"The Mobile Money Experience in Sub-Saharan Africa" in The African Technopolitan Magazine

Take a look at IMTFI Postdoctoral Scholar Mrinalini Tankha's article, The Mobile Money Experience in Sub-Saharan Africa, featured in the most recent issue of the African Technopolitan, a magazine of the African Centre for Technology Studies (ACTS).

The article is part of the January 2016 issue on "The Poverty of Development Strategy in Africa" and provides a comprehensive look into IMTFI's research findings in Sub-Saharan African since 2009. It traces shifts in the mobile money landscape and also discusses patterns that endure by highlighting the role of deep histories, rank and hierarchy, ritual and religion and the stickiness of trust in understanding user interaction and uptake of new technologies. The article further emphasizes the role of  locally embedded rich qualitative research and offers suggestions for new future directions in mobile money research in the region.

Read the rest of the issue here.

Conditional Cash Transfers in the Philippines (part 2 of 3)

By IMTFI researcher Erwin A. Alampay

According to the Department of Social Welfare and Development (DSWD), only 20% of the population receiving conditional cash transfers (CCTS) are operationally problematic. The constraints offer some clue as to how the use of m-money might be unfeasible in these locations. In particular, it will be unfeasible for m-money to work in areas where there are no cellular signals, which likely accounts for part of the difficult to reach 20%. Nonetheless, would it still be beneficial to consider the implementation of m-money in other areas?

Photo 1: Enumerators prepare tokens for the survey respondents

At present, there are various modalities for delivering conditional cash transfers to their intended beneficiaries. These different modes consider the availability of Landbank branches, or in its absence, possible partner rural banks, and postal services (PhilPost). The expense for the DSWD vary per option. For those using Landbank/cash cards, there is no additional costs except for the initial cost of providing cash cards. For partner rural banks, the rates vary between 22 to 40 pesos (about US$.50 - $.91). Using Philpost, a government-owned corporation, the cost is 50 pesos. If none of these are feasible, then other groups bid to provide the service. By bidding this out, the cost of using other private conduits has gone down from Php75 initially to only Php42.

In terms of using m-money as an alternative, the question is whether it can deliver to beneficiaries at a cost less than other modalities in areas not serviced by Landbank/cashcards, but where access to mobile services are present.

We considered the technical and financial feasibility question, by visiting an area where GRemit has operated, San Jose, Mindoro Oriental.  In the past two years, at least half of CCT funds that have been distributed there were delivered through GRemit, albeit not through a “pure m-money model.’ There is also operational m-money infrastructure in the area (e.g. GCash and Smart Money/Padala).

Technical feasibility

We surveyed CCT beneficiaries that GRemit was already servicing and asked about their interest, access, and previous experience in using m-money through cellphones. The majority of respondents (71% of 307 respondents) expressed interest in receiving CCT through the mobile phone. Relative distance to known claim/redemption centers for mobile money was significant with regards their willingness to do this. Those who were closer to a known cash-out center were also more willing.

In terms of mobile phone ownership, almost half (49%) of the respondents owned a mobile phone, and a majority subscribed to SMART (90%). Interestingly, ownership of a mobile phone was not statistically significant as to whether they were interested in m-money for CCT. This suggests that even those who currently do not possess a mobile phone are open to this option. This also means, that if this is to be universally rolled out, then the cost of providing mobile phones to the beneficiaries must be considered in design implementation.

Photo 2: Beneficiaries wait for their names to be validated.
In the background mobile stalls sell toys, clothes and food.

Overall, a third (34%) reported knowledge of receiving money via the mobile phone. People’s pre-existing knowledge of the use of m-Money was also statistically significant with regard to willingness to use it as a transfer conduit. Those who knew how to use m-money were more willing to have CCTs delivered through their mobile phone. Furthermore, those who had previous experience using mobile money were also those who reported interest in receiving their CCT in this manner. More of them were familiar with and had experience transacting with SMART Padala centers than with GCash merchant partners.  Partly this was because more of them were SMART subscribers, and there was a greater presence of such outlets in the area (see Photo 2). A third had already experienced using SMART Padala, and only 1.5% had used GCash. Although training non-users would be still be needed for implementation of CCT thru m-money, the existing experience in the community can be helpful in its acceptance. 

Financial feasibility 

To be financially feasible, cost efficiencies and potential savings (for both the government and the beneficiaries) should be demonstrable. The DSWD expressed preference for more frequent CCT releases at smaller amounts. However, if this is done, the operational costs would be greater because of manpower costs and expenses directly connected to its distribution and compliance monitoring. 

