisms have been used successfully in Sub-Saharan Africa, particularly in remote areas that are difficult to reach with large sums of cash. The Democratic Republic of Congo’s Emergency Design and Implementation of Cash Transfers in Sub-Saharan Africa 107 Cash Grant program distributed cash monthly for one year to ex-combatants through mobile phones. In 2007, an emergency CT program used to respond to postelection violence in Kenya transferred cash through mobile phones using unique SIM (Subscriber Identity Module) cards (that is, portable memory chips). Groups of 10 beneficiaries shared a mobile phone and received support from a literate cluster leader (del Ninno 2009).
As shown in figure 3.7, the majority of CT programs in Sub-Saharan Africa allow beneficiaries to retrieve benefits through a local office, such as a post bank or commercial bank. Slightly over one-third of programs require beneficiaries to travel to designated paypoints to obtain their cash. Just over 1 in 10 programs use direct deposit to bank accounts or mobile ATMs, and slightly fewer than 10 percent of programs provide cash through community-level distribution to beneficiaries or mobile phone payments. Many programs use a combination of payment mechanisms, relying on the methods that function best in a given location.
Appropriate Transfer Mechanisms In choosing transfer mechanisms, programs should keep burdens on beneficiaries and others in mind: the transfer mechanism chosen should be
Source: Authors’ representation.
Note: Sample size is 57. Data are limited to those programs whose specific distribution mechanism could be determined. Total is greater than 100 percent because some programs have multiple distribution systems.
108 The Cash Dividend appropriate to beneficiaries’ circumstances. If retrieving transfers is too costly or difficult for beneficiaries, they may opt not to take them. For instance, the Swazi government distributes CTs through bank checks, which is the most convenient approach for the responsible department.
Unfortunately, this mechanism places a heavy burden on elderly and destitute beneficiaries, who must collect and cash their checks. In some instances, beneficiaries are unfamiliar with checks, and they often have to travel to offices located far from their homes to collect and cash the transfers (RHVP 2007).
Distribution decisions may affect beneficiaries differently. An evaluation of Ethiopia’s PSNP found substantial variability in beneficiaries’ ease of access to payments. In some localities, beneficiaries were paid close to their homes, whereas up to one in three beneficiary households were forced to sleep away from home when retrieving transfers (Gilligan and others 2009b).
Namibia and South Africa use several transfer mechanisms to ensure that accessible methods are available to all households. Namibia’s Old Age Pension makes payments through bank deposits, post offices, or mobile banking units that use smart cards. Two-thirds of beneficiaries receive their payments through mobile banks and smart cards (ELCRN 2007; Levine, van der Berg, and Yu 2009). This type of setup may be the most effective solution for maintaining high coverage in remote areas.
Programs that rely on community members to retrieve and distribute CTs may ultimately place significant costs on those community members, especially in terms of time expenditure. In Zambia, for example, teachers often close school for a day or more each month to retrieve transfers.3 Kenya’s CT for OVC has relied on district children officers to deliver transfers to households in some districts; the feasibility of this arrangement has decreased as coverage per district has increased.
Because many potential beneficiaries of CTs in Sub-Saharan Africa do not have banks, distributing cash into bank accounts may not always be feasible. However, Swaziland’s Emergency Drought Response program tested the use of direct deposit transfers for previously unbanked individuals and found it to be fairly successful. Households in the program received training on financial basics to help them understand the purpose of banking and how to use their bank accounts. Save the Children contracted with the Standard Bank of Swaziland to distribute transfers into bank accounts for beneficiaries, and Standard Bank worked with Swazi Post to deliver transfers. Recipients were able to withdraw funds from the post office using point-of-sale machines or an ATM card.
Design and Implementation of Cash Transfers in Sub-Saharan Africa 109 They were free to withdraw funds whenever they chose (Devereux and Jere 2008).
Almost 6,100 beneficiaries,4 most of them female, opened bank accounts as a result of the program. The program evaluation found that beneficiaries adopted the bank account and concomitant technology with few problems (Beswick 2008; Devereux and Jere 2008). That experience suggests that using the formal banking system to deliver transfers should not be ruled out simply because the beneficiary population is unbanked.
However, programs that want to distribute cash through the financial system to the unbanked should plan to spend resources to educate beneficiaries and bring them into the formal system.
These examples illustrate that transfer mechanisms should be considered in light of the burdens that they place on both program administrators and beneficiaries. The examples also highlight that technology, if harnessed correctly and marketed appropriately, can be used to improve program execution and perhaps even draw the unbanked into formal financial systems. For more on the potential (and hazards) of using technology to improve CTs in Sub-Saharan Africa, see box 3.4.
Frequency of Cash Transfers The majority of the identified cash transfers are given on a monthly or bimonthly basis. Transfers are awarded quarterly and annually in less than
Experimentation in New Technologies for CTs in Africa Cutting-edge information and communication technologies were for many years viewed as too advanced to be used in developing countries. In some of those countries, however, new systems that are being developed are skipping generations of obsolescent technologies, and more advanced technologies are being introduced than those used in some wealthier countries, which often use outdated legacy systems in which they have large investments.
Advanced technologies have the potential to improve efficiencies in CT programs, especially in the areas of registration, transfer payment, and program monitoring. However, program policy makers and planners must be careful not to be dazzled by high-tech approaches. Drawbacks of each type of technology
Box 3.4 (continued) must be carefully assessed. Building on existing infrastructures of established systems with national coverage, such as postal banks, should still be considered.