Executive Summary | From Beneficiaries to Economic Citizens

From Beneficiaries to Economic Citizens A qualitative analysis of recipient experience of electronic benefit transfers in Andhra Pradesh

Project Brief, Prepared by Quicksand, September 2013

Background CGAP (Consultative Group to Assist the Poor) approached Quicksand to help understand how recipients view the transfer of social welfare payments from the government directly into their bank accounts, enabled through several technology platforms. The state of Andhra Pradesh (AP) has been employing a variety of technology solutions to enable electronic benefit transfers of National Rural Employment Guarantee Scheme (NREGS) and Social Security Pensions since 2006.

East Godavari and Visakhapatnam. In each district, the research team identified specific villages that would ensure the total sample was reflective of the diversity in size, population, access to urban centres, sources of income, and primary occupations of the residents. Another key factor for selection was covering a spectrum of technology platforms and last mile agents that deliver G2P benefits.

Around sixty in-depth interviews and extended observation sessions were conducted with individuals, families, and community groups who were recipients of one or more of the G2P benefits. These included not only individual recipients of government benefits, but also households availing NREGS payments, PoP-CAs (Poorest of the Poor - Community Activist), Self Help Groups (SHGs) convening, and observing the actual G2P benefit disbursements.

These were supported with over twenty interviews of individuals who were employed as Customer Service Points (CSPs), Business Correspondents (BCs) employed directly by banks, Mandal Coordinators (MCs), Village Organization members, Electronic Benefits Transfer (EBT) coordinators, APMs (Assistant Project Manager) under SERP (Society for Elimination of Rural Poverty) and other such provider side stakeholders, to build an understanding of the experience of the last mile delivery of G2P benefits.

Objective The study’s goal was to illustrate the endrecipient experience in AP, India, especially in remote, tribal areas. The secondary objective was to provide ideas for solutions that could enrich the quality of that experience for recipients.

The study identified several domains of inquiry necessary to provide an informed understanding of digital cash transfers in the AP context. These were explored keeping key questions in mind during interviews with both recipients and service providers.

The key categories of inquiry were: User-experience of receiving governmentto-person (G2P) payments and experience of new technologies facilitating these payments Experience of last mile agents (e.g., bank agents, postal officers) Segmentation of the financial needs of the poor according to livelihoods and sociocultural contexts.

Most beneficiaries interviewed in the study were receiving electronic benefit transfers from anywhere between a few months (in tribal areas) to 2-3 years.

Method The overall approach was a deep dive analysis of 20 villages spread across three districts. The field research was conducted over 6 weeks in the districts of Mahbubnagar, 3

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KEY INSIGHTS ENHANCING THE G2P PAYMENT SYSTEM Does EBT Empower G2P Recipients?

The technologies deployed (i.e., smart cards, mobile NFC (Near Field Communication), Point of Transaction [PoT] terminals) present an opportunity to drive transparency and accountability and can help transfer control to the end recipient in a way that enables them to make decisions on matters that directly concern their well being. The manner in which these technologies are currently implemented however, does not leverage their full potential nor does it fully achieve the goals of empowerment and accountability under which EBT programs were conceptualized.

different from the manual system they were previously accustomed to.

Is information relating to their accounts available to recipients?

Linked to lack of agency is the issue of access to information. Several aspects of the end recipient experience, as it stands today, are compromised because of poor information access. These include information on whether these are bank accounts, what services they can avail, account balances, whether money has been credited into their accounts, the reasons for delays, or an expected date by which payment is likely to be received.

Mobile phone usage is ubiquitous in AP, and it was evident from our interviews that as long as people find value in any new technology they would find ways to adopt it in their everyday lives.

What are the advantages of selecting an agent from within the community?

AP is the only state to have mandated that only women be hired as CSPs. Additionally, the state government has created unique criteria for hiring CSPs, and all BCs are required to adhere to it, salient amongst which are: CSP should be a permanent member of the village CSP should be a member of a SHG Member of SC/ST should be preferred for the role of the CSP

In the current EBT implementation, however, this interaction between the user and technology is almost always mediated by a CSP. As a result, over the last several years, the recipients have built no knowledge of how the system works and have no incentive to learn it. This has also created a technology “blind box� wherein any breakdowns go unexplained and the resulting recipient experience ends up being only marginally 5

CSP should have a minimal educational qualification of 10th class education

which they took immense pride. CSPs being community members leverages a certain level of trust, and the commitment displayed

by CSPs (e.g., traveling great distances to deliver benefits) has further impressed upon recipients their integrity.

