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A growing number of developing countries are using biometric technologies to create national identification programs or for more specific needs, including cash transfers, voter registration, and disaster relief. CGD’s research shows how biometric ID can help improve public service delivery, advance progress on many of the Sustainable Development Goals, and helps shape global best practice in applications that use the technology. Our work on India’s pioneering Aadhaar system aims to understand how it has impacted a billion Indian lives, and how the technology could be useful to other developing countries.
Center for Global Development
WASHINGTON – As governments across the globe begin to use direct transfers to get money to citizens unable to work, a new report from the Center for Global Development (CGD) finds that just 56% of citizens across 99 developing countries have access to a phone, a bank account, and an ID. Those three things, the researchers find, are the building blocks for the successful rollout of digital government transfers, from emergency cash transfers in a pandemic to everyday government programs like pensions and food subsidies.
“Governments around the world are moving full-steam ahead to get money in the hands of their citizens who are out of work due to the coronavirus. But we found that for digital payments from governments to work well, countries need to have the digital basics in place: bank accounts, IDs, and phones. And far too many developing countries are running behind on making sure their citizens have access to those basics,” said Alan Gelb, one of the authors of the study and a senior fellow at CGD.
“There are a lot of advantages to bringing government payments online. It can cut out costly middlemen and time-wasting activities like waiting in line to pick up a ration payment, as well as providing a much stronger defense against corruption, “Gelb said. “And, in a crisis like this, it means you have the digital infrastructure ready to go for something like emergency cash transfers.
“India has been at the forefront, digitizing programs like pensions and subsidies to buy cooking gas for poor families. And what India’s experience illustrates is how you need a trio of digital basics to make payments work: a digital ID to prove a person is who they say they are, a financial account to for them receive the money, and a mobile phone that can be both an information hub and a tool to access that money,” said Anit Mukherjee, a policy fellow at CGD and another author of the study.
The researchers found that while many governments had focused on rolling out national biometric ID programs, like India’s Aadhaar system, financial inclusion is the biggest hurdle for most. About 34% of the population in the 99 countries they examined lacked a financial account, and in the lowest-performing countries, more than two thirds of the population did not have access to a financial account.
“We found that the lack of bank and mobile money accounts is the biggest gap in digital readiness. It’s hard to get money to citizens who don’t have either,” said Mukherjee.
The report found:
There are significant gender gaps in access to phones, IDs, and especially bank accounts. In sub-Saharan African countries, men were at least 9 percentage points more likely to have access to each of the three than women.
More than twenty percent of women in Pakistan don’t have access to even one of a bank account, mobile phone, or ID, four times the rate of men.
Sub-Saharan African countries tend to have relatively high rates of financial inclusion, thanks to widespread use of mobile money in many countries, led by Kenya, which did better than much richer countries on that front.
Financial inclusion remains relatively low in Latin America. While nearly 80% of Latin Americans had access to a mobile phone, barely more than 50% had a bank or mobile money account.
The good news, they found, is that building on one part of the basics helps expands others. Everything else being equal, having an ID and a mobile phone increases the likelihood that a person will have access to a financial account, particularly for groups that are disadvantaged. Also, even as access makes it easier to implement social transfers, transfers can themselves be a powerful force for increasing financial inclusion.
“None of these numbers are set in stone. Governments can and should work to expand their citizens’ access to the digital basics. And they should need to ensure that they do it in ways that don’t reinforce existing inequalities,” Gelb said.
The full report is available at https://www.cgdev.org/publication/citizens-and-states-how-can-digital-id-and-payments-improve-state-capacity.
Onerous KYC documentation requirements are widely recognized as a potential constraint to full financial inclusion. However, it is sometimes difficult to judge the extent to which this constraint is a serious or binding one, relative to others. The paper considers this question, distinguishing between different types of documentation and different financial market segments according to their KYC requirements.
Tariq Malik, former chairman, National Database and Registration Authority, Pakistan
Pakistan is a leader in the application of identification systems and technology to a range of development issues. The National Database and Registration Authority (NADRA) of Pakistan has become a central player in a number of program areas and has been internationally recognized for its expertise, including winning many awards for excellence.
This paper surveys 160 cases where biometric identification has been used for economic, political, and social purposes in developing countries. One primary conclusion is that identification should be considered as a component of development policy, rather than being seen as just a cost on a program-by-program basis.
India’s reform of household subsidies for the purchase of LPG cooking gas stands out for a several reasons. The paper provides a detailed picture of the reform through its various stages, including how the process was conceptualized, coordinated, and implemented. It analyzes how such a reform must be able to adapt to concerns as they arise and to new information, how digital technology was used and how it is possible to use a voluntary self-targeting “nudge” to defuse potential resistance to income-based targeting.