mSTAR and USAID will be hosting a webinar on how to incorporate digital financial services into health projects on April 4th. Register for the webinar here.
By Ellen Galdava
The digital revolution is paving the way for development practitioners to use ICT to overcome economic and social challenges. More and more health initiatives are leveraging mobile and wireless technologies to improve outreach, data collection, communication with health workers, case management, referrals and much more. Governments are increasingly investing in health management information systems and open source human resource solutions to enable timely data access, inform resource allocation and intervention targets, and make decisions on performance objectives.
The application of digital financial services (DFS) in the health sector is also becoming increasingly wide-spread. To explore the ways DFS can be used to improve health outcomes, mSTAR and USAID wrote a brief on the role of digital financial services in accelerating USAID health goals. While DFS encompasses a variety of electronic payment channels, such as cards, computers and mobile-based payment platforms, most case studies in the health sector focus on mobile money via phones, given its wide reach into under-served segments and geographies. With 174 million active accounts worldwide, mobile money services are now available in two-thirds of low- and middle-income countries and have aided in the decline in the number of unbanked individuals.
By incorporating DFS and leveraging transaction data, donor-funded programs can improve program monitoring and gain valuable insights into the cost of health products and services. DFS can also improve access to insurance and health savings products (and consequently access to health care) by making financial transactions more convenient. DFS boosts resiliency and consumption in the face of economic shocks, including illness.
But how can donor-funded health projects use DFS? At a recent workshop mSTAR, USAID and members of the health and DFS sectors discussed and outlined five key considerations for implementing DFS in health projects.
- Create a regulatory framework
Unlike traditional financial services, DFS requires third-party agents or collaboration among banks and telecommunication companies. This collaboration across many stakeholders can increase chances of fraud due to more people and companies along the chain. Therefore, to safeguard customers from potential fraud, liquidity and other DFS-related concerns, effective and appropriate DFS regulations need to be in place before transitioning a project from cash. Additionally, without an appropriate regulatory framework, there is limited chance to create an innovative, sustainable and financially inclusive DFS ecosystem.
- Digitize the entire value chain
In order to successfully introduce digital financial services in cash-based projects, all business processes from payee registration and identification to delivery of funds should, ideally, be digitized. If back-end processes still require manual approvals and signatures, payment delays will continue to occur and beneficiaries or implementers will not be able to fully utilize the benefits of DFS.
- Empower governments for sustainability
The first stages of implementing DFS in any health-related project require partnering with, training and empowering government officials to ensure that they see the benefit of DFS and have stake in continuing the move towards a cashless society. The support from government and their active participation in the process provides implementing partners with important resources to support project transitions, from enrollment into dissemination of funds via DFS. This is well demonstrated in mSTAR’s Liberia project where the government of Liberia worked with the project team to onboard health and education workers onto mobile money salary payments, ultimately enrolling around 5,000 health and education workers into the program.
- Conduct a cost-benefit analysis of transaction fees
While DFS reduce costs associated with cash distribution to beneficiaries, there are transaction fees associated with DFS. When transitioning to mobile payment systems it is important to account for transaction fees, such as cash out fees for customers, since these fees might be a barrier to usage and might be viewed as an extra cost compared to making or receiving cash payments. To offset this, during the planning stage, programs should conduct a cost-benefit analysis to compare the cost of digital versus cash payments for all stakeholders involved. This type of analysis will also help demonstrate the relative cost savings of using digital channels and help justify government or donor subsidization of transaction fees for beneficiaries.
- Improve digital literacy
Although mobile payments improve convenience and lower expenses for health workers, beneficiaries in most markets lack familiarity with and trust in conducting financial transactions via mobile or other digital channels. Customers face numerous challenges, including connectivity disruptions, literacy issues that prevent reading text alerts and navigating mobile money menus, and potential fraud at agent outlets if customers are unfamiliar with processes or transaction fees. Initial training and ongoing support channels should be provided to beneficiaries to improve digital literacy and to help them to understand mobile money transactions and other related issues.
As demonstrated in the Role of Digital Financial Services in Accelerating USAID’s Health Goals brief leveraging DFS in health projects provides valuable benefits to projects and beneficiaries. In addition to those benefits already mentioned, DFS brings healthcare to vulnerable populations across the world. However, before introducing DFS in projects it is important to consider these five factors in order to successfully integrate it and realize its benefits.
To learn more on how to incorporate digital financial services into health projects, don’t forget to register for a webinar with mSTAR, Telenor Health and USAID on April 4th. Register for the webinar here.
Ellen Galdava is a Program Officer at FHI 360. Ellen has been managing programs in international development and ICT4D for four years. At FHI 360, she manages an ICT for agriculture program and leads research related to digital financial services in education, health and youth, and ICT and agriculture. Prior to joining FHI 360, Ellen supported the development of an online class curriculum on Corporate Sustainability for undergraduate and graduate students from Eastern Europe. She holds a Master of Science degree from Conflict Analysis and Resolution, George Mason University.