Better than Cash

According to the February 2012 USAID blog titled, “We must do better than cash,” USAID is planning to use it’s $22B/year aid “footprint” to motivate it’s grantees to transition away from cash-based development to innovative mobile payment solutions. Based on USAID’s observations in Kenya, Haiti, Mexico and Brazil, USAID believes that their implementing partners will generate at least 15% efficiency gains in their operations by 2016 by integrating mobile payment solutions into their programs. Since USAID provides grants to most of the largest NGO’s, including UN organizations and developing governments, the better-than-cash program is something every USAID grantee needs to evaluate now.

I first heard about the Better-than-Cash (BTC) program in August 2011, during a USAID mobile money conference in Haiti. During the conference, Priya Jaisinghani, USAID Advisor to the Administrator and Director of the Mobile Solutions team, made several pre-announcements and comments, including:

USAID would be integrating new language into USAID contracts and grants to encourage the use of electronic and mobile payments. When evaluating two competing proposals that are otherwise equal, the one with better mobile financial service integration into the program would get “bonus” points.
USAID would be launching new programs designed to catalyze the scale of innovative payments platforms. Haiti would most likely be the first program country, because of the current mobile money momentum in Haiti and the large quantity of USAID implementing partners working in Haiti today.
My favorite quote from the conference was from a USAID financial analyst who said, “The worst program reporting with mobile money is better than any program reporting without mobile money.” His point was that electronic mobile money transactions, electronic beneficiary registration systems, and electronic program monitoring systems are inherently more transparent than their paper-based equivalents.
Grant requests would need to demonstrate a full integration of mobile money into the proposed program. USAID grant reviewers will have mobile money expertise and will be able to evaluate the programs that truly integrate innovative mobile payment solutions vs. the programs that merely pay lip service to mobile money.
The USAID Mobile Solutions team would be “evangelizing” mobile money BTC solutions internally across ALL sectors of USAID as well as externally to implementing and funding partners.

The worst program reporting with mobile money is better than any program reporting without mobile money. USAID program analyst.

How soon will USAID grantees have to make the transition to mCommerce?

USAID implementing partners in Haiti have already started integrating electronic vouchers into their programs. Last year, the USAID Food-for-Peace program was focused on distributing food commodities in Haiti. Starting in 2012, the Food-for-Peace program focus is transitioning to eVouchers. Digicel and Transversal are helping CARE and CRS manage their eVoucher programs, enabling 20,000 beneficiaries to receive $50/month in eVouchers that are being redeemed at local merchants who sell locally grown food and commodities. What this Haiti example demonstrates is that mobile money may dramatically impact program design (e.g. importing commodities vs. electronic cash transfers).

Better-than-Cash real-world examples

Because of the relative maturity of the mobile money market in Kenya and the high consumer acceptance rate of the M-PESA mobile money service, there are many real-world examples we can learn from today. A Slate article, titled “Reaching the Poor: Mobile Banking and Financial Inclusion,” observed the same program design impact for emergency response in Kenya (shipping commodities vs. transferring mobile money):

In our analysis of data from 2008 to 2010, we identified a particular benefit of mobile money: It allowed households to better cope with risk. When bad things happened—illness, crop failure, job loss, and violence—households with access to M-PESA were able to get help faster, from more people, and in larger amounts. More anecdotal evidence also suggests that M-PESA can help households cope with natural disasters. For example, between 2007 and 2009, successive droughts struck the country, but the widespread deprivation and starvation associated with the first (before M-PESA had spread widely) were not observed as acutely during the second. Some commentators have attributed this to the fact that purchasing power was more easily directed to affected areas. Governments did not have to send trucks filled with food; families and friends simply sent money by M-PESA, creating enough demand to induce suppliers to deliver food where needed.

In November 2011, USAID commissioned a report titled, It’s better than cash: Kenya Mobile Money Assessment, that includes the following sections and real-world uses for mobile money: