Page 319 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

Studies have estimated that leakage is as high as 70 to 85 per cent of the total funds in some cash transfer
programs. 3

Technical issues:

The technological challenges in cash transfers begin with identification. Many NGOs and governments continue
to record beneficiary information by hand on paper. Accessing the information is inefficient and costly, and
the process of digitizing that information (if the information is digitized) is cumbersome.
Data on the efficacy of cash transfer programs is also difficult to collect when people receive benefits in cash.
Cash is notoriously difficult to track, and does not leave a digital trail. NGOs have, at times, contracted outside
auditors to conduct surveys on the effects of the cash transfer program. While data from surveys is better than
no data, the process of auditing and collecting data is costly.

If beneficiaries were to move away from the village, change names, or die, this information would be difficult
to change inside of the registry. Digital survey tools can make the process easier, but survey teams would still
need to travel to people’s homes and collect information. This is a costly process.

Logistical issues:

Cash transfers can also be a logistical nightmare. Transportation infrastructure in many countries is severely
4
lacking, making the journey to beneficiaries costly and difficult. Then, once the cash is delivered, beneficiaries
often have to wait to receive the cash. In the Concern Worldwide example, beneficiaries had to wait an average
of three hours to receive their money. 5

Employees or volunteers travelling with large amounts of cash are easy targets for thieves. Improved security
and theft protection imposes extra costs onto the cash transfer program. Some cash transfer programs buy
insurance and contract with 3 party transportation and security companies to ensure safety. This raises the
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overall cost of the program. 6
Political issues:

Cash transfers can also create political problems. The most basic political problem arises when the paying
agency decides which citizens are eligible for benefits. Identification problems can compound this issue.
Conflicts of interest can also surface between national governments and state governments over where
to disburse cash, and which entity receives the political credit. Finally, cash is notoriously difficult to track.
Therefore, transfers in untraceable bills could promote corruption. This could include overpayment to “ghost”
beneficiaries, who may not exist, or underpayment to beneficiaries who are entitled to more funds.

4 The last 10 years: New ways of making bulk payments

Bulk payments have taken a step forward in recent years with the introduction of various new capabilities and
technologies. These innovations have made it possible to collect more information on the efficacy of the cash
transfers, and have made some bulk payment programs more efficient.
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3 Muralidharan, Karthik, Paul Niehaus, and Sandip Sukhtankar. Building state capacity: evidence from biometric smartcards in India.
UC San Diego. July 2015.
4 Zimmerman, Jamie, Kristy Bohling, and Sarah Rotman Parker. Electronic G2P payments: evidence from four lower income coun-
tries. CGAP. April 2014.
5 Aker, et al. 2014.
6 Pasricha, Nicole and Khurram Revzi. After Watan: the contributions of a G2P payments program to building a branchless banking
industry. mennonite economic development associates. September 2013.
7 Pickens, Mark. David Porteous and Sarah Rotman. Banking the poor via G2P payments. CGAP December 2009.

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