A critical feature of many social safety net programs is the transfer of financial resources to beneficiaries. Frequent delays and difficulty accessing payments can undermine government effectiveness and result in poor service provision. These problems are severe in Nepal, one of the world’s poorest and mountainous countries. Mobile Grant Payments (MGPs) – a system enabling direct social program payments via mobile money – is a potential solution.
In 2015, a massive earthquake destroyed or damaged more than 750,000 mostly rural, Nepali homes. The Housing Reconstruction Grant (HRG), funded by the government and international donors, is the flagship home reconstruction program led by the National Reconstruction Authority (NRA). Constrained by the legal architecture, the NRA implemented a complex multi-agency paper and digital process for transferring funds from the government to beneficiary commercial bank accounts. In addition to delays in payment, government officials have been worried by the process’s opacity and rise of non-beneficiaries with access to a beneficiary’s bank account(s). Could a mobile grants payment system help turn digital financial services from a possibility into a practical solution in Nepal?
This pilot study investigated the possibility of MGP implementation in the NRA. Researchers conducted an in-depth field study of the locallevel obstacles (infrastructural, operational, and regulatory) to successful MGP implementation, as well as rigorous screening and partnership development of multiple potential private sector partners. Laprak, a village located near the epicenter of the earthquake, was severely damaged and is still deemed a vulnerable area for habitation. The survey team conducted electronic surveys of nearly 500 households in Laprak and acquired secondary data from the NRA. This data was collected by the Central Bureau of Statistics after the earthquake in order to assess the conditions of affected households.
The NRA-sourced data provided a broad understanding of the beneficiary population at Laprak: 58% of the population is illiterate and 79% have a household monthly income below $100. By way of comparison, Laprak’s average per capita income is less than $240, whereas Nepal’s gross national income per capita is $730. Even when compared to the typical beneficiary,
Laprak remains quite poor, the average beneficiary per capita income is around $667. In addition to the collection of data, a number of qualitative discussions and meetings were held with various stakeholders in the banking sector to understand the scope and hurdles of the mobile banking sector in Nepal.
Results and Policy Implications
One of the most surprising findings is that 91% of the households in Laprak own a mobile phone, with an average of two mobile phones per household. As the village is an extremely rural and poor community with only intermittent mobile access, this result is a testament to how important locals view access to mobile technology. Another encouraging result was that 57% of respondents believed they would find it easier to receive grant money via mobile phones versus going to a bank. While it is important to not over-interpret these results due to field identification challenges, a conservative interpretation still suggests significant potential for MGP.
From a regulatory perspective, the main financial regulator established the first set of rules to govern mobile payments in September, 2016. While there are many more regulatory steps that need to be taken, interviews with local financial institutions view this as a meaningful positive development. Within the banking sector, many players intend to leverage the e-payments infrastructure and agent networks already established to handle international remittances (remittance entails nearly 29% of Nepal’s GDP).
Given the challenges faced while collecting the primary data and connecting it to the government’s administrative data, the NRA has prioritized an immediate effort to resolve significant errors and challenges uncovered during this study. This includes correcting the beneficiary list and developing a system to be able to track individual beneficiaries moving forward. This has resulted in an on-going NRA-driven effort to correct these problems in Laprak and up to 500 other villages that may be affected by these issues.
January - May 2017