Why We Need to Advance Digital Financial Services for Factory Workers

By Majidul Haque

‘We want to be paid in cash! We are very much happy with the way we are receiving our salaries. We don’t need any banking system or MFS account!’

I heard this from most of the attendees in a town hall meeting I was holding with ready-made garment (RMG) workers in Bangladesh. As a Technical Lead for digital financial services at FHI 360, at the time I was writing a guide for BSR’s HERfinance project on how garment workers could use mobile financial services (MFS). Through the town hall meetings I could better understand workers’ opinions on using MFS instead of cash to receive wages.

Their plea for cash was natural. Cash has a real-life feel that comes from seeing, touching and counting notes, as Mr. Chhavi Ghuliani, Associate Director at BSR, notes in his article ‘Why is cash a problem?’. Digital channels, on the other hand, are intangible.

It might be appropriate to say that these unbanked workers’ preference is to always have something physical, as it ensures direct access to their money. Building trust in MFS might grow slowly unless they can practically feel or see its actual benefits. Therefore, raising awareness of the benefits of MFS among workers can play a vital role in digitizing salary payments.

After I explicitly explained the benefits of using MFS to the group of workers, they replied positively about accepting their wages digitally.

It might be appropriate to say that these unbanked workers’ preference is to always have something physical, as it ensures direct access to their money.

The RMG sector in Bangladesh has significant influence on the Bangladeshi economy in terms of employment, production and foreign exchange earnings. The industry employs over four million people, most of whom are unbanked. In Bangladesh, 90 percent of wages are paid through cash and RMG factories are no different in that regard.

In Bangladesh, 90 percent of wages are paid through cash and RMG factories are no different in that regard.

However, paying salaries in cash brings several concerns to both RMG factories and their workers. Factories face the risk of theft or fraud in the shipment and distribution of cash and the amount of time and resources required to process disbursements is significant. Workers, as well, face the risk of losing their cash through theft while traveling home from factories. Cash can also discourage maintaining savings, which are essential to enabling individuals to adapt to future demand and shocks. Women workers, who represent more than 80% of the total RMG workers in Bangladesh, face even greater risks as they often have little or no control over their money if it is in cash. In many parts of Bangladesh, women are likely to be more economically dependent on men or other family members for their survival due to their limited earnings, the male dominated culture and lower education. In addition, according to research done by the Financial Inclusion Insights (FII) program, less than half of women in Bangladesh have access to formal financial services and even fewer women have a registered account. As a result, they usually handover their cash to a male relative to store.

Given the limitations with cash, the high mobile penetration rate, and the rapid growth of MFS in Bangladesh, MFS has the potential to be one of the best solutions to digitize salary payments—not to mention that it can also serve as a powerful catalyst to bridge the financial inclusion gap of RMG workers. Digitizing salary payments can bring more efficiency and transparency to payroll systems by ensuring access to formal financial services for both men and women. In addition, women can also have more control over their salaries and influence over household financial decision making.

To help the RMG sector capitalize on this opportunity, FHI 360 and BSR recently published a manual titled ‘Digitizing Worker Salary Payments: A Manual for Ready-made Garment Factories.’ This manual provides a blueprint for ready-made garment factories in Bangladesh, and the organizations supporting them, who are interested in using mobile financial services to make salary payments to their workers. It includes background information on MFS, the possible benefits and challenges, and useful tips and checklists for implementing MFS salary payments.

 

Md. Majidul Haque is the technical lead – digital financial services (DFS) for the USAID Mobile Solutions Technical Assistance and Research (mSTAR) activity implemented by FHI 360 in Bangladesh. He has just under a decade of experience in telecom, banking and international development organizations, with a focus on new business, product development, project management and action research related to DFS, financial inclusion, e-commerce, payment gateways and value-added services (VAS). He has also been a key technical advisor on DFS to BSR’s HERfinance program, supporting the digitization of payments to female garment workers in Bangladesh. Throughout his career, Majidul has successfully introduced DFS to a wide range of segments, including smallholder farmers, local government officers, community health workers, ultra-poor women, slum dwellers, and ready-made garment workers. He worked with eight different RMG factories to roll-out MFS to more than 6,000 workers for salary disbursement.

