Opinion: E-transfers don't naturally promote financial inclusion — but they can

Penina Moyo, a shopkeeper in Zimbabwe, has benefitted from a humanitarian cash transfer program by the United Kingdom and CARE International. Photo by: Mira Gratier / DfID / CC BY-NC-ND

Cash transfers have gained prominence as an effective tool for humanitarian assistance, with an estimated $1.3 billion to $1.8 billion delivered as cash assistance in 2015. The digital or electronic transfer — “e-transfer” — of humanitarian assistance marries this growth in cash-based aid with an explosion in new technologies, including mobile phones. By the end of 2016, an estimated 65 percent of the global population had a mobile phone subscription; by 2020, that percentage is expected to grow to 73 percent.

Humanitarian payments can now be made to mobile phones, and many agencies choose to do so for a number of reasons. They may cite better security for staff, greater efficiency, or the opportunity to reinforce local payment infrastructure. Another benefit is often implicit: That recipients’ exposure to mobile money through humanitarian payments will increase their use of digital financial services.

Having a mobile phone is not the same as managing a mobile wallet, but the logic linking them is straightforward. If people lack experience using mobile money, then humanitarian agencies can create a learning opportunity by digitally transferring aid. By switching to mobile money, agencies have a safer, streamlined system for making bulk payments, and aid recipients have access to not only their cash but a robust menu of financial services. Suddenly, traditional alternatives — the shopkeeper who lent them money, the trucker who carried cash to a family member in the capital, or the goat that served as their “savings” — are replaced by powerful digital financial tools.

Unfortunately, it’s not that simple.

Research by the Electronic Cash Transfer Learning Action Network, or ELAN, in Bangladesh, Ethiopia, and Zimbabwe demonstrates that short-term exposure to mobile money services does not significantly alter recipients’ financial behavior. Put more plainly: People will continue to use the informal financial services they used prior to an e-transfer program.

That is, unless programs are specifically designed to increase access to financial services. And that’s the good news.

Almost all ELAN study participants were new to mobile money. The highest pre-program use was Bangladesh, at 26 percent. Very few had unlimited access to a mobile phone, and in some cases, mobile technology was so novel that participants had difficulty even charging their phones.

Despite this steep learning curve, many participants spoke positively about mobile money and some even preferred it to “cash in hand” in the future — 41 percent in Ethiopia, 58 percent in Bangladesh, and 62 percent in Zimbabwe. Participants’ burgeoning awareness of mobile money as an available financial service is positive.

“If you look at the customer journey in mobile financial adoption,” says Marcella Willis, author of two of the studies, “the first step is awareness.” Humanitarian agencies can capitalize on these positive factors in order to connect vulnerable people — the most common recipients of aid — to digital financial services.

To that end, we have four recommendations for e-transfer programs that want to increase financial inclusion.

1. Understand whether mobile money fills a real gap: Mobile money offerings vary, and people have very logical and practical reasons for using informal services to manage their money. Agencies should understand service gaps, users’ priorities, and whether local mobile money options meet these needs.

2. Promote mobile phone ownership if rates are low: Subsidized phone purchases in Ethiopia shot ownership rates to 99 percent; in other countries, many program participants were gifted phones or purchased one with their transfer. New users need access to, and control over, a personal mobile phone to gain digital familiarity and skills.

3. Provide opportunities for robust, hands-on training: Provide opportunities for users to practice transactions and be clear about the capability and utility of mobile wallets. Retention was greatest after hands-on trainings led by trusted community or family members rather than large group instruction.

4. Increase transfer frequency to build familiarity: New mobile money users need multiple opportunities to master mobile money transactions, such as PIN entry or the steps to cash-out. Repeat transfers can build proficiency and confidence.

The studies’ findings are “a reminder that we need to think about the lives and priorities of people assisted and be careful not to create unrealistic expectations,” says Sarah Bailey, author of the ELAN consolidated study and policy brief.

Any decision requires weighing tradeoffs. Hitting the right balance is even more delicate in a humanitarian response, where the primary objective is to deliver life-saving aid. Brian Hunter, Save the Children’s country director during the e-transfer program in Zimbabwe, understands. “Because we wanted to get as much money in the pockets of beneficiaries as we could,” he says, “we limited some of the activities we could have done” to promote uptake of new services.

Chrissy Martin, senior advisor for digital financial at the United States Agency for International Development, echoes this. “Financial inclusion doesn’t always align with [humanitarian] program goals,” she explained. “If people need to buy food, we don't necessarily want them to keep money in their [mobile] accounts.” It costs money to run tailored trainings or subsidize phone purchases — and no one wants to reduce the amount of emergency assistance provided to households in need.

Still, digital bulk payments can be an enabler — a “push factor” — in the use of formal financial services, according to Silvia Baur, a development economist at the Consultative Group to Assist the Poor. “But the consumer experience needs to be really positive,” she said, “so that a participant thinks, ‘This is of value to me, this is better than what I’ve been using.’”

In Ethiopia, that seems to be the case. Seventy-four percent of participants said they planned to continue using their new mobile money accounts.

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About the author

  • Bree Oswill

    Bree Oswill has worked at Mercy Corps for more than a decade and is currently the Communications Advisor for the Electronic Cash Transfer Learning Action Network.