Mobile Money as conduit for Conditional Cash Transfers in the

Philippinespresented at

the CPR South Conference in Maropeng, South Africa 11th of September 2014

Erwin A. Alampay & Charlie CabotajeCenter for Leadership, Citizenship and Democracy (CLCD)

NCPAG -University of the Philippines

Conditional Cash Transfers (CCT)in Philippines

• Global trend in CCT in the world

• Dramatic increase in CCT as a strategy for poverty alleviation in the Philippines

1,012,195

2,278,559

3,121,530

3,937,5914,309,769

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

2010 2011 2012 2013 2014-2016

CCT Beneficiaries Country-wide

Source: ADB

Photograph: The Guardian/Vanderlei Almeida/AFP/Getty Images

Growth of CCT in the Philippines

1,009,025,500.00

6,274,887,500.00

10,035,585,300.00

13,151,920,900.00

30,909,950,200.00

33,908,902,800.00

0.00

5,000,000,000.00

10,000,000,000.00

15,000,000,000.00

20,000,000,000.00

25,000,000,000.00

30,000,000,000.00

35,000,000,000.00

40,000,000,000.00

2008 2009 2010 2011 2012 2013a

Amount funded annually

Amount funded annually

3300% increase in 5 Years!

Challenge of distribution

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012 2013a

Proportion of funds released thru GCash

Other conduits

Released thru Gcash/Gremit

Overall, GRemit only serves around 12% of CCT beneficiaries, but this peaked at 29% in 2011.

However, the value has increased from Php980M to Php4.08B (peaking at Php6B in 2012) passing thru GRemit

This also varies across regions

BUT IS IT BETTER?Cheaper?More efficient?More secure?

Distribution

• Before it was done quarterly (every 3 months), but now it is done bi-monthly

• Benefits are 500/mo; 300/child (up to 3children)== ranges from 1600 to 2800 (if done bi-monthly)

• If done monthly, it would range from Php800-1400

Transaction costs for DSWD

Conduit (period) Cost/Remarks

Cashcard initial Php50, no transaction costs thereafter (Landbank ATMs); Php20 other

ATMs (interbank fees)

Philpost Php50

GRemit (2010-11) Php75

GRemit (2012) Php 60 (negotiated)

Mlhuillier (2013) Php42 (Gcash was disqualified/late)

GRemit (2013) Php42 (Mlhuilllier did not participate, 42 became the ceiling set, LBC was

diqualiflied)

Reasons for using GRemit

• Pragmatic- need for more direct/closer channels of delivery because of from that transportation expenses was greater than beneficiaries were receiving;

• Perceived Cost savings (compared with other alternatives (e.g. using helicopters; boats)

• Easier logistically to find partners

Data Gathering

• Interview with DSWD-CCT region IV

• Interview w/DSWD Central Office

• Field Observations

• Survey (n=192) results from CCT implementation in field

Succeeding Surveys and field observations were

conducted in 4 other provinces (but survey

results are not yet included here)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012 2013a

Region IVB CCT Conduits

Other conduits

Region IVB Released thru Gcash/Gremit

31,791,500.00

25,017,500.00

10,932,700.00

25,831,100.00

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013a

San Jose, MO, CCT Conduits

Other conduits

Released thru Gcash

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012 2013a

Mindoro Occidental CCT Conduits

Other conduits

Released thru Gcash

Observations regarding CCT distribution

• m-Money was not really used

• G Remit Merchant partners are limited by the number of people/desks they set-up

Observations regarding GRemit CCT distribution

• Distribution is manual, and not simultaneous

• Long lines occur waiting for merchant partners to set-up, even if processing may take only a minute/beneficiary

Observations

• Security remains a problem

NOT MORE EFFICIENTNOT MORE SECURE

Other Observations

• Temporary markets/vendors follow where the CCT Distributions are set-up.

