Following from the Component 1 focus on better governance and management, Component 2 deals with necessary systems strengthening activities required to provide a reformed social protection system. This support will include both soft inputs – delivery coordination and training to local delivery agencies (notably Local Government Institutions – LGIs); and hard inputs – systems inputs such as IT infrastructure, compliance and M&E.
The second component focuses on the development of a modern social protection system, able to deliver strategic objectives. The component has three activity streams: (1) the overhaul of current payment delivery mechanisms, (2) the harnessing of poverty database information for downstream policy planning, and (3) the means of monitoring performance, both in terms of compliance and M&E, with linkages to the management information and payment systems. There are also fiduciary and public expenditure management dimensions.
Creating platforms for direct benefit transfers
This work stream seeks to develop the payments infrastructure within Union Parishads (UPs) to move to electronic Government-to-Person (G2P) delivery to individual accounts. This would utilize platforms provided by UNDP’s Access to Information Project (A2I) and a system of agent banking linked to the Central Bank’s financial inclusion initiative to be promoted by A2I. This would require hard inputs – central IT works, local equipment and, crucially, matched with softer inputs – a programme of training and awareness building within UPs. The intervention will be carried out on a pilot basis (within the SWAPNO pilot intervention) with later replication by GoB. The aim is to demonstrate and establish model platform(s) for direct benefit transfer of mainstream government social safety nets.
In establishing platforms for direct G2P cash transfers, two things need to be kept in mind:
– New technologies have opened up endless opportunities for innovation, connectivity, efficiency and outreach and made old solutions obsolete. However, introducing new technologies means more than investing in hard and software; it is even more about training operators how to manage new technology platforms.
– Payment platforms are not only about technology, but about serving the greater purpose of financial inclusion, which requires de-learning of old practices, awareness raising and change of mindsets. Public banks and post offices, having a track record of not being particularly service oriented or open to modern technology, are likely to need extensive process engineering to service “last mile” users.
At the most basic level, a country must have communications infrastructure in poor and rural areas to enable customers and cash point agents to communicate with the provider’s transaction authorization system through a mobile phone or other digital interface. Fortunately, mobile penetration in Bangladesh has increased exponentially over the last decade and the networks are projected to continue growing in coming years. As per HIES data, 63.7% of all households in Bangladesh had a mobile phone in 2010 – in stark contrast to only 9.5 % with an active bank account. By July 2013, six mobile operators had a total of 107 million subscribers.
Once the connectivity layer is in place, providers can undertake the considerable task of extending cash point retail networks into poor and rural communities and connecting customers to a digital payment grid. Payments such as government social transfers are actually effective gateway products to fuel this.
It is important to consider designing payment arrangements that can be integrated with other payment channels – which would be the path most likely to reduce cost and improve efficiency. The issue of reduced transaction costs needs reflection on the cost of the recipient in terms of both direct monetary cost (charges) and convenience to get the transaction done (travel time, waiting in line, opening hours). Improved efficiency includes all this, plus considerations of reduced administrative cost for the government to execute payment, reduced corruption and other leakage.
It is important to define the ambition level for G2P transfers; whether to serve only as an instrument for the limited purpose of more cost-effective direct benefit transfers or whether such transfers can also be conducive to mainstream financial inclusion of social protection beneficiaries. In a final analysis, direct benefit transfers are not only about Government-to-Person (G2P) transfers, but equally about creating platforms for Person-to-Person (P2P) transfers.
Three approaches of an inclusive banking model which can be considered for G2P are currently in use in Bangladesh:
1) Public-Private: This model of banking is running in partnership with banks, agents and mobile phone operators. Money transfer of e-payment system can be done through certain empowered private and public banks. It can also be done through local government. Bangladesh Bank has given authority to 30 banks, both public and private, to carry out mobile banking.
A variant of this model is being promoted through the UNDP assisted Access to Information (A2I) project. A cash point agent per Union will be trained and equipped with IT equipment, including a biometric device for fingerprint, vein or iris scanning. These cash points can be schools, NGOs, clubs, MFIs, the A2I Union Information and Service Centre, etc. The agents can be licensed from any bank authorized to carry out e-banking.
A2I sets out some principles in the selection of cash point agents:
i. Attitude and culture: The agent should have the mentality of inclusive banking and be willing to include the extreme poor.
ii. The agent must provide easy access to services (in terms of both location and acceptance in the local community).
iii. The agent has to use a technology neutral transaction solution connected to financial institution thorough any Internet system.
iv. The agent will not charge any unnecessary cost.
v. The agent must have sufficient resources for the role as cash point.
vi. Ideally, the cash point business should not be the main source of income of the agent.
2) Public: The necessity of the post office in earlier function is of out date. There are around 8,500 post offices in Bangladesh, of which 2,000 are complete offices and 6,500 secondary postal agents. The number of post office points is adequate in terms of accessibility. World Bank is giving preference to using postal office as a platform of epayments, in for instance EGPP and a CCT programme implemented through LGD. The LGD project has introduced biometric information for payment of safety net allowances. Postmen are going to a cash point with a vendor machine to reach the beneficiaries.