Would m-money provide a financially viable option in such a case? At current market rates, it was calculated that at smaller increments (cash transfers lower than Php2000), both GCash and SMART Money can be delivered at a rate lower than what is currently being charged by DSWD’s conduits (i.e. MLhuillier or GRemit). SMARTMoney charges for the sender are also lower than what GCash charges (Php10 vs Php40 respectively).  With amounts larger than Php2000 (about US$46), GCash becomes less viable, whereas SMART Money continues to be a viable alternative. At present, the maximum benefit provided on a bi-monthly release is Php2800.  This would cost Php15 for the sender if coursed through SMART Money, and Php60 if coursed through GCash.

Photo 3: Merchants hand out money to beneficiaries.
Barangay Central and San Agustin.

Costs on the part of the cash transfer recipients can also be compared. For CCT beneficiaries, their primary concern is the travel expense. However, transactions using SMART Money has additional charges, whereas GCash does not. It was also noted that the different cash out centers we interviewed in San Jose were not consistent in their policy as far as cashing out was concerned. This implies, that if CCT is implemented in this way, then m-money merchants must be duly trained/informed; and beneficiaries taught the correct deductions, if any. For smaller cash transfers, GCash and SMART Money, even with their additional charges, are competitive and even better than the current amount DSWD pays for delivering the amount per beneficiary, particularly for transactions below Php2000. GCash is not viable with bigger transactions (higher than 2000), whereas SMART Money becomes less attractive once money transferred is higher that Php2700.  But, given the large volume of money possibly coursed through this system, the government may want to negotiate for reduced rates.

Nonetheless, there would still be limitations on m-money viability. It would be dependent on the scale of availability of these services, and accessibility of their cash out centers in the areas being served and the transportation costs for accessing them.

Conclusions: Implications on CCT program design

Even as mobile phone coverage increases, there will still be areas where access to mobile phones is not universal. As such, an important consideration for CCT implementors is whether to provide this option only to those with mobile phones, and/or to provide mobile phones to beneficiaries as well.

Rolling out this program would be easier to implement in areas where cash out centers already exist. There, existing knowledge and experience in receiving cash transfers through phones are more likely, and community knowledge can be leveraged to help convince and train non-users. 

Financially, an m-money based CCT can be viable, particularly for small and frequent transfers. Further, since there are two kinds of mobile money platforms in the Philippines, another consideration is to which existing networks the majority of beneficiaries in an area are subscribed and the ubiquity of partners/merchants present there.  This can reduce barriers to adoption and generate positive interest in the proposed modality.

However, would the existing number of m-money cash out centers be able to absorb huge single day demands for cashing out? Can cashing out be controlled or reduced by retaining CCT in a non-cash (m-money) form within a local ecosystem? This will be discussed in my next blog: “Leveraging CCT to develop stronger m-money eco-systems in local communities.”

Read the first post, "Use of m-money for conditional cash transfers in the Philippines: Part 1 of 3"

Use of m-money for conditional cash transfers in the Philippines: Part 1 of 3

By Erwin A. Alampay based upon his IMTFI funded research with Charlie Cabotaje

Design-Reality Gaps in the Use of M-money for Conditional Cash Transfers in the Philippines

Conditional cash transfers (CCTs) are programs that transfer cash to poor household beneficiaries on the condition that they regularly accomplish a set of human development tasks on a regular basis. These are often related to investments in the health and educational well-being of their children that are also monitored. Most CCT programs move transfers through the mother (Fiszbein & Schady 2009).

CCT Distribution by GRemit merchants in San Jose, Mindoro Oriental
Photo credit: Charlie E. Cabotaje

In the Philippines, the conditional cash transfer program is called the Pantawid Pamilyang Pilipino Program (4Ps) and is overseen by the Department of Social Welfare and Development (DSWD). It is a human development program that invests in the health and education of the poor, particularly those with children between 0-14 years of age. As of June 2013, the program had already enrolled 3.9 million households. The amount disbursed has also grown by 3300% in 5 years, to almost Php34B (about 753M US$) in 2013. Given the program’s scale, whereby beneficiaries are given cash grants of between Php1600-2800 (35-62US$) every two months, one of the main challenges is logistical, given the limited access to banking services in a country that is composed of more than 7000 islands.

