Electronic delivery of social cash transfers: lessons learned and opportunities for Africa

Delivery of cash transfers typically involves a compromise between the cost of reaching recipients literally at the door of their homes, and the savings from providing them at a central point to which recipients must travel to receive their benefit.

The solution is to deliver cash electronically, thus minimising risk through stringent banking rules, reducing the demands on staff time, and ensuring convenience for recipients who can access their transfers at a place and time of their own choosing - therefore reducing costs all around.

This brief outlines recent experiences in cash delivery systems from across Africa, with a focus on Kenya, Malawi, Namibia and Swaziland: 

Policy lessons:

• the electronic delivery of cash can be achieved through a variety of mechanisms - debit card, smart card or cellphone, using a range of financial infrastructure - banks, automated teller machines (ATMs) and point-of-sale (POS) devices
• the benefits of electronic delivery systems to both governments and recipients are well known in terms of improved cost efficiency and flexibility of access, so this brief emphasises issues that are relevant to private sector partners, who are vital to the introduction of such systems
• increasing spread of cellphones in Africa, including both signal coverage and handset ownership, makes distribution of cash transfers by cellphone increasingly viable.
• growth of financial infrastructure and opportunity for banks to increase their market share has increased the favourability with which banks view potential participation in government-to-person cash transfers
• evidence from Malawi and Swaziland shows that cash transfer recipients who are provided with bank accounts to receive their cash transfers tend to then use them to save money and to receive person-to-person transfers (e.g. remittances) – thus making further use of financial infrastructure and services
• the time- and cost-intensive nature of the payment mechanism setup relative to the operating costs
  means that the incentive for private sector partners to engage is much greater for long-term programmes than short-term pilots
• as well as the growing base of evidence from projects and programmes in Kenya, Malawi, Namibia and Swaziland, other countries that have expressed interest in the use of electronic delivery systems include Ghana, Lesotho and Mozambique