Alternative Payment Mechanisms

Reducing  Error, Fraud and Corruption

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Participants

– Gideon Kachingwe/Malawi - Luisa Cumba/Mozambique

– Ramesh/Afganistan - Danilo Bay/Mozambique

– Brighton Ndambo/Malawi - Serene Philip/Sudan

– Adwoa Asotia-Boakye/Ghana - Andi Patunruang/Indonesia

– Janet Chidengu/Malawi - Maxwell Kuunyem/Ghana

– Patrick Acheampong/Ghana - Noor Ahmad Hanifi/Afganistan

Goal Specific Objective Why focus on EFC

Good payment mechanism should have timely distribution of correct amounts, to the right people, and at predictable frequency & at a minimum cost.

To identify an alternative payment mechanism that will reduce error, fraud and corruption.

• Many countries use significant budget towards SSN project (1 ‐3.8% of GDP)

• Increase efficient use of public funds and coverage

• Credibility of the project 

Existing Payment Mechanism

Manual Payment

• AFGHANISTAN  10% 

• MOZAMBIQUE  100%

• MALAWI  90%

• INDONESIA  10%

• SUDAN  95% 

• GHANA  50%

Electronic Payment

• AFGHANISTAN  90%

• MALAWI  10%

• INDONESIA  90%

• SUDAN  5%

• GHANA  50%

Payment Cycle and point of leakage

Payment process starts

Control leakage at every step

Challenges with Manual Payment and alternatives

Situations leading to leakage Alternative interventions PS

Payment list List manually generated can be easily altered;Ghost beneficiaries

The Central agency should oversee the delivery agent.

Payment delivery Difficult to reach placesMobilization of beneficiary/ Power differentials/ GatekeepersRisk of handling cash leads to theft

Sound communication strategyOversight and supervision (in signed MoU).Defined roles and segregated responsibilities at each stage of Payment cycleArmed securityMove away from community focal person to beneficiary groups to communicate.

Payment reconciliation Tedious and open to errors Computerized listing for each reconciliation of each payment cycle.Biometrics or ID systems to reconcile list

Strong Grievance system & monitoring agency.

Sudan Gazeira State

Challenges with electronic system and alternatives

Situations leading to leakage Alternative interventions PS

Payment list Opportunity to tamper though limited

List should be controlled by authorized staff. Audit trail system in place

Payment delivery Beneficiary can forget or share the key or password or ATM card. They still have to rely on others to access money. 

Campaign ‘know your client’ to ensure that money reaches the right recipientJoint monitoring Alternative agents for paymentsMultiple methods of verification(ID + biometrics)

Payment reconciliation Faster and easier ID & or biometrics

Electronic (E-Zwich) Payment System (Ghana- Bongo District)

Electronic (Bank) Payment System (Malawi- Balaka District)

Challenges in conflict and fragile countries and ways to deal

Situations leading to leakage Alternative interventions PS

Payment list Prone to politicization; Fragile governments;Lack of peoples representationTechnical capacityStaff turn over

Objective recertificationInvest in staff and systems

Payment delivery Inability to reach war prone areas;Lack of mobility;Lack of monitoring;

Allocate budget;Invest in administrative setup;Invest in rehabilitation of paymentsystems and broader infra‐ structure.

Payment reconciliation Technical capacityStaff turn over

Invest in staff and systems

Key observations

– Majority of the developing countries rely on manual system.

– Manual systems present a greater opportunity for fraud, error and corruption.

– there should be segregation of duties between the central agency (Eg.MoWSS) and service providers  (Eg. Sudapost, Savings Bank and Zakat. ) 

– MoU and responsibilities to be clearly defined at all the stages of the payment chain.

– Proper accountability and reconciliation for each payment cycle.

– Invest in strong communication strategy

– Strong monitoring and supervisory agency

Questions from audience?Thank you!