Growth in funding allocated to CCT 2008-2013 (Source DSWD)

At present, DSWD uses various channels for sending the CCT. The basic design is through Landbank of the Philippines (LBP) and the use of cash cards. Ms. Antoinette Duero, from the DSWD’s Financial Management Service, estimates that around 40% use cash cards and the rest (60%) uses other conduits, like Philpost, GRemit, etc. They estimate that operationally, they only have around 20% with logistical problems overall (for example people may face significant costs in terms of transportation to get to the payout site, absence of alternative channels, etc.). The majority (80%), DSWD finds ‘manageable’.    

GRemit as a conduit 

On November 5, 2010, DSWD and LBP engaged the services of Globe Telecom in the pilot implementation of the distribution of cash grants using the GCash Remit service, the telecommunications company’s cash pick-up service. Since the pilot, was considered a success, the DSWD decided to expand to more areas using the same service. By 2011, the service was serving about 300,000 beneficiaries and distributing approximately PhP 1 billion (22M US$) in cash grants to almost 70 areas in 16 remote districts in the country. This was said to have made the act of claiming grants more convenient for beneficiaries who used to spend money and time for their transportation to, and queuing up in banks and distribution centers but has also spurred local economic activities as the beneficiaries were more likely to spend their grants in their community (Bold, 2011).  

Design-Reality Gaps on mobile money use

GCash is the mobile money technology that Globe Telecom developed over a decade ago. Among the potential advantages of GCash, and mobile money in general, is its supposed efficiency and security features. In reality, however, the primary consideration for DSWD was to get a partner with a presence in the different areas and districts in the country where they needed to disburse the grants, particularly those where there is no Landbank present and no rural bank available to help disburse the grants. For instance in Balabac in Palawan where GRemit was first piloted, there were no rural banks, and GRemit was the only option they knew at the time. It was noted that initially, beneficiaries were made to travel to the next municipality of Bataraza (or Brooke’s Point) to claim their grants, however this posed security issues for the beneficiaries and significant transportation costs. According to DSWD's Regional Program Coordinator, Mr. Vincent Obcena, “We (initially) had to have the beneficiaries go to the nearest Landbank (in Brooke’s Point or Batarraza). This would cost the beneficiaries several hundred pesos, sometimes 300-500 pesos even.”

Bringing the bank to them

Photo credit: Charlie E. Cabotaje

Another option was to bring Landbank to the municipality through the use of land and air transportation. Mr. Obcena described the logistical challenge of implementing the distribution in 2009: “We even used a helicopter to bring the money, because it was risky for LandBank to transport it by public transportation and boat. That was a risk they did not want (to take on). However, it was also not always possible to have the money brought in by helicopter, and it was not sustainable because it was expensive."

It was noted that the design of its implementation never considered what mobile money technology had to offer. In Mr. Obcena’s words the m-money model does not apply in this case because: “there was no use of the technology by the beneficiary.”

It is worth paying closer attention to the way that money actually passed across the different groups involved in the transactions. To explain how it works, we have an extended quote from a DSWD regional staff member:

"There is no use of (mobile money or mobile phones) technology among the beneficiaries. Instead, beneficiaries are given transaction slips by DSWD with codes. They gave this to the GRemit merchant who will enter the code for verification before remitting the cash. It is only the merchant who has a GCash account in this arrangement. They put the code that DSWD generated at the central office, and texts this back to GRemit. They needed this then because they could not verify the GCash transfer without the code. This was done individually, and not in bulk, as a control measure in case the beneficiary did not appear on the day of the release for funds.  Merchants then get paid per transaction  by GRemit (per beneficiary who are able to collect their CCT) and GRemit, in turn is paid by LandBank of the Philippines."

Ms. Duero, from the DSWD central office, says this is a way for GRemit to monitor their merchants, considering also that these merchants are just accredited by GRemit and not really part of their company. The text sent by the merchant to GRemit is their way of monitoring if beneficiaries were paid and by how much. This is also important because GRemit and the merchant also have an internal fee sharing arrangement for each transaction. The argument (for the sharing) is that even as the merchant provides the manpower and direct field contact, Globe provides the technology and infrastructure. 

Photo credit: Charlie E. Cabotaje

Unfortunately, the design as stated, never really took into consideration how the mobile money technology can be more beneficial for cash transfers. Such a model has been demonstrated to be possible, as Aker, et. al  (2011) have documented in Niger. In the Philippines, the U.N. is also piloting a similar scheme, but this time, partnering with SMART Money as part of a cash for work program to rehabilitate communities affected by Typhoon Haiyan (see Lee-Brago 2013).

