Agriculture Reference
In-Depth Information
that the transaction is with the intended beneficiary. Conventional payment systems are
brick-and-mortar banks and post offices. By definition, such infrastructure is not well
developed in the poor remote areas of low-income countries. This has been a barrier to
the use of cash transfers.
Computerization of financial systems and the use of the Internet and mobile devices
have broken through this impasse. Africa leads the world in the use of mobile phones to
transfer cash. It has allowed urban migrants to remit money to their families still living
in rural areas. Effectively, any retailer is potentially a point for banking transactions.
In India, post offices have typically delivered cash payments in welfare programs
(such as those arising from pension and public works), but this process is vulnerable to
capture by the intermediaries, which results in both delay and loss. Policy now empha-
sizes the direct transfer to savings accounts of beneficiaries in banks and post offices.
This is possibly only because of computerization of financial systems. This still does not
address the issue of “last-mile” connectivity. An emerging model here is the use of inter-
mediaries between the banks (situated in towns and larger habitations) and the ben-
eficiaries (resident in villages). These intermediaries, called banking correspondents,
provide services of withdrawal and deposit with the help of Internet-enabled portable
devices that record these transactions in real time. Internet connectivity is provided
through the usual mobile phone networks.
Authentication systems require verification of the identity of the beneficiary. In a
digital system, this can be done through a user-supplied numeric code or password.
More secure systems rely on biometric identification. India has a nationwide project to
store biometric data about its residents. In applications to the delivery of public services,
the service provider can use it to verify the identity of the recipient. This does require
biometric scanners. However, they are easily built into the portable Internet-enabled
devices used for recording transactions.
Until a decade ago, cash transfer feasibility was restricted to areas with a high density
of payments systems, such as the big cities. This is not so anymore.
Challenges to Cash Transfers: The Paternalism Argument
The economics case for cash transfer is that it allows people to make their own spending
decisions. However, this is exactly what bothers cash transfer opponents. To them, it is
not self-evident that individual decisions are made wisely. The goal of food subsidy is to
increase food intake and improve nutrition. This is furthered only by the supply of food
and not cash, which can be dissipated in various ways.
Paternalistic arguments are particularly appealing when men receive cash transfers
and use it for their own and not their families' self-interest. The argument is that men
will use the cash for alcohol and cigarettes. There is anecdotal evidence that some money
from cash transfers is diverted to undesirables such as alcohol. One of the problems in
coming up with empirical evidence regarding this phenomenon is that in surveys peo-
ple are very unlikely to report alcohol purchases from cash transfers. However, certain
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