Transparency

Shifting the billions of dollars in cash payments to disburse salaries, pensions, social welfare stipends, cash-for-work funds, and humanitarian relief to electronic can increase transparency, reduce corruption and ensure accountability because financial flows can be tracked in real-time.

Reduce Corruption and Increase Accountability

Electronic payments can also facilitate an audit trail helping governments, the development community and the private sector ensure payments and benefits end up in the right hands.

  • In 2004, the Dominican Administradora de Subsidios Sociales (ADESS) partnered with Visa Inc. and four financial institutions to launch the Solidaridad prepaid card to beneficiaries of the Comer es Primero (“Eat First”) subsidy. The Dominican Republic now tracks and controls benefits distribution to ensure it helps those who need them most while reducing subsidy distribution costs.1
  • Argentina has also seen a decrease in government payment leakages with the Ministry of Social Development’s shift to electronic payment cards. Those who admit to paying bribes to local officials in order to access their money fell from 3.6 percent to 0.3 percent.2

According to USAID, electronic payments aid in “efforts to improve transparency, mitigate corruption, [and] reduce leakages in the disbursement of funds.” (Mobile Money, USAID, October 9, 2011)

Electronic Payments Ensure All the Funds Get To the People Who Need it Most

Cash payments to citizens often suffer from high leakage, meaning the full amount does not reach the recipient. According to the World Economic Forum, intermediaries can intercept payments, keep part of the payment for themselves or require facilitation payments (e.g. bribes).3 As a large number of intermediaries are required to deliver payments to dispersed areas and to poor and illiterate populations, significant portions of the cash payments often leak – or are diverted – along the way.4 Estimates suggest that up to a quarter of the total government benefits paid don’t make it into the hands of the recipient, which is a major problem for both governments and beneficiaries. Shifting to electronic payment methods reduces leakage, thus improving transparency, accountability and efficiency for governments and greater benefits for beneficiaries.5

In Afghanistan, over 1,200 Afghan national police receive salaries via Roshan’s M-Paisa service, Afghanistan’s first mobile money transfer service. When the employees first received their salary through mobile phones, a number of employees were prompted to think they had received a nearly 30 percent raise, however, in actuality they were paid the correct amount for the first time. When they were being paid in cash, 30 percent of their salary was being “taken off the top.” Moving to mobile payments has ensured that Afghan citizens receive the salaries they earned. The Afghan government is also incorporating mobile payments into its signature initiative to extend credit facilities to Afghan entrepreneurs based in rural areas.6

 


2 Banking the Poor via G2P Payments, report by CGAP and DFID

3 World Economic Forum, “Galvanizing Support: The Role of Government in Advancing Adoption of Mobile Financial Services”, WEF and The Boston Consulting Group: Geneva, Switzerland. 2012

4 World Economic Forum, “Galvanizing Support: The Role of Government in Advancing Adoption of Mobile Financial Services”, WEF and The Boston Consulting Group: Geneva, Switzerland. 2012

5 World Economic Forum, “Galvanizing Support: The Role of Government in Advancing Adoption of Mobile Financial Services”, WEF and The Boston Consulting Group: Geneva, Switzerland. 2012

 

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Private Sector

Reduce many of the costs related to hard currency payments.

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