As such, among those who qualified for the bidding, GRemit was outbid in early 2013 by MLhuillier, a remittance company with a nationwide network of pawnshops. Partly this was because GRemit did not really have the technological advantage working for it, and MLhuillier’s network could just as easily compare with Globe’s network of merchants. Among the considerations for those who participated in the bid was the matter of cost but also their capacity to deliver the grants down to the barangay-level (community-level).

However, it is also unlikely that the 20% of the population that DSWD finds problematic will be solved through a truly mobile money based system. According to Ms. Duero, the problem for mobile money in those cases would be very basic: some beneficiaries do not have cellphones and some areas lack cell sites and have poor cell signals. More likely, m-money can work in the 80% that DSWD finds less difficulty.  However, if they are not as problematic and is already manageable, why should DSWD consider this as an option? 

Where mobile money can help will be discussed in my next blog, part 2 of 3: “The Potential and feasibility of m-money for CCT in the Philippines: where mobile money can help.”

Can social transfers boost electronic payment adoption and financial inclusion? Lessons from Palawan, Philippines

IMTFI fellow and researcher Anatoly (Jing) Gusto’s project looks at dispensing cash grants in the Philippines. You can find out more about the project here.

The potential of social transfer schemes to boost electronic payment adoption and ultimately financial inclusion is starting to gain recognition (see, for instance, Zimmerman 2012).  Our findings are drawn from a study involving a group of beneficiaries of the “Pantawid Pamilyang Pilipino Program” (4Ps), a conditional cash transfer (CCT) program based amongst an indigenous group in the Philippines. They point to three major issues that stakeholders need to think about when selecting channels to make it an effective gateway for financial inclusion. The following is a roundup of how continual changes in Technology, user and cultural contexts and the denomination of bank notes are major factors in promoting financial inclusion and particularly savings among the poorest of the poor.

ATM dispenses only 500 & 1,000 peso bills

1. Continual Changes in Technology
Regulators have made a concerted effort to help distribute cash grants to beneficiaries by thinking about how to apply new technology. But just as project proponents, channels, and direct beneficiaries are starting to get accustomed to one mode, new technologies and models begin to appear.

In the Pantawid Pamilyang Pilipino Program (4Ps), several disbursement modes were adopted by the Department of Social Welfare and Development (DSWD) and the Land Bank of the Philippines (LBP), a depository and disbursing bank of the Program. At the start, cash grants were disbursed through the LBP Cash Card (non-interest bearing debit card account) and could only be withdrawn from Automated Teller Machines (ATMs). Today, a portion of the grants are already released via the over-the-counter method in the LBP bank branches and through other conduits including rural banks, cooperative banks, cooperatives, non-government organizations, merchant partners of one electronic money issuer, and through the Philippine Postal System (PhilPost).

Each new technology brings not only new business models and processes, but also new information that needs to be learned and accepted by all concerned. The pace of change is daunting, especially for organizations that must work with millions of individuals nationwide, not to mention other social welfare functions they have to attend to.

Positive effects of technological changes

LBP has shown its openness to other disbursement channels, most recently one that involves point-of-sale (POS) terminals. Post fieldwork meetings with DSWD and LBP revealed that there is an effort to explore how other channels, including biometrics and POS terminals, can be used in partnership with conduits and merchants. In a recent payout in Palawan in 2013, CCT beneficiaries reportedly got the chance to purchase and pay for goods in the merchant’s store without using cash by swiping their ATM cards on a POS terminal and entering their Personal Identification Number (PIN) which is the same PIN used in the ATM.

A payment transaction which results in an electronic deduction of the purchase amount from the beneficiary’s cash card and corresponding credit to the merchant’s deposit account is believed to be convenient as it eliminates or reduces the need for beneficiaries to take the extra step of going to the ATM to withdraw money.

2.  User and Cultural Contexts

Regulators and providers must understand that the CCT beneficiaries are a new and unique client segment that enjoys regular, steady flows of capital (sometimes into a deposit or debit account). While technological advancement offers new options in the distribution of cash grants, the context with which the “target clientele” operates is still the same.  CCT beneficiaries are economically vulnerable, with relatively low levels of education, they may also be more comfortable operating in the informal sector. In the case of Indigenous groups, their traditional cultural practices and rudimentary experience in using/storing physical cash causes problems. Regulators may be ill-equipped at the moment to serve and monitor this market if their focus is limited to formally regulated institutions.

