Mobile Money to Deliver Cash Aid: Believe the Hype?
Research suggests that mobile distribution had some tangible benefits for recipients of aid, but they also carried costs that could exceed those of traditional physical and voucher-based transfers.
In the two years since the earthquake, several nongovernmental organizations (NGOs) have used Haiti’s nascent mobile money services to deliver cash to people in need. These programs have been among only a handful of global examples (14 were identified worldwide) of cash distribution using mobile money and represent an important opportunity to learn. Early research suggests that mobile distribution had some tangible benefits for recipients of aid, but they also carried costs that could exceed those of traditional physical and voucher-based transfers. We’ve put together a set of recommendations that can help NGOs to get the most out of this exciting new platform.
As NGOs in Haiti adopted mobile money, they were aware that this was also new territory and an opportunity to establish some evidence about its usefulness. Two of them actually put parallel aid programs into effect that delivered the same transfers to two groups of people, one using traditional physical or voucher-based distribution methods, and the other using mobile money. They found that mobile money could be faster and safer, but its usefulness as a tool for expanding financial inclusion was less clear.
On the other side of the ledger, using the mobile money platform came with big start-up costs. As a result, the first deployments of cash distribution programs using mobile money carried higher costs than traditional distribution methods. But in the “steady state”—when all one-time costs have been paid—mobile money may yet turn out to be cheaper. And if the use of mobile money spreads among consumers, fees to transfer cash will likely drop as well, further lowering the cost of the platform.
For NGOs that take the long view, mobile money is a tool ripe for innovation that promises to get better and cheaper. It certainly comes with challenges, though. A mobile money ecosystem in the early stages of development won’t necessarily be able to do everything that an NGO wants in an efficient way; limiting how payments can be used, for example, is expensive and difficult in Haiti. Our research suggests that NGOs should take pains to appraise all the costs of starting up a program based on mobile money, including the possibility that they will have to help other actors build the infrastructure of the industry. The relationships with these actors—mobile network operators, banks, and government agencies—can be complex, since they are partners as well as service providers and regulators.
Read more about our findings in our full report, “Plugging into Mobile Money Platforms: Early Experiences of NGOs in the Field.”
Read an introductory post, “Mobile Money in Haiti: A New Support for Disaster Relief and Development Programs.”
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COMMENTS
BY elizabeth
ON January 23, 2012 10:44 AM
Hello:
In the third paragraph above you state: “A mobile money ecosystem in the early stages of development won’t necessarily be able to do everything that an NGO wants in an efficient way; limiting how payments can be used, for example, is expensive and difficult in Haiti.” In what way is ‘limiting how payments can be used’ expensive and difficult?
Thank you
BY Stéphane Bruno
ON March 26, 2012 05:42 PM
Hello Elizabeth,
It is expensive and difficult in that the core features of a mobile money service does not allow limiting payments to specific merchants or for specific goods. So, customizing the service every time and for specific purposes is costly for the MNOs and non-efficient (because it requires developers time for a feature that might not be reusable)