Factors affecting the cost-efficiency of and Central Africa... · 2013-12-11 · Factors affecting...
Transcript of Factors affecting the cost-efficiency of and Central Africa... · 2013-12-11 · Factors affecting...
© 2013 Oxford Policy Management Ltd
Factors affecting the cost-efficiency of e-transfers in humanitarian programmes Draft results
11 December 2013 Clare O’Brien, Oxford Policy Management
© 2013 Oxford Policy Management Ltd
Contents
Background and method 1. The research question 2. Scope and limitations of the study 3. How to measure administration costs 4. E-payment mechanisms Case studies 5. Kenya case study 6. Somalia case study Conclusions 7. Conclusions 8. Recommendations
© 2013 Oxford Policy Management Ltd
The research question
Are e-transfers more cost-effective than traditional manual cash delivery methods [in a humanitarian context], and under what conditions?
Question arises because:
− Cash increasingly offered to households instead of in-kind aid − Interest in delivering it electronically rather than in physical notes − But not used at scale as widely as one might expect; and some attempts
to use it have not been successful − CaLP research in 2011 identified seven factors that might impede take-
up, of which one is cost − This study investigates to what extent this is an issue
© 2013 Oxford Policy Management Ltd
Scope and limitations of the study
• We have had to study cost-efficiency rather than cost-effectiveness - Cost-efficiency analysis means calculating the administration costs of
delivering a transfer: ‘$X spent on admin for every $Y reaching the beneficiary’ - Cost-effectiveness analysis would have compared these costs against the
extent to which the programme reached its intended objectives (improvement in dietary diversity / consumption etc.): ‘$X spent on the programme for every Y% improvement in households’ dietary diversity score’
- Couldn’t do this because impossible to isolate the contribution of the programmes studied using monitoring data
• Case studies analysed using common methodology; but be wary of simple comparisons – very different contexts
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How to measure administration costs (1)
• We have included all expenditure not given to the beneficiary (‘support costs’, ‘direct costs’, ‘indirect costs’, ‘overhead costs’)
• Both actual purchases (mobile phones, transport, communications etc.) and estimated value of staff time
• Includes expenditure by primary donor(s) and value of NGOs’ resources used on project
• Did not include expenditure by beneficiaries (would need large surveys; and may be difficult to remember because a long time ago)
• All broken down into three dimensions: − (Time) One-off or recurrent − (Level of expenditure) Central / local / beneficiary level − (Activity) Seven themes – Design / institutional arrangements /
communication / training / targeting & registration / disbursement / M&E
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How to measure administration costs (2)
Recu
rrent
activ
ities (
ever
y tra
nsfe
r)O
ne-o
ff ac
tivitie
s One-off per programme
(central level)
One-off per location (local level)
One-off per beneficiary
(beneficiary level)
Programme design
Targeting / registration
Targeting / registration
LEVEL OF EXPENDITURE ACTIVITY GROUP DESCRIPTION
Institutional arrangements
Communication / advocacy
Training
M&E
Analytical studies, determination of target population and benefit value, writing operational manuals, designing forms and databases
Communication strategy, awareness campaigns
Setting up database. Independent monitoring and impact evaluation.
Community mobilisation. Targeting exercise (identification of beneficiaries)
Registration of beneficiaries with ID card. Supply of phone, bank card etc.
Local levelDisbursement
M&E
Setting up temporary paypoints. Security measures. Checking beneficiaries have received right amount, and dealing with complaints
Monthly monitoring of market prices. Post-distribution monitoring. Monitoring compliance with conditions
Training programme staff, implementing partners
Negotiating with partners, setting up contracts
Training Training of beneficiary in programme procedures, how to use phone / card etc.
Central levelM&E
Disbursement Transfer of funds, incl. commission. Payment of beneficiaries
Monthly reporting
Beneficiary level Disbursement Travel to collect cash. Charge and repair phone
© 2013 Oxford Policy Management Ltd
How to measure administration costs (3)
Line item By financing source (who
pays?) By financing agent (who
spends?) By activity
DFID Oxfam UNICEF...
Oxfam local NGO
Payment provider
Design Training
M&E...
Personnel
Manager
Field officer...
Transport
Communication
Printing
Office costs
Commission
Management fee
[...]
