opinionBy Gabrielle Smith
Rapid ICT developments are changing the way aid is disbursed.
Information and communication technology is evolving at an extraordinary pace, constantly changing the way we live and work. With rising mobile phone penetration and recent innovations in "branchless banking" in low- and middle-income countries, governments and aid agencies are increasingly looking to these new technologies to serve humanitarian responses.
Since the Indian Ocean tsunami in 2004, there has been a growing trend towards humanitarian assistance in the form of cash grants, rather than food or other commodities. Getting large amounts of cash to isolated and often unstable environments presents aid agencies with obvious logistical and security challenges, but new techniques are arising.
Electronic payment systems are a quick, secure, transparent and cost-effective alternative to delivering cash by road, in envelopes. These systems allow money to be transferred using debit cards, chip-enabled cards or mobile money systems on mobile phones. Though originally developed by the banking and telecoms sectors as a means to "bank the unbanked" and expand their customer base and market share, these are now being used by aid agencies to transfer money to where it is needed most.
Rather than receive cash in hand, recipients are now getting cash grants from aid agencies via card accounts or mobile phones, allowing people to withdraw money from branchless banking 'agents' (usually a local trader) or purchase the items they need in local shops. Since the original mobile money product - Safaricom's M-Pesa platform in Kenya - was developed seven years ago, mobile money services have expanded across East Africa and are becoming available in Nigeria, Niger, Haiti, Zimbabwe, Afghanistan, Pakistan and Somalia.
Since M-Pesa became the first service used to deliver aid in the aftermath of the food price crisis of 2007-8, private firms have partnered with aid agencies and governments to deliver cash transfers in Haiti, Niger, Côte d'Ivoire, Kenya and the Philippines. Similar developments have taken place with card-based services, the largest in Pakistan when the government used pre-paid debit cards, provided by UBL Bank, to distribute aid to 1.3 million people affected by floods.
By the end of 2011, electronic payment systems had been used for cash transfers in 25 aid programmes in 11 countries. Alongside improved security, accountability, cost and speed of aid delivery, there are benefits for service providers too. Humanitarian agencies can be significant clients, generating high volumes of transactions, giving emerging branchless banking systems a welcome injection of cash.
With the majority of aid recipients fitting the 'unbanked' demographic, companies are also introduced to a previously untapped market. The use of branchless banking systems also allows for involvement of the wider national population and diaspora communities in humanitarian efforts. In response to the 2011 crisis in the Horn of Africa, Safaricom launched their 'Kenya for Kenyans' campaign, which allowed M-Pesa customers to text donations. Before the end of 2011 this raised over 150m Kenyan shillings ($1.7m).
While partnering with private sector service providers offers huge promise for quick, precise and flexible aid delivery, even in challenging environments, some barriers must be overcome if aid programmes are to adopt these services systematically and on a large scale. Recipients of aid are arguably the world's poorest; they live in isolated communities with limited infrastructure and knowledge of technology. Branchless banking systems are still developing and their coverage is limited.
The lack of mobile network coverage in rural areas, especially in Africa, presents a significant challenge. Establishing the processes and systems to use electronic payment systems on a humanitarian programme also takes time - time which is of the essence once an emergency is declared. When Kenya was faced with drought in 2011, despite having the world's most developed mobile money services, these factors combined to make electronic payments unviable for much of the humanitarian response.
Greater collaboration between the private sector, aid agencies and governments and an increased focus on innovation and preparedness would allow the potential of mobile and card-based payment systems to be realised on a more significant scale. By taking advantage of new low-cost technologies and developing co-financing arrangements and service delivery models it should be possible to extend networks and provide under-served and disaster-prone areas with these services.
Gabrielle Smith is social protection adviser at Concern Worldwide