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Mobile Money Solves Risky Cash and Lack of Loans for Farmers in Ghana: New Video

This is the last of a three-week blog series on digital financial services for agriculture. This series showcases mSTAR and the Digital Development for Feed the Future team’s recently released interactive online resource and instructional videos, made to complement The Guide to the Use of Digital Financial Services in Agriculture. The online resource breaks down the steps of how to use digital financial services in agriculture. To view the other blogs, visit the home page of our blog.


Like in many developing countries, agriculture is the mainstay of the Ghanaian economy. 62 percent of Ghanaians are employed in the sector, says Doris Amponsaa Owusu, Business Services Specialist for USAID’s ADVANCE II Project (Agricultural Development and Value Chain Enhancement). ADVANCE II, implemented by ACDI/VOCA, supports the scaling up of agricultural investments to improve the competitiveness of important value chains in Ghana, and is supported by Feed the Future, the U.S. Government’s global huger and food security initiative.

In Ghana, buyers drive from the south to buy food from the rural, agricultural north. But due to a lack of banks in the north, buyers must carry huge sums of money as they travel across the country. Dealing with this amount of cash is risky and cumbersome for buyers and farmers alike.

Doris explains how her ADVANCE II team sat down to think about how they could eliminate the risk of carrying large amounts of cash. Mobile money provided a perfect solution: it diminishes the threat of theft and ensures buyers are able to pay farmers efficiently and smoothly. Plus, mobile money is simple to use and offers the ability to access additional financial services such as savings, insurance, and credit.

To implement the mobile money solution, ADVANCE II partnered with MTN, one of the largest mobile network providers in Ghana. MTN piloted the mobile banking service with a farm in northern Ghana. They first trained a group of nucleus farmers, farmers who contract and provide support to smallholder farmers, in the mobile money service. After being trained by ADVANCE II, the nucleus farmers subsequently trained 1,072 smallholder farmers. Farmers enjoyed the service Doris says, and approached ADVANCE II asking to scale up the project. So ADVANCE II trained input dealers and out grower businesses.

After success with the farmers, out growers, and input dealers, ADVANCE II saw more benefits mobile money could offer. The farming communities Doris and her team work with have savings and loan associations, where each farmer contributes weekly towards production for the next season. “The women still have to keep these moneys in metal boxes kept under the beds,” says Doris. So her team partnered with MTN and Fidelity, a banking firm, to digitize the savings and loan associations.

ADVANCE II and the farmers they work with are excited about the results of mobile money, and plan to scale up the program to 10,000 smallholder farmers. “I would recommend it to any project that would want to implement mobile money or digital finance as part of their project approach,” says Francis Ussuman, Regional Coordinator on the ADVANCE II team.

In the video below, Doris, Francis, and local farmers show how ADVANCE II implemented mobile money in Ghana and impacted the agricultural sector.

As the video shows, digital financial services have the potential to strengthen Feed the Future projects around the globe. USAID is here to help missions and partners identify specific challenges in value chains and integrate digital financial services into those corresponding challenges.

To learn more about how to implement digital financial services in Feed the Future projects, read the Guide to the Use of Digital Financial Services in Agriculture. If you have specific questions or feedback, contact digitaldevelopment@usaid.gov

New Video Shows How Mobile Money Makes Inroads in Malawi

This is the second of a three-week blog series on digital financial services for agriculture. This series showcases mSTAR and the Digital Development for Feed the Future team’s recently released interactive online resource and instructional videos, made to complement The Guide to the Use of Digital Financial Services in Agriculture. The online resource breaks down the steps of how to use digital financial services in agriculture.


Malawi’s economy is “built on the backbone of the smallholder farmer,” says Kilyelyani Kanjo, who served as Chief of Party of the FHI 360-led Feed the Future Malawi Mobile Money Project. But smallholder farmers face a major challenge: cash. Farmers who transact in cash face issues of theft and security, and they incur huge costs as they travel long distances to access banks.

