A digital lifeline in a public health crisis

Five lessons from using a digital cash transfer program to help poor families struggling with COVID-19.

BY ALEX ROBINSON AND RAKIB AVI 

This piece was originally published in Stanford Social Innovation Review. It has been reposted below.

As the COVID-19 pandemic sent shockwaves around the world, policymakers have been scrambling to adapt responses in a rapidly evolving context. In a country like Bangladesh, for example, where 85 percent of the population earns less than $5.90 a day, government-imposed lockdowns have quickly transformed from public health measures into full-blown humanitarian crises: Bangladesh’s vast informal economy accounts for 9 out of every 10 jobs, so the devastating effects of lockdown due to COVID-19 were felt almost immediately. According to a nation-wide rapid response survey, households living in extreme poverty reported an income drop of 73 percent from February to the first week of April. With the lockdown halting all but the most essential economic activity, many families are now unable to afford even basic necessities.

To mitigate the profound disruption to life and livelihood caused by efforts to contain the virus, governments must rapidly scale social support to vulnerable households. Cash transfers have become the most widely adopted form of intervention, representing 65 percent of COVID-related social assistance schemes. For people living in extreme poverty, cash support can be a lifeline until the economy reopens. To respond to the threatened food security of millions of families that are now being pushed into poverty in Bangladesh, BRAC, a leading global development organization based in Bangladesh, decided to launch a cash transfer program to 200,000 of the most vulnerable families in the country, both the urban poor living on daily wages and ultra-poor families living in rural areas.

BRAC opted for a cash transfer program instead of relying on food package distribution because research demonstrates that cash is a more effective way of distributing aid when the market system is functional. But although we wanted to move fast with cash at the beginning, COVID-19 has presented a unique set of challenges and cash disbursement becomes increasingly inefficient, if not dangerous, in the midst of a pandemic. Designated paypoints can become difficult to access under the constraints of restricted mobility and curfew—especially for remote populations—while long queues and heavy congestion at paypoints raises the risk of infection. The inherent security risk of cash distribution for both staff and recipients may only intensify as financial hardship spreads.

Digital transfer, on the other hand, moves money to the most vulnerable with greater speed and accuracy. It provides predictability and flexibility so that recipients can cash out or purchase necessary goods when and where they choose. And mobile payment has been recommended by the WHO as the preferred option because it reduces the risk of virus transmission via paper money.

BRAC first tested the feasibility of digital cash transfers with a pilot intervention in early April, involving a small subset of participants, and then scaled across 41 districts in Bangladesh. BRAC’s Ultra-Poor Graduation program implemented the digital transfers in collaboration with our microfinance team and the mobile financial service (MFS) provider bKash, a phone-based system for transferring money similar to Venmo and PayPal. The process of digital transfer began with the collection of digital wallet numbers and other relevant information from pilot participants. BRAC shared this information with bKash for verification, after which a list of active wallet numbers was generated. BRAC then transferred funds to bKash, which in turn disbursed stipends to verified active numbers. Disbursement results were sent immediately to BRAC, and we reached out to pilot participants for confirmation and feedback. By April 23, a total of 6,242 participants had each received a stipend of BDT 1,500 (approximately 18 USD) via digital disbursement, drawn from BRAC’s emergency assistance fund.

Here are five lessons we’ve drawn from delivering mobile payments to 6,242 at-risk families:

1. Conduct an accurate assessment of clients’ digital readiness.

This is a necessary first step in a country such as Bangladesh with high mobile penetration but low digital literacy, and in which almost half of all adults are still unbanked. Before scaling up digital transfers to 6,000 families, BRAC undertook a rapid pilot assessment of 242 families in four districts to assess its feasibility.

The initial assessment showed that 37 percent of participants already had a registered account number with MFS provider bKash. For these respondents, our Microfinance digital cluster team collected relevant information from clients via phone or home visit. This information was sent to bKash for rapid verification of active numbers, followed by direct cash disbursement. When the assessment uncovered 38 particularly vulnerable families who lacked access to any mobile phone within the household, we tagged these participants with a trusted contact, such as a neighbor, to coordinate the transfer.