The community-based CSP model is rich with opportunities to make it more robust and credible. One of the biggest advantages of this system is the trust that is inherent in it and the extent to which it mitigates end recipient’s anxieties and frustrations.

However, institutionally it lacks a credible backing and is in dire need of systems and processes that make it more integral to the BC institution and more aligned to the longterm vision of G2P payments.

Are community based CSPs an efficient model of delivery?

Despite this expressed trust and a mutual understanding of the importance of the role of the CSP, there is a clear need for additional support. At peak transaction times, the crowds would surge to an unmanageable number. Without a formal, organized physical infrastructure for making payments (e.g., most CSPs observed made payments from the patio of a closed school building or their own home), and with no institutional support forthcoming, she would often seek the assistance of someone familiar and

Across all study locations it was observed that the woman selected to be the community CSP was an educated and ambitious person mostly between 20-25 years of age. For a majority of the women, this was their first formal job and one in 6

trustworthy. In addition to an inadequate physical and human resource infrastructure, the CSP also has to negotiate several technical and process glitches without a clear error resolution mechanism for either.

Finally, the CSP’s own salary and associated incentives are often delayed and transferred without any intimation to the CSP about the basis of calculation.

observed recipients with multiple identity cards or those that listed a falsified age that entitled them to benefits they’re not actually eligible for.

There is also a great deal of risk to the CSP in the current system as they are often carrying large amounts of cash to remote places. Despite these issues, there is little that either the CSP or the recipient can do by way of troubleshooting or airing grievances.

The most common issue that recipients face is non-payment due to funds not being credited to their account (the team observed cases in remote areas in which 3 months’ of payments were still not received). The CSP is the face of these payments and this scheme to the recipients, yet they have no window into the system and cannot address their concerns nor explain the lack of credit, leading to frustration on the part of both parties.

Simple design interventions around managing the crowds such as breaking up tasks in order to distribute the load, or managing cash flows (e.g., allowing CSPs to access cash through existing points of commerce such as ration shops or retailers) will make the benefit payment experience more efficient for the recipient and safer for the CSP. Additionally, efforts to keep the CSP network motivated need to be considered (e.g., a more systematic rewards and recognition program, career progression).

Does EBT address erstwhile issues of accountability and transparency?

Solutions to consider To enhance agent performance Develop a grievance redressal mechanism to record and address customer complaints A system log to record errors in technology Training the CSP so she can address, and troubleshoot issues as they occur To enhance recipient experience An SMS-based system of accessing the status of their payments Providing the flexibility of withdrawing and depositing money through the smart card provided to them, albeit at points of transaction that are not tied to the CSP

At its most basic level, the business processes and workflows need to be overhauled to make them more predictable and reliable.

Certain basic measures, such as increasing accountability, providing customer grievance redressal, and introducing troubleshooting measures, are absolutely critical. It is also important from the point of view of preventing its credibility from being eroded in places where it is already in effect.

As indicated earlier, the CSP often solicits help from a family member or other trusted community member for disbursing funds.

While seemingly a necessary fix, the potential for error or malfeasance is great. There were also cases in which the research team 7

KEY INSIGHTS G2P PAYMENTS & FINANCIAL INCLUSION

For the G2P payment system to evolve into a robust financial inclusion channel over time, it must become more than just a payment conduit. Prevalent financial behaviors and practices of end recipients provide an opportunity to understand their unmet needs and enhance their financial capacities through incremental changes in channels and products that constitute the existing G2P system. The current system can also leverage existing financial infrastructure, wherever available, in order to complement its own vulnerabilities and inadequacies. Some of the key drivers that can facilitate this evolution are: Encouraging recipients to save in payment accounts

the poor, there is an opportunity to make incremental changes to the system to allow greater flexibility to end users in how they manage the benefits.

With a deeply entrenched SHG network, the state of AP is probably unique in the prevalence of savings behavior amongst its citizens. Except for the tribal areas, almost every household visited was a regular saver.

In addition to bank accounts, people had bought ULIPs (Unit Linked Insurance Plans) and company deposits, while chit funds and community registries were also common instruments used by people. The households visited by the research team showed a high level of sophistication in managing their finances, generally.