“There’s a better way to move money: mobile money.” Kilyelyani says. In Malawi, mobile phones have penetrated the rural areas. Phones have become ubiquitous. With mobile money services, farmers can access their bank account as long as they have their phone. Through support by Feed the Future, the U.S. government’s global hunger and food security initiative, the project focuses on strengthening the ecosystem so that mobile money can take off.

To do this, the Feed the Future Malawi Mobile Money Project takes a strategic approach. It builds capacity for service providers, banks, and regulators. Kilyelyani and her team create spaces where stakeholders, including competitors, share ideas, forge partnership and work together to strengthen mobile banking in Malawi. The project works on issues around financial literacy and creates public awareness campaigns.

Their efforts have made a significant impact in the uptake of mobile money in Malawi. In 2012, there were 200,000 mobile money subscribers in Malawi. Now, there are 2 million. Moreover, the government is closely involved in and has formally recognized the project’s efforts through a collaboration called the Mobile Money Coordination Group.

Mobile money is really an important element that any Feed the Future project can do,” says Steven Kulyazi, a Program Officer for the Malawi Mobile Money Project. Like in Malawi, mobile money can transform the reach and success of a project and impact agricultural outcomes for smallholder farmers, who are the backbone of many countries’ economies.

As Steven says, any USAID project can implement mobile money in their project. USAID is ready to help missions and partners identify specific challenges in value chains and integrate digital financial services into those corresponding challenges.

Watch this video to hear from Steven, Kileyelyani, and others on how the Malawi Mobile Money project successfully strengthens mobile money in Malawi.

 

To learn more about how to implement digital financial services in Feed the Future projects, read the Guide to the Use of Digital Financial Services in Agriculture. If you have specific questions or feedback, contact digitaldevelopment@usaid.gov.

Call for Case Studies! Responsible Data Practices in Digital Development

Do you have a digital technology project that manages personally identifiable or otherwise protected/sensitive data on beneficiaries in the field?

Have you struggled with and addressed challenges around balancing the need for information, protecting it from misuse, and mitigating privacy risks?

Would you like to engage with and inform USAID on development of best practices for ethical data collection, use, and management in field-based programs?

We want to hear from you!

mSTAR is looking for up to three projects where we can test and apply our draft good practice guidelines for ethical collection, use, management, sharing and release of data in field-based digital development programs.

The use of digital technologies is increasing in development programs. This has the potential to yield tremendous benefits but also increases the chances of exposing individuals and communities to harms and privacy risks related to poorly managed and protected data. USAID and its implementing partners recognize these challenges, especially the need for good practices to guide collection, use and sharing of data in a responsible manner.

Therefore, in collaboration with Sonjara, Inc., Georgetown University and the USAID Global Development Lab, mSTAR is conducting research on existing practices, policies, systems, and legal frameworks through which international development data is collected, used, shared, and released. Based on this research, the team will develop good practice guidelines for USAID that will be tested against real world experiences in field-based digital development programs and that will help:

  • Mitigate privacy and security risks for beneficiaries and others
  • Improve performance and development outcomes through use of data
  • Promote transparency, accountability and public good through open data

mSTAR is looking for digital development projects to assess how our guidelines would work in real world settings. Once selected, the research team will conduct field visits of 1-2 weeks per project, in order to understand “on-the-ground” context and project needs. The research team will work with the project management team to apply draft practice guidelines to each case, help identify what practices work and any gaps in the guidelines. The team will also capture feedback from the project management team and partners on implications for project costs and timelines, as well as document existing good practices and lessons learned from the project on how they manage their data. These findings will be used to further refine the USAID Responsible Data Practice guidelines.

What types of projects are we looking for?

