Rapid Response for Social Payments During COVID-19 Introduction 3
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DECEMBER 2020 AUTHOR Loretta Michaels Rapid Response for Social Payments During COVID-19 Introduction 3 1. Rapid Identification of Eligible Recipients 4 2. Simplified Due Diligence for Rapid Account Opening 7 3. Use of Alternative Channels — Fintech, Postal Networks, and NBFIs — for Delivering Payments 13 The Path Forward 18 Notes 21 Acknowledgments The aim of this policy note is to examine steps CFI conducted this work as part of our taken by policymakers to rapidly distribute partnerships with the Mastercard Center for social payments to millions of people whose Inclusive Growth and Deutsche Gesellschaft livelihoods were impacted by COVID-19. This für Internationale Zusammenarbeit (GIZ) is the second in a series of policy notes that GmbH. The author would like to thank the will analyze data collected on policy responses following for their valuable input on and by international bodies and engage in direct suggestions for this brief: Ivo Jenik and consultation with in-country stakeholders to Mehmet Kerse of CGAP, and Denise Dias, assess the impact of policies, both in the short- an independent financial regulatory and term and long-term, on low-income customers supervisory consultant. and the financial providers that serve them. Introduction As countries around the world grapple with the While the wholesale digitization of government devastating economic impact of the COVID- payments, government IDs, and government 19 pandemic, governments have turned to registries (social protection, salaries, pensions, supplemental cash transfers as a key policy tax, etc.) is a large undertaking over many instrument to offset the loss of income. These years, and is beyond the scope of this brief, the measures include a range of approaches, from COVID-19 crisis has forced policymakers to wage subsidies to extended unemployment find innovative ways to deliver rapid support support and a variety of social welfare payments. payments to those most in need.5 A critical aspect There’s also been a push to extend payments 1 of getting this emergency aid out is the ability to outside the usual social protection mechanisms, quickly identify and onboard eligible recipients to ensure that all eligible low-income people and who don’t already have transaction accounts, and small businesses are reached. Given ongoing distribute the payments as soon as possible. concerns about fraud and theft, not to mention cash handling during this health crisis, most The Center for Financial Inclusion (CFI), as part efforts have focused on digital payments. of its partnership with the Mastercard Center According to World Bank estimates, 340 cash for Inclusive Growth and Deutsche Gesellschaft transfer measures — digital and non-digital — were für Internationale Zusammenarbeit (GIZ) taken across 156 countries by mid-September,2 GmbH, explored what governments are doing and government-led social assistance payments to enable rapid payments to those without in response to COVID-19 have globally benefited existing accounts. This paper reviews three of 1.8 billion people, including 1.1 billion new social the measures being taken to speed up payment assistance payments recipients.3 distribution,6 specifically: quick identification of eligible recipients, simplification of customer Those countries with well-developed social due diligence (CDD) rules for rapid account protection systems, payments infrastructure, and opening, and greater use of alternative wide access to digital financial services have fared channels such as mobile apps, post offices, much better in getting these payments out quickly, and nonbank financial institutions (NBFIs) but even they have struggled to rapidly open like microfinance institutions (MFIs) and accounts for their more vulnerable populations. cooperatives to distribute payments, directly Policy actions to encourage use of digital accounts or in conjunction with payment service such as e-money have included raising transaction providers (PSPs). Note that this analysis is and balance limits along with reducing or based on a snapshot in time and just a selection removing transaction fees. Some countries have of examples undertaken due to COVID-19, and also declared cash-in/cash-out (CICO) points that governments and industry stakeholders essential services, but it’s unclear whether are constantly evolving in how they handle the “essential services” extends to account opening or ongoing challenges of the COVID-19 crisis. A how many of these points even conduct account common theme throughout, though, is the ability opening in addition to CICO. These measures are and willingness of policymakers to be nimble all helpful in promoting digital account usage, and innovative as they design solutions for these but largely only impact current digital account challenging times. holders, leaving those without accounts of any kind at risk of being overlooked.4 CENTER FOR FINANCIAL INCLUSION 3 Rapid Identification 1 of Eligible Recipients Countries with well-established social protection Being able to provide comprehensive social schemes have existing databases to work from welfare payments for a nationwide crisis situation when determining eligible beneficiaries for like COVID-19 requires the ability to incorporate social payments under COVID-19. However, all these lists, verify eligibility in a timely fashion many database rolls can be limited in scope, out and check for duplicates, as well as compare of date, or present other impediments to use, against lists of recently deceased. This work is far such as being based in different government more complicated than it sounds, even for the ministries with varying rules around access. most sophisticated of governments. What’s more, the COVID-19 crisis has impacted many people beyond those on social welfare rolls, Integrating multiple government databases is especially small and medium enterprises (SMEs) not a trivial undertaking, and often includes and informal workers, as well as many previously further challenges around privacy and data employed workers, all of whom suddenly find protection. In many cases, authorities choose to themselves without income. start with those beneficiary rolls most relevant to low-income social welfare support and work In order to quickly determine who’s eligible for out from there using a variety of tools to help COVID-19 support payments, governments have existing beneficiaries more easily receive the had to be innovative in tapping into all available new payments or help non-beneficiaries sign existing information, whether publicly or up. The State Bank of Pakistan, for example, privately owned. Primary efforts include starting transformed the eligibility review process for with current beneficiary and employer rolls, the government’s social relief program, Ehsaas then moving onto recent voter registration lists, Emergency Cash, from an in-person process and mobile cellular customer records, including to a remote process, allowing residents to send location data. an SMS to Ehsaas to confirm available social benefit funds. Individuals could then collect cash Current Beneficiary from biometrically-enabled branchless banking and Employment Rolls operations and biometrically-enabled ATMs.7 The obvious starting point for most governments is the existing social protection lists they use for In Jordan, after the government announced a variety of welfare benefits. While these lists a cash transfer program for informal workers ostensibly provide up-to-date information, one impacted by the COVID-19 crisis, the Central challenge with using them is that they are usually Bank of Jordan (CBJ) relaxed its regulations to based only on the requirements of the ministry allow for online account opening with simplified or municipality that collects the information. know-your-customer (KYC) requirements.8 For example, the department that focuses on Workers apply through a webpage and are maternal and child health will only have lists of required to provide information including: recent mothers and families of young children. prior participation as beneficiary in the Bread Another department list may focus only on Subsidy Compensation program, national ID old-age pensioners in a particular jurisdiction. number, national ID card number, and mobile CENTER FOR FINANCIAL INCLUSION 4 phone number. (Refugees are able to use their health emergency. (The program was recently UNHCR IDs for account opening.) The applicant extended beyond the emergency lockdown information is verified via the new National period but amended to focus on certain regions.) Unified Registry (NUR), and the payment Because Togo does not have a strong national arrangement is based on the delivery of cash ID system, they took advantage of a recent voter transfers through e-wallets, which can be opened registration campaign to verify the identity of with any of the seven licensed PSPs, all of which eligible recipients. interoperate through the CBJ’s JoMoPay switch. Beneficiaries without e-wallets are contacted To sign up, beneficiaries had to dial *855# on their through an interactive SMS and are requested to mobile phone, respond to the prompts filling in choose among the listed PSPs to open an e-wallet. their information including voter registration Upon selection, the government sends each PSP number, and submit their application. The a list of the beneficiaries that have selected them, government chose this USSD channel to ensure and PSPs must assist beneficiaries in the process that recipients who lacked internet access could