Citizens and States: How Can Digital ID and Payments Improve State Capacity and Effectiveness?
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Citizens and States How Can Digital ID and Payments Improve State Capacity and Effectiveness? Alan Gelb | Anit Mukherjee | Kyle Navis —-1 —0 —+1 587-84331_ch01_4P.indd 1 2/12/20 2:15 PM Center for Global Development. 2020. Creative Commons Attribution-NonCommercial 4.0 Center for Global Development 2055 L Street, NW Fifth Floor -1— Washington, DC 20036 0— www.cgdev.org +1— 587-84331_ch01_4P.indd 2 2/12/20 2:15 PM Contents Preface . v Acknowledgments . vii Acronyms . ix ExecutiveSummary . 1 1 . CitizensandStates:HowCanDigitalIDandPaymentsImprove StateCapacityandEffectiveness? . 15 Development themes: From MDGs to SDGs— with JAM................................................17 Cautions: No “silver bullet” .......................................................................19 2 . ID,Mobile,andFinance:APictureofAccesstoJAM . 25 Data considerations............................................................................. 25 A global snapshot ............................................................................... 26 Gender gaps in the JAM trinity ................................................................... 36 Financial inclusion patterns and government transfers: Insights from logistic regressions ............... 38 From data to policy ............................................................................. 39 3 . JAMSynergiesandPolicyDirectionstoIncreaseAccess . 41 Synergies across the three components.............................................................41 ID- mobile and ID- finance . 41 Mobile- finance................................................................................. 43 Synergies between JAM and government ser vices, payments, and programs............................ 46 P2G payments, JAM, and the ac cep tance ecosystem ................................................. 48 Leveraging high- speed mobile infrastructure to foster inclusion ..................................... 49 Broad policy directions...........................................................................51 4 . TowardsEfficientPricingwithEquity:TheRoleofDigitalTechnologies . 52 Efficient pricing and the SDGs.................................................................... 52 Moving to efficient pricing with equity: The role of digital technologies................................ 53 Reimagining green taxes in the context of direct transfers ........................................... 54 Some country experiences....................................................................... 56 Towards more efficient and equitable subsidies: PaHaL and Ujjwala ................................... 58 —-1 —0 —+1 iii 587-84331_ch01_4P.indd 3 2/12/20 2:15 PM Reforming fertilizer subsidies: Digital ID and payments for sustainable agriculture ..................... 60 Lessons from the cases .......................................................................... 65 5 . ImprovingtheEfficiencyofSocialProtection . 66 Role of digital technology.........................................................................67 Cash transfers.................................................................................. 68 Reforming in- kind transfers through technology: The case of PDS in India..............................76 Transfers to promote financial inclusion and women’s empowerment ................................ 83 Lessons from the cases .......................................................................... 85 6 . TowardsResponsiveReal-TimeDigitalGovernance . 87 Feedback loops ................................................................................. 88 Some critical success factors for feedback.......................................................... 89 From princi ples to practice ...................................................................... 90 Preliminary lessons on the potential for real-time governance and its limitations....................... 93 Annex1 .NoteonJAMData . 97 Limitations of Findex coverage ....................................................................97 ID estimates ....................................................................................97 Mobile access .................................................................................. 98 Financial accounts .............................................................................. 98 Limitations of a snapshot ........................................................................ 98 Annex2 .AnalysisofJAMDatafromFindex2017 . 101 Logistic regressions for financial inclusion.........................................................101 Robustness check for country weighting...........................................................102 A closer look at government transfers and financial inclusion ........................................106 Probabilities under dif fer ent scenarios . .106 References . 111 -1— 0— +1— iv Contents 587-84331_ch01_4P.indd 4 2/12/20 2:15 PM Preface Digital technologies are part of our everyday lives. We This report considers the potential of digital ID, communicate through email, text messages, and financial inclusion, and mobile technologies to WhatsApp. We connect with others on social media, improve the capacity of governments to deliver bet- search for information, listen to music, stream mov- ter, more inclusive, and accountable public ser vices, ies, shop online, and commute using rideshare ser- subsidies, and transfers. It proposes an analytical vices. We pay for these digitally, often using our framework to achieve global development objec- mobile phones. Many of the digital tools we use did tives, reviews the growing body of lit er a ture on digi- not exist a decade ago and some may not survive tal reforms, pre sents new evidence from country beyond the next decade. The only constant in the dig- case studies and field-based research, and recom- ital world is change, and we need to adapt quickly to mends a set of princi ples for countries to follow as keep up with it. they move forward on their digital governance journey. Governments around the world are moving to harness the power of digital technologies to improve their Universal access to well- functioning ID, connectivity, capacity to serve people. Many public ser vices are now and financial inclusion has to be a first principle when online— passports, driver licenses, land rec ords, just to considering moving citizen-government interactions name a few. Food stamps are distributed as electronic in this direction. Digital reforms should be designed in vouchers; pensions, education stipends, and social a beneficiary-centric approach, understanding their grants are directly transferred to bank or mobile needs and their capacity to navigate the new digital money accounts. These changes are not limited to rich ecosystem. Aligning incentives is critical to improve economies— countries like Bangladesh, India, Kenya, accountability and prevent vested interests from Pakistan, and Rwanda, for example, are leapfrogging derailing well- meaning reforms. Digital technology their way towards digital governance at a rapid pace. should be a tool for inclusion and empowerment as The language of governance is changing, and it is embodied in the SDGs—it is certainly pos si ble but not becoming increasingly digital. certain. In this dynamic and evolving context, how can digital Fi nally, the report outlines the challenges that states technologies play a positive role to achieve the ambi- must confront, including the issue of po liti cal will, tious objectives and targets embodied in the Sustain- digital capacity, and protection of personal informa- able Development Goals (SDGs)? How can they both tion. ID, mobile communications, and digital finance empower citizens and improve state capacity? What offer huge potential but also increase risks of track- can we learn from the experiences of digital reform in ing and surveillance. Digitized service delivery also developing countries? Fi nally, what can we say about generates enormous volumes of data, much in real the future trajectory of digital governance— the guid- time, increasing the importance of sound data gov- ing princi ples, the harmonization of policy design ernance. These are universal challenges and ones and technology, the risks, and the challenges going that resonate strongly in countries of the developing forward? world. —-1 —0 —+1 v 587-84331_ch01_4P.indd 5 2/12/20 2:15 PM Governance will need to evolve as citizens increasingly adjust to—as well as demand—“digital first” interac- tions with the state. We hope that this report will be a useful starting point for future work in this important and emerging area of policy and practice. Masood Ahmed President Center for Global Development -1— 0— +1— vi Preface 587-84331_ch01_4P.indd 6 2/12/20 2:15 PM Acknowl edgments This report draws on studies conducted over several helpful comments and observations provided by read- years. Some have been in collaboration with MicroSave ers of vari ous drafts, including Michael Pisa and Consulting (MSC), and here we want to recognize and Charles Kenny at the Center for Global Development thank the members of their teams, including Mitul and Maria May, Neeraj Mittal, Robert Palacios, Steve Thapliyal and others, for a productive and enjoyable Rasmussen, Aishwarya Lakshmi Ratan, Kartik Srivas- collaboration. We thank our co-authors and other tava, and Ruth Goodwin Gruen and staff at the Better authors of a range of papers that have