A group of development organisations, foundations and private companies, including Citi and Visa, have formed the Better than Cash Alliance to lobby for a shift towards electronic payments (e-payments) in the fight against global poverty.
The alliance, comprising the UN Capital Development Fund (UNCDF), US Agency for International Development (USAID), Bill and Melinda Gates Foundation, Citi, the Ford Foundation, Omidyar Network, and Visa, is calling on governments, the development community and private sector to adopt the use of e-payments for programmes that support people living in poverty.
A report commissioned by the group, written by the US consulting firm Bankable Frontier Associates (BFA), claims that people living in poverty around the world exist in a cash-only economy that can prevent them from breaking the cycle of poverty by denying them access to banking and other financial services.
Around 2.6 billion people live on less than US$2 per day and 90% of them lack access to formal financial services, states the report, with most poor households forced to subsist almost entirely in an informal, cash-only economy making it difficult for them to save for the future, build assets and move out of poverty.
However, across the globe, governments, the private sector and the development community make billions of cash payments to these people, including as disbursements of salaries, payments to vendors, pensions, social welfare stipends, cash-for-work programmes, and emergency relief payments.
The alliance argues that the shift from cash to e-payments can result in significant cost savings and dramatic increases in transparency, security and economic growth, citing a recent report by the World Bank which found that governments can cut up to 75% of costs through e-payment programmes. The benefits for the recipients are less pronounced, but they could at least be inside the format of the financial services sector with appropriate protection.
David Porteous, lead researcher for the BFA study, says: “Cash-only economies often make it too difficult to find a path out of poverty. It means it is hard to build up savings, cash offers too many opportunities for corruption, and women are often at risk when they have to carry their life savings in cash or gold rather than in an electronic account. For these many varied reasons, it is so important to begin the journey to electronic payments.”
The shift from cash is already underway, with the governments of Peru, Kenya, Colombia, and the Philippines, along with USAID, the United Nations Development Programme (UNDP), Mercy Corps, Care USA, Concern Worldwide, and the World Food Programme (WFP) committed to digitising their disbursements and payments to people living in poverty.
Earlier this month, the WFP teamed up with MasterCard to rapidly expand its digital food project so that in the near future 30% of the people it helps will get food vouchers, via mobile phones or cards, even if they do not have regular access to banks.
The alliance says that by making this commitment to ditch cash, these groups are now also eligible for its technical and financial support. Christine Roth, deputy executive secretary, UNCDF, says that: “While there are many benefits in shifting away from cash, the effort requires leadership, resources and technical expertise. By offering these services to governments, private sector and development community organisations, we believe we can accelerate the shift to electronic payments.”
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