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Leveraging Digitized Social Welfare Programs to Deepen Female Financial Inclusion in Africa

The McKinsey Global Institute estimates that widespread adoption and use of digital payments and financial services could increase the GDP of all emerging markets by $3.7 trillion by 2025. This additional GDP could create up to 95 million new jobs, raise overall productivity and investment levels, and make government spending more efficient. Interestingly, no one stands to benefit more from this growth than women.

It is a fact beyond argument that women and girls shoulder the global burden of poverty. Decades of research show that poverty deprives women of vital health, education, and socioeconomic opportunities throughout their lives.

Two women digitally making a financial transaction

For women in low and middle-income countries, digital savings, credit, and payments services can provide them with a critical link to the formal economy and a gateway to greater economic security and personal empowerment. When women-headed households in Kenya adopted mobile money accounts, poverty dropped, savings rose, and 185,000 women left agricultural jobs for more reliable, higher-paying positions in business or retail.

Government-to-person (G2P) payments- a form of social safety programme have been identified as a key enabler in deepening financial inclusion and women’s economic empowerment. The World Bank’s Global Findex 2018 report advised that if governments digitized cash payments, they could enable up to 100 million unbanked adults to open their first account. Digitizing G2P transfers from cash payments to financial accounts for beneficiaries has led large numbers of low-income people, many of whom are women, into the formal financial system for the first time.

Leveraging on the behavioural change influenced by the pandemic, this moment in history is one in which G2P payment programmes when well-designed can promote long-term women’s economic empowerment through financial inclusion beyond its use as an immediate response to the crisis.

COVID-19 pandemic with social distancing and widespread lockdowns saw many countries prioritizing opening bank accounts to ensure G2P payments got to beneficiaries safely to curb the spread of the virus.

Government officials in India are combining digital payment and ID technologies to deposit money directly into the accounts of citizens living in distant villages, increasing the transparency and efficiency of social welfare programs.

In Niger, distributing government benefit payments through a mobile phone instead of cash helped give women who received the transfers more decision-making power in their households.

Unfortunately, in Nigeria, we are still lagging behind in this regard. The Federal government in responding to the economic effects of COVID-19 mandated the Ministry of humanitarian affairs to ensure cash transfers of N20,000 were given to 3.6 million vulnerable families captured in the social register; there was a lot of controversy and backlash surrounding the transparency of the process. The payments were done with cash which could easily be diverted and also increase the spread of the virus.

In 2017, one of the world’s most successful G2P programme- Indonesia’s conditional cash transfer program, Program Keluarga Harapan (PKH), made this transition from cash to digital, enlisting four state-owned banks to open basic savings accounts for millions of women recipients.

In response to Covid-19, PKH switched from quarterly to monthly disbursements for beneficiaries, increased the annual payment amounts by 25%, and added 800,000 beneficiaries. Indonesia’s digital G2P systems and its existing infrastructure has proven essential to the government’s ability to respond to the needs of women, who have been the hardest hit among its vulnerable populations.

My hope is that Indonesia can become an example for similar efforts around the world as many governments globally, are just embarking on their journey toward digitization of payments.

I recognize that as effective as digitizing G2P payments is in enhancing access to financial services, it has not recorded the same success in translating this access to active usage of the accounts. Beneficiaries face constraints like inadequate information on account functionality, lack of trust and limited knowledge in conducting transactions independently play a major role in suppressing the usage of these accounts beyond cashing out government payments. Although these challenges have limited the potential of G2P payments to propel women’s financial inclusion and economic empowerment, they are not unbeatable.

G2P payments must address the constraints faced by beneficiaries regarding account use by doing the following:

·       Digitized G2P payment programmes must take into cognizance the behavioural design of beneficiaries to drive account use. Its efforts should be geared towards building financial capabilities for beneficiaries by leveraging on peer support as part of its intervention plans. Beneficiaries need to be educated on the features of their savings accounts and its use as an economic empowerment tool.

·       The programme must be coordinated to carry all stakeholders along. The partner banks, programme coordinators and field agents need to work together in eliminating misinformation about account usage.

·       Incentivize the private sector to prioritize account activation. Lowering barriers to entry for non-bank FSPs with expertise in payment systems to participate in digitized G2P programmes could accelerate account usage as they have a strong relationship with the customers in the communities they operate in.

Following efforts to rebuild the economy post-COVID-19, it has become imperative for efforts to be geared towards ensuring G2P recipients use their accounts as tools for recovery and resilience. There is evidence that if digitized G2P payment programme beneficiaries are equipped with the right information and have a greater financial capability, a larger proportion of them would be confident to transact using their bank account. They will be motivated to save, transfer funds, receive payments, actively use their accounts to save, make payments, transfer funds, and be eligible for loans.

For women, G2P payments into accounts can provide an independent income stream and a secure place to store funds; protecting them against allotment of funds by other family members. It also helps in strengthening her control over her economic advantage and increasing her bargaining power within the household. In the future, active use of accounts can make women eligible for credit or other financial interventions from the government.