Transition From Physical Cash To Digital Will Improve Recipients’ Usage — Report

A new report conducted by Strategic Impact Advisors (SIA), FSD Africa, Enhancing Financial Innovation and Access (EFInA) and the GSM Association on digitisation of social welfare payments in Nigeria has revealed that a gradual transition from physical cash transfers to digital would improve recipients’ usage.

The British Deputy Commission in Lagos gave details of the statement on Thursday that the transition would not be immediately possible everywhere due to limited network connectivity, low mobile phone ownership levels, and low literacy rates among other barriers.

The report outlines different opportunities for social protection and humanitarian actors, and the private sector to work together to support increased access to digital payments for poor and vulnerable recipients of assistance.

It said that cash transfers were increasingly used by the Nigerian government for development and humanitarian agencies as a tool to support the poor, vulnerable and promote wellbeing.

The report, however, stated that a large proportion of cash transfers delivered to the poor in Nigeria require recipients to “cash out” immediately.

It said the Central Bank of Nigeria (CBN) had been championing the government’s efforts by designing policies that could enhance the transition from physical cash transfers to digital.

According to the report, the CBN is committed to achieving its 95 percent financial inclusion target set for 2024.

“The joint report on opportunities and barriers to digitising social protection and humanitarian payments in Nigeria highlighted the opportunities within digitisation of cash transfers and presented a roadmap for its actualisation.

“The study reinforces the need to create an ecosystem in which recipients could eventually access cash transfers on a permanent digital wallet.

“This would be done through their mobile phones, leading invariably to multi-choice usage, which they can then use to transact to meet all of their needs and help to reduce reliance on physical cash,” it said.

The commission said that the report offers recommendations to improve Nigeria’s capacity to deliver digital payments to the poor.

It said there was a need for humanitarian and social protection organisations to work in partnership with the government and financial service providers to support an enabling environment to reach last-mile recipients.

The report stated that there were pockets of digital transaction-ready recipients who could support the development of digital payment ecosystems and help to advance financial inclusion.

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It said although digital payments would not be enough to bridge the financial inclusion gap in Nigeria, access to digital payments was an integral component.

Commenting on the report, Juliet Munro, Director, Digital Economy at FSD Africa, said: “Cash transfers are a vital source of income for many underserved households.

“We are delighted about the ongoing conversations with our partners on the existing possibilities to digitise cash payments.

“Once the systems are in place, the targeted households will be able to access the much-needed aid faster and more efficiently", Munro said.

Ashley Immanuel, Chief Executive Officer at EFInA said: “Fintech Innovation is a key driver of financial inclusion and very useful in providing access to financial services, especially for the underserved.”

She said that digitising cash transfers would help reduce the burden for cash disbursement and support recipients’ application of healthy financial habits like saving.

Chris Pycroft, Development Director at UK Foreign, Commonwealth and Development Office (FCDO) Nigeria, said:  “I am really encouraged to see this report highlight principled and important opportunities for development actors to support increased access to payments among the poor.”