Integrating payments with the financial ecosystem of the recipients Equipping or re-designing G2P payment channels to address complexities that are inevitable with an increase in scale and scope (e.g., cash handling as the program is scaled up, supporting CSPs through training and other mechanisms to offer more sophisticated products)

For G2P payments, one significant downside is that the CSP is the only transaction point for recipients to claim their benefits. Even though the smart cards issued to people displayed the name of the bank and the BC institution on it, almost no respondent identified these as bank accounts, let alone expressed an understanding of the features that came with them. Field observations indicated that recipients accepted the payment that they were told was their due without asking any further questions. The ability to withdraw and deposit payments at will was not available, nor acknowledged, by people. As a result of what appears to be

Can payment accounts be used as regular bank accounts?

It is evident that the G2P payment system is meant only for fund disbursal at a frequency that is determined top-down in its current design. Given the level of sophistication that already exists around financial behaviors of 8

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largely system-driven constraints, it is not surprising that the payment accounts are mostly dormant with little or no transaction history associated with them.

like chit funds, community contributions, or even extensive borrowing and repayments to friends and family, betrayed a high level of user sophistication and understanding of these products. Users were a lot more comfortable and trusting of these instruments, and spoke about the relative ease with which they could access and negotiate these, even if sometimes lopsided in terms of their engagement. Sophisticated products that can address some of the fickle and unpredictable economic conditions of the poor are a well-qualified need for most consumers. However, mainstream institutions must learn from the intimacy and accessibility that some of the informal channels provide.

The system needs to be re-envisioned to foster greater flexibility for the users to access payments and other account-related information. Furthermore, incentives need to be created to encourage users to keep money in their payment accounts rather than simply emptying them each month as payments are received.

Can the community CSP model handle more complex operations pertaining to a more evolved financial inclusion channel?

The existing system will need to be redesigned to accommodate the needs of end users in order to increase the scale and scope of G2P payments. Leveraging existing, and trusted, cash points within communities will ease the burden on the CSP for payment disbursal. Beyond merely getting cash-inhand to end users, efforts must be made to enhance recipient financial literacy while also providing products to protect users in instances of unexpected financial need. The current system needs to be evaluated to determine if it is capable of doing so.

Cash management in the community CSP model is one of the major risks to be addressed, but the research team encountered other channels where cash management was a more intrinsic capability.

In one instance the team observed local shopkeepers working as FI-BCs for CGGB (Chaitanya Godavari Grameena Bank), selling low-ticket financial services. Although not designed to handle G2P payments, the shopkeeper was able to manage reasonable volumes of cash withdrawals and deposits for individual savings accounts.

Even telecom agents could get involved as mobile ubiquity necessitates at least semi-frequent visits by users for recharging account balances and the like. While the need for greater distribution channels and more sophisticated financial instruments was well documented, it was also evident that in certain cases mainstream financial products had been mis-sold to end consumers. On the other hand, informal financial instruments 11

KEY INSIGHTS Tribal & Remote Areas The tribal communities present a completely different set of challenges when evaluating the impact of electronic delivery of government benefits. A difficult geographical terrain, highly dispersed population groups, unique social customs, and weak economic conditions necessitate a fundamentally different approach to EBT than what is being implemented for the rest of the beneficiary groups.

This study focused on the remote mandals of Visakhapatnam in AP, also known as ITDA (Integrated Tribal Development Agency) areas, to document the challenges around accessibility, cash management risks, poor technology support and poor operational oversight pertaining to EBT. Amongst the locations and tribes studied were:

Araku Madagada Konda Kummari Konda Dora Malakapolam Bagata Iragai Konda Dora Bagata Chumpi Valmiki Konda Dora

Dumbriguda Podjela Konda Doras Kodu (PTG - Primitive tribal group) Paderu Paderu | Malakapolam Bagata G. Madgula Matyapuram Valmiki Porja

Profile The tribal villages are characterized by a cluster of hamlets with a common practice of subsistence farming and a strong tradition of “living off the land�. Most of the households own very small pieces of land, which provide for their family’s consumption.

The government also provides infrastructural

support like land and seeds for farmers to cultivate NTFP (Non-Timber Forest Produce), such as coffee, tamarind, pepper, and pulses, which farmers sell back to cooperative shops, as well as training and investment support for craft-based occupations like pottery and lac work. Given the meagre and fluctuating 12

income generated from these occupations, there is a high dependency on NREGS work in these villages to sustain livelihoods. In contrast however the volume of NREGS work in tribal regions is much lesser as compared to the peri-urban and rural locations. Also the processes for wage calculations and disbursement are less systematized. In such a scenario, the beneficiaries’ often reported being let down on account of NREGS generated work and payments.

round-trip visit to these markets in shared Jeeps and auto rickshaws. These weekly markets cater to all household requirements: clothes, utensils, trinkets, meat, snacks, alcohol stalls, and other services, such as repair works and tailors. These markets are also frequented by whole-sellers, moneylenders, and pawnshop owners from nearby towns.

