Delivery mechanisms for cash and voucher programs

MBRRR TrainingSession 5.1

Part I: Delivery mechanisms for cash transfers

Payment mechanisms in cash transfer programs

DELIVERY AGENTS

• Aid agencies• Banks• Post offices• Mobile phone

companies• Micro-finance

companies• Security companies• Local traders (hawala)

DELIVERY METHODS

• Direct delivery (“cash in envelopes”)

• Delivery through banking systems

• Smart cards• Debit cards• Mobile phones

Safe place for transfer (post office, school, meeting space, etc.)

BeneficiariesCRS/Partner

Cash transfers

Beneficiary use of transfers

Fee for service

Food/

School fees

Direct cash distributions

Livelihoods

Debt repayment

Beneficiaries

Bank

CRS/ Partner

Cash transfers

Beneficiary use of transfers

Fee for service

Food/

School fees

Cash payments using banks

Livelihoods

Debt repayment

Safe place for transfer

Beneficiaries

Trader/ Hawala agent

CRS/ Partner

Cash transfers

Beneficiary use of transfers

Fee for service

Food/

School fees

Cash payments using third-party distribution agents

Livelihoods

Debt repayment

Safe place for transfer

Beneficiaries

“MPESA” agent/ATM

CRS/ Partner

Cash transfers

Beneficiary use of transfers

Fee for service

Electronic transfer (SMS)

Food/

School fees

Cash payments using mobile phones or debit cards

Livelihoods

Debt repayment

Direct delivery to recipients

STRENGTHS• Can be delivered low-cost• Can be delivered quickly• Simple; does not require new

skills on part of beneficiaries• Not limited by presence of

banks or other financial infrastructure

• Beneficiaries do not require bank accounts or assets (phones)

• Flexible if beneficiaries move locations

WEAKNESSES• Security and corruption

risks• Often labour intensive for

staff • Possibly long waiting lines

at distributions• Fixed distribution date and

times• Multiple distributions for

frequent transfers

Delivery through bank accounts

STRENGTHS• Reduced workload for agency

staff• Corruption and security risks

may be reduced if institutions have strong control systems

• Flexibility and convenience for recipients who can choose when to withdraw cash and avoid queues

• Access to financial system for previously unbanked recipients

WEAKNESSES• Timed needed to negotiate roles,

contractual terms and establish systems

• Reluctance to set up accounts for small amounts of money

• Bank charges may be expensive• Recipients may be unfamiliar

with financial institutions and have some fears in dealing with them

• Possible exclusion of people without necessary documentation, e.g. women, IDPs, and children

Delivery through banks without accounts (checks)

STRENGTHS• Same as bank accounts but

with less delays caused by having to verify transfers

WEAKNESSES• As bank accounts are not

opened recipients do not gain access to the banking system

Delivery by sub-contracted parties (traders, remittance companies)

STRENGTHS• Sub-contracted parties accept

some responsibility for loss• Security risks for agency reduced• Remittance companies may have

greater access than agencies to insecure areas

• Recipients may be familiar with these types of systems

• Flexibility and access – these systems may be near to where recipients live and may offer greater flexibility in receiving their cash

WEAKNESSES• The system may require greater

monitoring for auditing purposes• Transaction fees may be costly• Reduced control over distribution

time frame• Credibility could be at risk if the

transfer company cannot provide the money to the agreed time schedule

• Recipients may be more removed from aid agency and so less able to complain if things go wrong

• Risk of collusion between staff and traders/agents

Delivery via pre-paid cards or mobile phones

STRENGTHS• As with banks possible reduced

corruption and security risks, reduced workload for agency staff, greater flexibility for recipients

• Greater flexibility in where cash can be collected (e.g. mobile points of sale, local traders)

• A mobile phone (individual or communal) can be provided at low cost to those who don’t already have them

• Automatic “topping up” of transfer values

WEAKNESSES• Systems may take time and be

complex to establish• Risks of agents or branches running

out of money• Costs and risks of new technology

such as Smart Cards• Requires financial infrastructure

(ATMS) or Point of Service (POS) devices

• Recipients may be unfamiliar with new systems

• Form of identity may be required depending on local regulations which may exclude some people

Group work

• In your country groups, complete the Delivery Mechanism Assessment matrix

• Identify all the feasible delivery mechanisms for a likely shock in your country

• Make a recommendation on an appropriate cash delivery mechanism for the context in which you are working

Part II: Payment mechanisms for voucher programs

Vendors at fair

Beneficiaries

CRS/Partner

Flow of stocks

Vouchers

Cash

Payment scheme for fairs

Shop-based vendors

Beneficiaries

CRS/Partner

Flow of stocks

Vouchers

Checks/deposit

Payment scheme for shops

Large Traders

Small traders

Beneficiaries

CRS/Partner

Flow of stocks

Vouchers

Cash

Checks/deposit

Payment scheme in weekly markets

Issues to consider

• Frequency of payment– Capacity of vendors to restock– Capacity of vendors to maintain credit– Staff capacity

• Method of payment– Cash– Checks– Bank deposit– Mobile transfers– Sub-contracted third parties (traders, microfinance organizations)

• How to pay small vendors – be creative!– Relationships with larger vendors– Payment to groups

SO1 Indicators

SO1 Indicators

Tools

• CRS cash and voucher SOPs

• CRS account codes• CaLP “Delivering

Money”

Key Messages

• Creativity may be necessary in designing good payment delivery mechanisms, especially in working with small traders

• Security is often a key concern, and the modality should be carefully considered – this doesn’t mean cash is the most dangerous.

• Financial audits are a key concern, but CRS has MQ SOPs to facilitate this.