In response to the COVID-19 pandemic, globally, there has been a rapid scale up of Government-to-Person (G2P) payments, especially digital cash transfers via mobile money agents and e-wallets. Many least developed countries (LDCs) have relied on robust mobile money agent networks, and high levels of mobile connectivity and ownership which enable G2P transactions. Such transfers are particularly advantageous in emergency situations like the COVID-19 pandemic as they allow for digital payments to take place in situations of social distancing and lockdowns.
Digital payments can offer multiple benefits to various stakeholders, including governments, recipients, and service providers. Digital payments are a driver of financial inclusion, with payments often serving as a gateway to account ownerships and access to savings and loan products. Furthermore, evidence suggests that shifting government payments to digital platforms results in substantial government savings for cash transfer programmes. For example, in 2018, the Government of India estimated that using digital payments for social cash transfers resulted in savings of over $12.7 billion (Pazarbasioglu and others, 2020). Many countries, including LDCs in Asia, have started to strengthen and improve their G2P cash transfer systems.
In response to the COVID-19 pandemic, 1,414 social protection measures have been either planned or implemented across 222 countries or territories as of December 2021. These included various social assistance, social insurance, and labor market measures. Social assistance measures constituted 55 per cent of such measures on average (in East Asia and Pacific, it is higher at 61 per cent and South Asia, it is at 70 per cent) and within that, 42 per cent were cash transfers (Gentilini and others, 2020). The capacity of countries to manage G2P transfers effectively as well as to ensure inclusion, especially of informal workers, has become more important in light of the use of cash transfers as a policy response to the pandemic. Lessons from the rapid scale-up of G2P systems in various countries suggest three building blocks for a system: a unique ID (preferably digital with biometrics), socio-economic databases that are linked to the unique ID, and a channel for digital delivery.
This paper reviews the three building blocks in eight Asian LDCs – Afghanistan, Bangladesh, Bhutan, Cambodia, the Lao People’s Democratic Republic, Myanmar, Nepal, and Timor-Leste – and discusses measures that can enhance the capacity of these countries. It also looks at whether the reviewed LDCs offer any lessons for others in the region. The paper also reviews the regulatory frameworks for digital payments and digital delivery channels in the reviewed LDCs.