Comparison of M-Money costs for sender

NOTE: There’s also a one-time initial Card Application fee of Php100 for SMART

SMART Money GCASH

Remittance Range

Charges Total (Max) (for sender

Charges (Php20 per 1000)

Ph1-Php500 Php5 Php5 Php20

Php 501-1000 Php5 Php5 Php20

1001-1500 Php 5 + 2.5 Php7.50 Php40

1501-2000 Php 5 + 5 Php10 Php40

2001-2500 Php 5 + 7.50 Php12.50 Php60

2501-3000 Php 5 +10 Php15 Php60

above 3000 Php 5 + 2.50/Php500 above 1000

Php 15 ++ Php80++

Comparison of m-money charges for recipientRemittance Range

SMART thru ATMS

SMART merchant (1% per tnx)

Gcash merchant

Ph1-Php500 Php5 (BDO); Php 15 other networks

Php 1-5 None

Php 501-1000 Php5 (BDO); Php 15 other networks

Php-5-10 None

1001-1500 Php5 (BDO); Php 15 other networks

Php10-15 None

1501-2000 Php5 (BDO); Php 15 other networks

Php15-20 None

2001-2500 Php5 (BDO); Php 15 other networks

Php20-25 None

Comparison of m-money Costs for DSWD/beneficiary (total)

Remittance Range

Current GRemitmodel

SMART Money

Gcash Directmodel

Ph1-Php500 Php42 Php10 Php20

Php 501-1000 Php 42 Php 15 Php 20

1001-1500 Php 42 Php17.50 to Php 22.50

Php 40

1501-2000 Php 42 Php25-30 Php 40

2001-2500 Php 42 Php32.50-Php37.50

Php 60

2800 Php 42 Php 43 Php 60

CostThreshold

Initial Survey Results

• Beneficiaries farther away were more resistant to using mobile money, and those nearer were also more willing (considering that ATM option would also be there)

• Most of the respondent beneficiaries were SMART subscribers (also validated in 4 other CCT areas)

• Many were more familiar with SMART Padala centers

• Those who have had previous experience using SMART money were more likely to report interest in using this option

In 4 other areas: SMART and Gcash Centers were presentBUT resistance was absence of signals; electricity

Stages of Access*

MENTAL ACCESS: 136/192 were interested or willing to receive CCT directly to the cellphone (71%)

MATERIAL ACCESS: 49% (95/192) have a cellphone; 86 (or 90%) are subscribed to SMART

SKILLS ACCESS: 34% (65/192) know how to receive money using a cellphone

USAGE ACCESS: 33% (63/192) have used SMARTmoney1.5% (3/192) have used GCash

* Adopted from Van Dijk (2009), as conceptualized in Alampay & Bala 2010

No cell:Can’t affordNot a priorityNo signals

Interest:No linesNo ID neededLess transport costGood in Emergency

RESULTS

• OWNERSHIP of a cellphone was not statistically significant as to whether they were interested in m-money for CCT (Chi=2.89, df=1, a=.089)

• Pre-existing Knowledge to use m-Money was statistically significant to willingness to use this as a conduit. Those who know were more willing Chi=7.729, df=1, a=.005)

• Distance to known claim/redemption was also statistically significant to willingness (Chi 12.96, df=1, a=.000) Those closer were more willing.

Findings

In actual GRemit implementation:• Benefits were not apprent: Not more efficient, not more secure• Implementation was no different, and technology model was not

developed• Actual overhead cost (for distribution of transfers) not yet known,

but rather based on bidding; unknown/variable costs for beneficiaries

Feasibility of using a mobile money model:• Projected cost using SMART Money or Gcash can be potentially

lower, especially for smaller and more frequent cash transfers. • SMART would be a more technically feasible alternative should

direct transfers to cellphones are considered (more centers, subscribed to by more beneficiaries)

Field Evidence:Other Emerging Models

• UNDP- Cash for work program (post-Haiyan)

• Globe Banko- interest earning mobile based bank account (applied by Mercy Corps)

• USAID-SIMM Project ---building up m-money use in the local economy (salaries; loans, utility payment)

• Other country experience (see Aker et. al 2011; Nigeria e-Wallets for farmers)

RECAPITULATION

• M-Money for conditional cash transfers is Technologically feasible in some areas– Based on Typhoon Haiayan experience

– Consider availability of complementary systems/services

• M-Money if applied in CCT can be financially more cost efficient

• Need to strenghten local m-money ecosystems

What needs to be done

• Developing local m-money ecosystems

– To reduce need to cash out

• Education

– On use

– Alternative systems (SMART, Gcash, Globe Banko)

– About variance in fees

• Posisble fees in ATMs

Thank you.

eaalampay@up.edu.ph

or

cabotaj@yahoo.com