2. Provide on-the-ground support to open wallets in an expedited manner.

For the 48 percent of households with mobile phone access but no active accounts, our frontline staff provided targeted support to open bKash wallets. The first mobile money service introduced in Bangladesh, bKash continues to control a vast majority of the market, with more than 35 million registered clients and country-wide penetration via a strong local agent network. Our staff familiarized each participant with the account opening process and transfer protocols and then linked each participant with the closest agent to open an account within 24 hours.

Once a wallet was activated and cash disbursed, frontline staff confirmed receipt and solicited feedback. Our digital cluster team provided round-the-clock support to resolve any issues faced by clients. Thanks to close coordination and support, 94 percent of recipients successfully received the full transfer upon first attempt. (Most failed first attempt transfers were due to incorrect numbers, inactive accounts, and submission of accounts registered on other mobile banking platforms.)

3. Preempt delays in the transfer process by anticipating potential client misinterpretation.

For emergency digital cash transfers, it is critical to partner with a provider that is familiar to participants, widely accessible, and capable of quick client onboarding. Despite all the benefits of partnering with bKash, there was one unanticipated obstacle with emergency digital cash transfers. Given its widespread penetration, bKash is often used as a generic name for mobile money, such that some clients who indicated they held an active bKash wallet were in fact linked with a different MFS provider. This accounted for the majority of unsuccessful transfers. For our next round of transfers, we will communicate proactively to counteract potential confusion.

4. Women play a critical role in realizing the numerous benefits of digital transfers.

While a myth persists in Bangladesh that women are less capable than men of using a mobile phone or maintaining a mobile banking system, our pilot program proved otherwise. Most women BRAC engaged were already aware of mobile banking. Because households were drawn from our Ultra-Poor Graduation program, women participants regularly accessed local marketplaces and interacted with shopkeepers to sell their products. Thanks to this, they already knew the location of the closest bKash agent and were confident in opening and using a digital wallet.

With digital wallets in hand, our women participants have been able to leverage a set of benefits unique to digital transfer. First, they can better manage their spending. Transferring funds into a mobile wallet seems to reduce pressure on participants to spend the full amount immediately, encouraging saving. Second, women participants can access new sources of credit, since many bKash agents also act as shopkeepers and these agents are more willing to allow them to purchase goods on credit, improving financial resilience. Finally, wallets can translate into greater financial security. Research has shown that mobile money accounts lessen the risk of significant financial shock through access to remittances and lending within a peer group, such as BRAC’s women-centric Village Organizations.

Lengthening the Lifeline

As economies remain shuttered during lockdown, many countries across the global south are looking to digital financial services as a way to safely and efficiently deliver emergency cash relief to vulnerable populations. At BRAC, we are rapidly scaling digital cash transfers and have reached almost 164,000 at-risk families to date.

Many stakeholders will have a role to play in ensuring that these transfers can be done well at scale. Policymakers must prioritize flexible onboarding, temporary fee waivers, and adequate protection measures. For example, market agents should convert to electronic methods for onboarding. This could enable same-session transfer of funds, close the window of time in accessing lifesaving funds, and minimize the health risks of repeated contact.

Categorizing these digital transfers as essential and waiving many associated fees will maximize financial support and boost trust in new clients. However, policies must also ensure that incentives remain for agents and that MFS providers do not incur unsustainable losses. In the coming weeks, agents will serve as a critical lifeline between households receiving relief funds and the institutions issuing them. It is imperative that we consider the best way to support their continued operation, even while we continue to minimize risks to the health of clients.

Now more than ever we have to remain adaptive, do away with antiquated systems, and identify simple, scalable innovations that can help build the resilience of underserved communities. Speed and agility has been the key for countries who have responded to this crisis well. Done well, digital cash transfers can help extend a badly needed lifeline for millions of people for whom the choice of staying back home is a luxury they cannot afford.

Alex Robinson leads the Social Innovation Lab and Rakib Avi leads innovation at BRAC.