  • Ongoing or recently concluded projects that are using digital technologies (SMS, IVR, mobile based data collection, USSD, software, social media platforms, sensors/IoT, etc.) to collect, store, analyze, manage, use and share individuals’ data.
  • The data could include personally identifiable information (PII) and/or other personal information such as health records of pregnant mothers, teachers’ attendance, financial transaction history of individuals, HIV/TB status, and/or other potentially sensitive information like LGBTQI status, membership in vulnerable groups (disability, ethic/tribal minority etc.), geocoded information, etc.
  • The project should have informal or formal processes for privacy/security risk assessment and mitigation especially with respect to field implementation of digital technologies (listed above) as part of their program. These may be implicit or explicit (i.e. documented or written). They potentially include formal review processes conducted by ethics review boards or institutional review boards (IRBs) for projects. Submissions of cases are NOT limited to only projects that have conducted formal ethics review. Projects that have been clearly defined as “research,” however, are excluded from this analysis. Note that, while information security processes are highly relevant to the overall problem of mitigating privacy risks, we are NOT looking for case studies that are entirely about information security/cybersecurity practices.
  • All sectors of international development are welcome to submit case studies. We are looking for diversity in context and programming.
  • Projects from all geographical regions are welcome.
  • We prefer case studies from USAID-funded projects but are open to receiving case studies from other donor-supported projects.

If your project or activity falls under the above criteria, please take a few minutes to share your project information here. We welcome multiple submissions from one organization; simply reuse this form for each case study proposed.

Contributions must be received by March 1, 2017.

Your help and support are much appreciated! Please share this call with others who may be interested in contributing case studies.

Click here to submit your case study. 

The Digital Finance for Development Handbook

This article originally appeared on ICTWorks here

The Digital Financial Services for Development Handbook was developed by USAID and FHI360 for use by USAID personnel to maximize the Agency’s use of and contribution to the growth of digital financial services in emerging markets around the world.

As an Agency, USAID brings significant comparative advantages to the collective effort required to build out financial services and market infrastructure that serve the poor and create pathways out of poverty. The Handbook is for use across USAID, though content is often framed with a Mission perspective in mind. It explores practical ways in which USAID personnel can advance digital financial services in support of USAID’s mission: partnering to end extreme poverty and to promote resilient, democratic societies.

usaid-mobile-money-handbook

Why does USAID see value in strengthening and using inclusive digital financial services?

Access to finance is not a banking challenge. It’s a livelihoods challenge and an empowerment challenge that cuts across all sectors (particularly with respect to gender and rural communities). If we resolve this challenge, we can transform lives by improving economic resilience and creating new market opportunities.

Although evidence substantiates the importance of financial inclusion to broad-based development, many of the world’s poor remain excluded from financial services because they are simply too expensive to deliver through traditional banking models (see Figure 1). But the prospects for deepening financial inclusion are bright for two reasons:

  • the incredible, rapid growth of connected technologies, especially mobile telephone infrastructure; and
  • the advent of branchless banking models that, when paired with the mobile phone, can make a host of useful services and products possible.

Together, these two elements constitute a key market infrastructure for a new, highly accessible digital economy that upends long-standing constraints to traditional business models. The value of this market infrastructure—digital financial services—is apparent in at least three broad ways:

  1. reducing loss (tied to theft, time, corruption, and business processes);
  2. increasing social protection (by enabling fast, secure transfers and extending saving, insurance, and credit services); and
  3. creating new market opportunities (for new business models, products, and services in every sector).

A central message of this handbook is that a digital financial services ecosystem is a key means to many ends. In addition to helping to expand financial inclusion, it can also be used as a channel to achieve other development outcomes. For example, it can be used to facilitate conditional cash transfers aimed at increasing school attendance, improve agricultural yields for smallholder farmers, and extend the reach of critical services such as power and water.

The Digital Financial Services for Development Handbook is intended to be used in concert with other resources being developed by USAID to equip its staff to harness the power of information and communication technology for development (ICT4D).

Paper-to-Mobile Data Collection: A Manual

This toolkit is written in order to give USAID program and contracting staff, implementing partner M&E and program staff, and researchers a better idea of what mobile data collection is, to evaluate its suitability and added value to a given project, and to give guidance in how it can best be put to use. It is directed at USAID Missions and implementing partners engaged in monitoring and evaluation, and offers the resources necessary for making an informed choice and an effective transition process from paper and pen to mobile. It will lay out the benefits of MDC use for implementing partners, as well as incorporating these methods in M&E related solicitations (RFAs and RFPs), when appropriate.

Access the tool here.