Brochure for maxwell stamp for spfmsp project

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PAYMENT SYSTEMS FOR SOCIAL PROJECTION BENEFITS

IN BANGLADESH SOCIAL PROTECTION SCHEMES IN BANGLADESH

The Strengthening Public Financial Management for Social Protection (SPFMSP) Project is a UK Department for International Development (DFID) and Australia Department of Foreign Affairs and Trade (DFAT)-funded technical assistance project for the Finance Division, Government of Bangladesh. The major objectives of SPFMSP are to enhance the capacity of the Finance Division and six line ministries implementing major social protection schemes to draw evidence-based budgets that

Since independence, the Government of Bangladesh has responded to the needs of vulnerable and poor populations as a part of its commitment to reducing inequality and poverty. The Government has introduced a variety of social protection schemes for vulnerable populations, ranging from food and cash transfer to public works, in order to promote efficient labour markets, diminish their exposure to risk, and enhance their ability to manage social and economic risks. These risks include illness, famine, natural disasters, unemployment, old age and disability. In 2017, Bangladesh is implementing 145 social protection schemes through 23 line ministries and divisions across the country.

respond to value for money, improve targeting of social protection programmes, prevent leakages, avoid duplication, bring greater efficiency to delivery systems, and establish an efficient monitoring system for social protection expenditure. SPFMSP is managed by Maxwell Stamp PLC. The Project recently completed a research study on Payment Systems for Social Protection Benefits in Bangladesh and is partnering with the Finance Division to develop a reform plan. The major findings and recommendations are outlined below.

Despite many schemes transferring cash to the poor, in most cases, beneficiaries are usually not given a choice about their preferred method of receiving their cash benefit. The money is disbursed in cash or transferred via banks or other financial agencies to the eligible beneficiaries. As a result, beneficiaries often incur multiple inconveniences in order to receive the money. A major complainant from beneficiaries is that to collect the money, they must leave their children unsupervised, often take time off work and travel great distances to the bank. In addition, the costs of travelling to a bank or payment points to receive their benefits are often significant.

WHAT IS A PAYMENT SYSTEM? A payment system is any arrangement used to make financial transactions (i.e., transferring electronic or physical money). A government payment system can comprise multiple institutions, instruments/mechanisms, people (government, transferee and intermediaries), rules, procedures, standards, and technologies which make a financial transaction possible.


EXISTING

PAYMENT SYSTEMS IN BANGLADESH

Payment through Treasury,

The majority of social protection programmes in Bangladesh include a component of cash transfer. Recognising this and the challenges faced by the current system, the National Social Security Strategy has mandated the Finance Division to design a more effective payment system.

e.g. Civil Service Pensions, etc.

Although payment mechanisms for social protection cash transfers have evolved

VER

IFY

RAGISTRATION

RECOMMENDATIONS: THE WAY FORWARD

STEP 1

considerably over the past decade, considerable advancements to the system can

FIELD OFFICER

E

ITIZ

DIG

ensure that it is effective, efficient and robust. Importantly, reforms should ensure that benefits can be delivered in a timely, convenient, transparent and reliable manner.

PROPOSED PROCESS FOR VALIDATION OF BENEFICIARIES

Field officers will digitize the data of every beneficiary registered under a social protection scheme and verify their details with the National ID database.

PROPOSED PAYMENT PROCESS Once beneficiary data is validated and hard-coded, Drawing and Disbursing Officers submit claims to the relevant Accounts Office, which will in turn initiate the payment cycle. *Step 2* Using Bangladesh Bank, the money shall be transferred directly to the individual accounts of beneficiaries (known as government-to-person or G2P payment) using the mode of their choice (post office, mobile, bank, etc.).


MODES OF PAYMENT FOR SOCIAL PROTECTION CASH BENEFITS IN BANGLADESH

POST OFFICE

BANK

Payment through Banking System (local bank branches, payment booths, agent banking, mobile phone banking),

Payment through Postal System,

e.g. Employment Generation Programme for the Poorest, etc.

e.g. Primary Education, Stipend Programme, Old Age Allowance, Disability Allowance, etc.

STEP 2

STEP 3 Ministry

Ministry’s MIS

Ministry

Ministry’s MIS

Ministry’s MIS

Ministry

DOUBLE DIPPING

TA DA

Ministry’s MIS

SPBMU

Ministry

Ministry’s MIS

Each department’s MIS will store all the beneficiary data from all of their ministry’s schemes which will enable cross-referencing to prevent beneficiaries from registering twice for the same scheme (double-dipping).

Ministry

Ministry

The Social Protection Budget Management Unit (SPBMU), at the Finance Division, will have access to all departments’ verified data stored on their MISs. The SPBMU will use this data to cross-reference that beneficiaries are not being registered for benefits under two mutually exclusive schemes (potentially under different ministries).

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WHY REFORM THE CURRENT SYSTEM? The proposed reform will enable the following:

Empowerment of beneficiaries to determine the most

Direct and timely payment to beneficiaries’ accounts

suitable and convenient payment mode, which in turn

through G2P payments, reducing the risks of

promotes financial inclusion;

rent-seeking, leakage and delays in payment;

Data verification to avoid double registration, and

Innovative advancements to not only link data verification

eliminate leakages and fraudulent payments such as

to the National ID database, but also to enable the

continuation of benefit payments after death, commonly

validation of data at the central level through a system

termed “ghost beneficiaries”

which is able to cross-reference beneficiaries registered under all schemes of all ministries. This can prevent beneficiaries from being registered under more than one scheme when exclusion criteria specify that a beneficiary should not receive benefits under any other scheme

Money to be directly withdrawn from the Treasury only when the payment is due, preventing money lying idle with the bank (float)

The reform provides a more robust distribution of social protection funds to reach the most vulnerable groups, faster.

For more detailed information about payment systems in Bangladesh and SPFMSP’s research findings, please visit www.spfmsp.com


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