Tribal communities are close-knit, and there is a high dependency on friends, family and community members for support in times of need. There is frequent informal borrowing from neighbours and other familiar community members, and there’s a shared understanding that the people of the village will help each other in times of need.

Even though these villages are remote, villagers frequent the weekly farmers markets to sell excess crop as well as to make their household purchases. Livestock is also sold at these markets when there is need for an immediate lump sum of money. These markets are held at an accessible location that tends to be a fair distance from the habitation; people pay up to Rs. 40 for a 13

TEA AND DOSA SHOP RUN BY LOCAL WOMEN TRINKET SHOP

TAILOR TOBACCO

CURD SOLD IN LEAVES Even though these villages are remote, villagers frequent the weekly farmers markets to sell excess crop as well as to make their household purchases.

Livestock is also sold at these markets when there is need for an immediate lump sum of money.

These markets are held at an accessible location that could be at a fair distance from the villages and people would pay upto Rs. 40 for a round trip visit to these markets in shared jeeps and autos.

JACKFRUITS

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SNACKS SWEET/FRIED FISH UTENSILS

LOCAL LIQUOR

LIVE C HAT

VEGETABLES ARE SOLD IN BUNCHES These weekly markets cater to all household requirements: clothes, utensils, trinkets; meat, snacks and alcohol stalls; other services like repair works and tailors. These markets are also frequented by whole-sellers, money lenders, and pawn shop owners from nearby towns.

MANGOES SOLD IN WHOLESALE

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Pertinent Differences in G2P Payment Delivery The process of recruiting CSPs, and subsequent operational procedures in delivering G2P payments in tribal areas, is similar to other regions in the state but there were some context-specific differences that make the CSP situation in tribal belts very unique when compared to their non-tribal counterparts.

information-sharing networks, such as people traveling back and forth from the nearby town. Network issues also affect the CSP’s ability to carry out mandatory processes such as updating transactions on the PoT machine to the CBS (Core/ Centralised Banking Solutions) server which requires a GPRS connection. In many cases, the CSP would have to finish one batch of payments, find network connectivity to upload information on processed payments on the PoT before resuming payments.

Workload In non-tribal areas, the CSP is responsible for one village, or in some cases one or two smaller satellite villages nearby (i.e., not more than 2-3 KMs away). In tribal villages, owing to a more distributed geography and a smaller size of habitations, the CSP could be mandated to service as many as 18-20 habitations. Habitations in tribal areas are separated by stretches of pastoral lands, fields, and forest cover. This untenable workload often forces the CSP to improvise when it comes to performing her duties comprehensively. As observed in one instance, the ‘mates’ of the NREGS group are delegated the duty of disbursing payments to their group members. The process completely overrides the biometric authentication and not necessarily due to technical/network related failures.

Manual payments In tribal areas where downloading the CBS data is a bigger challenge because of connectivity issues, most CSPs disburse the payments even when the account balance is zero, based on the amount provided on the funds transfer order sheets.

Also the limitation of PoT devices to hold data only up to 200 transactions, necessitates that the CSP sync it with the CBS server intermittently and start anew.

Mobile connectivity issues make it virtually impossible for the CSP to do that midpayment hence prompting the CSPs to do manual transactions.

Payment delays

More operational barriers due to network unavailability

In tribal areas there is a huge delay, 3-4 months typically, for recipients to receive their payments. Payments typically happen over a few days, though the frequency of which could vary on account of the delay in processing at the back end. On the day of the payment, beneficiaries could spend anywhere between 30 minutes to several hours in order to receive their dues. For some recipients who come from neighboring habitations, the total time spent, including

Feeble network coverage adds another level of complexity to the CSP’s operations.

While certain pockets in plains areas have intermittent access, the hilly areas could have several blind spots where network access is patchy or unavailable, making the communication between the CSP and MC erratic. Despite the odds, most CSPs have figured workarounds such as using informal 16

commute, could be longer. In the event of money not getting credited, the recipients would have to come again and end up losing the time they invested on that given day altogether.

Solutions to consider The local economy in rural and tribal settings has a high frequency of financial and product exchange, lively local markets, with a large number of stakeholders actively transacting amongst each other. Creating payment access points at these commercial “hotspots” can greatly increase the relevance and value of these benefits in people’s lives.

