Digitizing social protection and humanitarian payments to pave the way for financial inclusion
Cash transfers are increasingly being used by the Nigerian government, development agencies and humanitarian agencies as a tool to support the poor and vulnerable and promote well-being.
However, much of the cash transfers provided to the poor in Nigeria require recipients to “cash in” immediately.
The Central Bank of Nigeria (CBN) has supported the government’s efforts by designing policies that can improve the transition from physical to digital cash transfers.
The CBN is committed to achieving its 95% financial inclusion target set for 2024.
A joint report by FSD Africa, Enhancing Financial Innovation and Access (EFInA) and the GSMA, and carried out by Strategic Impact Advisors (SIA), found that a gradual transition from physical cash transfers to digital would improve the use of beneficiaries .
While this transition may not be immediately possible everywhere due to limited network connectivity, low levels of mobile phone ownership and low literacy rates, among other barriers, the report outlines different opportunities for social protection actors. organizations, and the private sector, to work together to support increased access to digital payments for poor and vulnerable aid recipients.
The joint report, Opportunities and Barriers to Digitalizing Social Protection and Humanitarian Payments in Nigeriahighlighted the opportunities of digitizing cash transfers and presented a roadmap for its actualization.
The study reinforces the need for an ecosystem where recipients could eventually access money transfers to a permanent digital wallet through their mobile phone, invariably leading to multiple-choice usage, which they can then use to make transactions to meet all of their needs and help reduce dependence on physical cash.
The report offers recommendations to improve Nigeria’s ability to deliver digital payments to the poor.
It highlights the need for humanitarian and social protection organizations to work in partnership with government and financial service providers to support an enabling environment to reach last mile beneficiaries, the importance of coordination to promote more consistent use cash transfers where appropriate, and efforts to better inform the development and expansion of relevant services by payment providers where possible.
The report recognizes that there are pockets of digitally transaction-ready recipients that could support the development of digital payment ecosystems and help advance financial inclusion.
While digital payments are not enough to close the financial inclusion gap in Nigeria, access to digital payments is an integral part of it and this report outlines practical next steps.
Commenting on the report, Juliet Munro, Director of Digital Economy at FSD Africa, said: “Cash transfers are a vital source of income for many underserved households.
We look forward to ongoing conversations with our partners about the possibilities that exist to digitize cash payments. Once the systems are in place, targeted households will be able to access much-needed assistance more quickly and efficiently.
Ashley Immanuel, CEO of EFInA, said: “Fintech innovation is a key driver of financial inclusion and very useful in providing access to financial services, especially for the underserved. Digitizing cash transfers will help reduce the burden of cash disbursements and support application by beneficiaries of sound financial habits such as savings.
Chris Pycroft, Development Manager at FCDO Nigeria said“Truly encouraged to see this report highlight important and principled opportunities for development actors to support increased access to payments among the poor, lay the foundations for financial inclusion and harness the Nigeria’s growing fintech scene.”