In the Philippines, indigenous people, particularly from the uplands, had initial doubts with the program and at first could not believe that the government would give them money for the betterment of their children’s education and health. Fortunately, with the help of locals known by the indigenous group (municipal links and parent leaders), DSWD was eventually able to allay fears and gain their trust. Municipal links and parent leaders were able to help by carrying out the transactions for the indigenous groups.

At least in the areas visited, cash is perceived with little value beyond its function as a means of exchange. In fact, storing cash in physical wallets or purses among indigenous groups is not a common practice. When asked where they store their money, they said they just put them in plastic bags or in an envelope containing their other CCT documents.  There are a few who set aside some amount of cash for covering future school related expenses of children, in particular school projects and food and transportation allowances, and for emergencies. What is more common are baskets that indigenous groups carry in their backs which they use for transporting goods they barter, sell, or purchase.

Making things work for financial inclusion

There is evidence that regulators can be flexible and creative which is what is needed to develop digital strategies that work in a specific context. For example part of the recent enhancements carried out by LBP and DSWD involves partnering with non-bank financial institutions as well as civil society organizations (CSOs) in the implementation of the program. Furthermore, there are signs that they are interested in knowing whether cash is really a prerequisite to be able to promote access to investment goods for the education and health of children. Is there a way for poor households to have better access to these funds or equivalent goods for education and health without using cash?

Merchant paying in candies due to
lack of coins and smaller bills

3. Denomination of Bank Notes
vs. Amount of User Transactions 

A conditional cash transfer, paid in high-denomination banknotes can result in “value leakage” as problems of access to the entire amount of the grant arise. For example, take a payment of ₱2800. If the ATM only dispenses ₱500 or ₱1000 notes, this is disbursed as two ₱1000 and one ₱500 bills, forcing a “leftover” of ₱300. Some merchants who sell goods during payouts have difficulty in giving the exact change as most transactions involve high-denomination banknotes for small purchases (e.g. less than ₱100).  One merchant resorted to using candies in lieu of coins when he runs out of smaller bills for change.

We have seen that while technology can be considered a limitation in terms of providing recipients the immediate access they need to the exact amount of the grant, we have uncovered practices and a growing mindset among beneficiaries associated with the denomination of banknotes and coins that provide opportunities for mobile and electronic money development. In particular, ATMs that dispense only high-denomination banknotes force people into “saving” amounts of their cash transfer between those denominations—and some report satisfaction with this outcome, saying that it helps them to cover unexpected expenses in schools and buffer financial crises. In one instance, a recipient even inquired if it is possible to credit those funds to a deposit account. Banks that serve as conduit partners for CCT must grab the opportunity to help with account opening in order to ensure that recipients get a CCT payment.

Key Takeaways and Challenges

Not just to withdraw money but to shop “cash-lite” if not “cashless” 

The objective of conditional cash transfers is for poor households to be able to invest (spend) in the education and health needs of their children. Our research has shown that CCT proponents must not only ask about “how to improve the delivery of grants,” but also “how to ensure an affordable and convenient way to purchase/deliver the needed goods/investment in the poor households.” The relevance for CCT beneficiaries of any form of value is not just related to its ability to be transferred and cashed out (liquidity), but also the ease of dividing it into smaller units of value (divisibility) conducive for small purchases.

Need not for “new” but “better” technology

Aligning technology with the actual delivery capability in the field is a challenge that CCT proponents will need to face in considering any other distribution channel. In the case of the Philippines, cash grants are often still disbursed through a non-interest bearing debit account. Banks that serve as conduit partners might be able to take advantage if beneficiaries are offered the opportunity to open a savings account where payments can be made via SMA. This way beneficiaries can be given incentives to save and maintain a higher balance. The accounts can be made more appropriate if they also include features such as bank transfer/remittance, bill payments, airtime top-up, insurance availment, etc.

Need for end-user education

The example of indigenous groups using the ATM machines indicates that while there might be a relatively simple technology already available, the CCT segment is still typically characterized by lower education levels and lower exposure to technology. These will require that any new technology introduced will need to include a significant training component that emphasizes the benefits of using the service as well as the mechanics of accessing the service.


Link to their final report: "Delivering Cash Grants to Indigenous Peoples through Cash Cards versus Over-the-Counter Modalities:  The Case of the 4Ps Conditional Cash Transfer Program in Palawan, Philippines"