Cash management In most non-tribal villages, the MC would drop the cash off at the CSP’s village/place of payment. In tribal areas, owing to greater geographical expanse and access limitations, the CSPs often have to travel to the mandal headquarters to take cash from the MC. Most CSPs spoke about the security risk that they have to shoulder while transporting the money back to the village and onwards.

On the technology side, making more robust PoT terminals in terms of longer lasting power (through either solar energy or higher capacity batteries) and increasing data storage capacity can increase the efficiency of payments and mitigate incidence of manual payments.

For a community that has been largely un-serviced by mainstream institutions, payment accounts present an opportunity for additional products such as insurance or simple deposit schemes to be routed to them.

The tribal communities have a high level of social cohesion and commensurate trust amongst each other. Payment benefits can therefore be used to facilitate SHG savings and subsequent access to bank linkages. Instructions from a recipient can trigger a small sum of money to be transferred virtually from an individual payment account into a designated SHG account.

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Shek Farid and his family work as tinkers, repairing and mending utensils.

Repair work is inconsistent and so they travel to the same village once every fortnight, such that there would be more utensils to repair in one visit.

Both of Shek’s parents used to mend utensils, and Shek’s wife helps him as well

my son will learn more useful skills if he works rather than goes to school.

winnowing fan made from scrap steel

Rice chaffer made from scrap steel

box made from tin container

patched broken utensil

dent removal from utensils

I work with my husband. Our family has been doing it for generations. He taught me how to do this long ago, and I’ve been working with him ever since.

One big expenditure they made was on a secondhand motorcycle, for which they are paying in installments to the owner. On the road, their biggest expenditure is fuel for the bike. When out on the road, they carry all their tools, forage food from the villagers, and sleep in public spaces.

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KEY INSIGHTS OTHER LIVELIHOODS ON THE MARGINS While the scope of providing electronic benefits to tribal and remote communities is replete with challenges, there are other occupational clusters that fall outside the realm of the current G2P benefits.

Peripatetics are a cluster of people that travel, and are consequently based in various places for short periods of time, to conduct their business. In most cases, this group relies on occupational skills that have been passed down over several generations. With an occupation that requires them to be on the move, most users from this group chose not to do NREGS work for the fear that they may lose their business to competition. Fishermen, especially those working in deep seas, are another community that does not engage in NREGS work as their erratic work schedule does not allow for it. On one hand this points to re-thinking benefit schemes to be more relevant for these groups, while on the other hand merely allowing flexible access to payment accounts and making them interoperable across locations can make these more viable for this segment and prompt them to be more pro-active in seeking these benefits.

for the present”. Others deemed it “chai beedi money” (petty cash) and did not consider it a dependable source of income.

Similarly, some self-employed entrepreneurs did not think that NREGS work supported their professional growth. In spite of these reservations, NREGS payments are invariably a share of most household incomes, even if relatively small. Developing products that help users divert a portion of these seemingly “non-dependable” sources of income into “dependable” long-term investments could be a way of repositioning the value of these benefits for a specific class of beneficiaries.

Several occupational clusters invest in asset classes that fall outside the purview of current lending schemes, such as livestock, occupation-related tools and equipment amongst small business entrepreneurs, and fishing nets and boats amongst coastal communities. Recognizing these as viable forms of security/collateral can open the doors to financial access and inclusion of these communities.

Another interesting dimension to NREGS payments was the perceived value of these benefits amongst certain communities.

A farmer in East Godavari stated that, “NREGS money is not for the future, it is 19

Abbreviations

Acknowledgement

AP Andhra Pradesh BC Business Correspondent CBS Core/Centralised Banking Solutions CSP Customer Service Point / Provider EBT Electronic Benefit Transfers G2P Government To People MC Mandal Coordinator NREGS National Rural Employment

Quicksand is grateful to the many individuals and organizations that contributed to this study, including: Society For Elimination of Rural Poverty, and the field staff managing their extensive grassroots program for community welfare in Andhra Pradesh Rural Development Department, Government of Andhra Pradesh and the field staff managing the EBT program

Guarantee Scheme

PoT Point of Transaction SHG Self Help Group

We would also like to acknowledge the support of CGAP and The World Bank Group.

Quicksand is a multidisciplinary design research and innovation consultancy working at the intersection of business, development and culture. Quicksand has worked extensively in the development sector by connecting the best practices of design & business with development programs to address the pressing and complex issues of public health, water and sanitation, education, livelihoods and financial inclusion.

For more information, please contact hello@quicksand.co.in

Illustration Garima Gupta Photography + Design Quicksand