3) Private: Mobile banking has been developed under a system, known as bKash. It has been expanded throughout Bangladesh, with 70,000 agents serving 6.8 million customers. They charge 1.8% of the transaction for withdrawals and a flat rate of Tk. 5 for transfers to another bKash account. However, the system is not yet compatible with other financial institutions, which makes transfers to banks and post offices impossible at this stage of technology development.
Chars Livelihoods Project is partnering with bKash for G2P payments. For such payments on a wider scale, bKash would be ready to waive the Tk. 5 transfer cost from the Government to individual bKash accounts and only charge for withdrawals.
The SWAPNO intervention will include piloting platforms of G2P electronic benefit transfers in two districts. This may include a mix of the three inclusive banking models outlined above – the A2I promoted model of cash point agents, the LGD model of post office cash point vendor machines and the bKash m-banking model – assessing viability, accessibility, functionality, cost effectiveness, user friendliness, benefits, challenges and sustainability of each respective model.
Harnessing management information systems for social protection programme planning
The Bangladesh Bureau of Statistics (BBS) is investing substantially in a new management information system to register all households for social protection programme administration. The database will include information on approximately 33.4 million households and will support targeting processes for social protection and other government programmes across a range of government ministries. The database will include indicators on a number of measures of vulnerability and deprivation, enabling the government to identify which households are most vulnerable across a range of dimensions of deprivation (for example, human capital, access to employment and livelihoods, household conditions, infrastructure, etc.).
The proposed work stream will support BBS to harness this information for downstream policy applications. For example, the database can match households with specific types of deprivations to the government programmes that will most appropriately and effectively address their vulnerabilities. The ability to aggregate the vulnerability indicators creates a capacity to match communities or districts as government scales up developmental programmes. For example, some areas may require a greater emphasis on infrastructure development while others may benefit more from livelihoods programmes. BBS’s initiative creates a potential wealth of developmentoriented data at household level. This work stream aims to turn this data into valuable information that strengthens the planning of social protection programmes and the required complementary developmental interventions.
Field M&E, Coordination and Local Compliance
The second area of activity under Component 2 will be wholly soft-inputs – field M&E, coordination and local compliance. This will be achieved by building in data collection to the UP payment system – allowing for assistance and real time monitoring at pilot locations. Compliance would also be supported through technical assistance to UPs, Upazilas and Districts, providing capacity building and facilitating linkages between centre and localities within existing reporting structures and through networks (e.g. communities of practice).
The linkages among payments, management information and monitoring systems can substantially reduce fiduciary risk, improve targeting performance and ensure rights-based delivery of people’s entitlements. While electronic payments mechanisms go a long way in reducing opportunities for leakage and corruption, in part by reducing opportunities for discretionary handling of participants’ benefits, risks remain that beneficiaries are unable to access their benefits or that their rights are compromised in other ways. A single registry management information system provides a vehicle for managing and monitoring all payment processes.
For example, civil society monitoring mechanisms can receive support from government through a centralised management information system – that can identify samples which monitoring processes can validate. The same system can channel the voice of the monitors to fiduciary risk analysts, who can identify patterns of problems and escalate monitoring activities appropriately. This work stream will build the linkages among the payments, management information and monitoring systems, piloting support to civil society initiatives that provide rights-protection mechanisms and strengthen social accountability.
In addition, civil society can support a grievance redress mechanism that aims to minimise exclusion error and protect the rights of programme participants. Social protection programmes around the world face challenges effectively implementing an appeals mechanism, because the required skills for grievances differ substantially from those required for programme administration, and because a grievance mechanism implemented as part of overall programme delivery suffers from biases – since programme administrators are often reluctant to fault their own systems. Effective grievance mechanisms should operate independently of the programme administration, which the required resources and authority to generate broad awareness of participants’ rights and to effectively arbitrate disputes. Civil society is often well-placed to deliver rights-protection mechanisms, given their historical role in amplifying the voice of the poor and strengthening social accountability. An alliance between national policy stakeholders and grassroots civil society organisations can deliver effective grievance mechanisms and reduce exclusion errors and other fiduciary risks.
Activities will include the development of MIS and other supporting systems, like:
– Secure user interfaces such as smartcards and/or mobile phones and their roll-out, initially within pilot areas and then nationally;
– Sourcing of all supporting software (links to M&E, QA systems);
– Appraise the use of the platform in holding data from related sectors;
– Exploit the database platform and IT support to deliver allied sectoral services – notably in health;
– Provision of appropriate training at all levels to enable usage and maintenance of the system;
– Support BBS to develop downstream planning and programme coordination linkages;
– Promote linkages among payments, management information and monitoring systems both at pilot level and with existing civil society interventions;
– Facilitate coordination meetings led by Deputy Commissioners, to ensure the envisaged MIS linkage from local to central level;
– Support civil society to implement grievance systems and other rights-protection mechanisms, particularly linked to BBS’s management information system.