TOTAL
Each set of columns adds up to same total
© 2013 Oxford Policy Management Ltd
E-payment mechanisms
• Card-based - Magnetic stripe / chip-and-pin / contactless - Magnetic stripe card needs account and live network
connection; others don’t - More widespread in Asia / Latin America / Middle East
than Africa • Mobile money - Beneficiary has account for withdrawing cash /
transferring funds / buying phone credit - Popular in Africa where high mobile phone ownership,
esp. East Africa • Mobile vouchers and tokens - Vouchers substitute for paper vouchers - Tokens mainly use phone for communication
• Electronic vouchers – like mobile vouchers except internet-based
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Case study of Kenya (1): Context
• Food security context: - Regularly affected by climate shocks eg. floods / droughts - Risks loss of livelihoods for rural population - Food price hikes in urban areas - Response to droughts in 2009/10 and 2011/12 are reviewed here
• Infrastructure context: - Banking infrastructure expanded hugely during 2000s incl. in rural areas - But usage of bank accounts still relatively low (26% in Eastern province) - Mobile network signal covers 95% of population - Global leader in mobile money, launched by Safaricom in 2007 - M-Pesa has 16 million users, more than any other financial service
© 2013 Oxford Policy Management Ltd
Case study of Kenya (2): The programmes under review
Date Agency Programme
Payment mechanism Value
No. of bens. Objective
1 Oct 2009–-Mar 2011 Oxfam
Nairobi Urban Livelihoods and Social Protection Programme
Mobile money (Safaricom)
$19 x 18 months c. 2,800
Food security and livelihoods promotion in urban areas
2 Sep 2011–Jun 2012
SOS Children's Villages
Marsabit Emergency Programme
Smart card voucher + cash (sQuid)
$87 x 8 months 2,000
Food security in Marsabit post-drought
3 Sep 2012–Mar 2013
Concern Worldwide
Marsabit County Emergency Response Programme (MRP)
Manual cash
$39 (or $26) x 6 months Amount depends on location
1,000
Food security and livelihoods promotion in Marsabit post-drought
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Case study of Kenya (3): Drivers of cost
Programme Cost
Cost-transfer ratio Factors reducing cost Factors increasing cost
1
Nairobi Urban Livelihoods and Social Protection Programme (Oxfam)
Mobile money
Transfer: $565,000 Admin: $361,000
0.64 (whole prog); 0.30 (last 6 months)
• M-Pesa widely used by beneficiaries already
• Became cheaper over time once beneficiaries were registered
• Low cost of disbursement under M-Pesa
• Oxfam lead partner in a consortium – work on securing funding commitments / contracts
• Advocacy raising awareness of crisis • High start-up incl. design • Phone / SIM purchases not major factor • Small value per transfer ($19)
2
Marsabit Emergency Programme (SOS Children’s Villages)
Smart card
Transfer: $1.39 million Admin: $204,000
0.15
• Heavy discounts from sQuid / Paystream (transaction fees at 1%; half-price for other services) – they were interested in trial
• POS terminals fairly low cost • High transfer amount ($87)
• Setting up office (new programme) • Targeting new beneficiaries • Liaising with traders for food voucher
component • High advocacy costs • Travel to Nairobi to upload value to
cards because poor network connectivity
3
Marsabit County Emergency Response Programme (Concern Worldwide) Manual
Transfer: $204,000 Admin: $59,000
0.29
• Very low design costs (follow-on from an earlier programme)
• No office set-up costs • No new targeting
• High transaction fees charged by traders who had to find the liquidity to pay beneficiaries
• Small value per transfer ($39 / $26)
NB. Don’t judge on ratios! Differing contexts
© 2013 Oxford Policy Management Ltd
Case study of Somalia (1): Context
• Food security context: - Large-scale displacement of population to IDP camps because of conflict - Famine in south-central Somalia July 2011 – February 2012 following drought
• Infrastructure context: - Very few financial services options - No central bank till 2012. No private banks, no ATMs, no POS devices - Reluctance to use Somali shillings in cash (old notes, risk of devaluation) - Environment conducive for use of mobiles: good network coverage; many
people have phones; no regulation. But can’t phone from one network to another
- Mobile money introduced in 2011 by Nationlink and Hormuud - Very popular because more secure; holds value in US$ - Mobile money services currently free for all users – phone companies keen to
attract custom
© 2013 Oxford Policy Management Ltd
Case study of Somalia (2): The programmes under review
Date Agency Programme
Payment mechanism Value
No. of bens. Objective
1 Aug 2011 –Jul 2012 Oxfam Emergency Cash
Transfer Programme Manual cash $75 x 6 months 12,548 Food security in
Mogadishu
2 May 2012–Aug 2012 Oxfam E-cash Pilot Mobile money $150 x 1 2,090
Livelihoods promotion; and trial of mobile money payment
3 Nov 2012–Aug 2013
Concern Worldwide
ECHO Conditional Cash Mobile money $100 x 10
months 500 Food security in Mogadishu
4 Mar 2013–May 2013
Concern Worldwide
IOM Unconditional Cash Transfers Mobile money $80 x 3
months 905 Food security in Mogadishu
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Case study of Somalia (3): Drivers of cost
Programme Cost
Cost-transfer ratio Factors reducing cost Factors increasing cost
1
Emergency Cash Transfer Programme (Oxfam) Hawala agents
Transfer: $5.57 million Admin: $1.12 million
0.20
• Low design costs (Oxfam and partner had used method before)
• Economies of scale from reaching 12,500 households
• Staff time to oversee disbursement of manual cash
• Large investment in joint monitoring activities with other agencies
2 E-cash Pilot (Oxfam) Mobile money
Transfer: $313,000 Admin: $140,000
0.45 • No need to oversee cash disbursement in field
• Purchase of phone and SIM card for every beneficiary
• Only one transfer per household
3
ECHO Conditional Cash (Concern Worldwide) Mobile money
Transfer: $500,000 Admin: $92,000
0.18
• Prior experience in using mobile money
• Made use of monitoring tools previously developed
• Economies of scale because 10 transfers
• Small extra cost of imposing conditionalities
4
IOM Unconditional Cash Transfers (Concern Worldwide) Mobile money
Transfer: $217,000 Admin: $23,000
0.11
• As above; plus no retargeting of beneficiaries (therefore no phone purchase either)
• No need for training
• Monthly contracting of network operator
NB. Don’t judge on ratios! Differing contexts
Internal filing codes, date, presenter © 2013 Oxford Policy Management Ltd
Conclusions
1. Costs have little to do with the payment mechanism 2. For costs that do depend on payment mechanism, there is no clear winner
between e-payment and manual payment 3. Many costs are negotiated 4. Cost savings can be made if aid agencies make their programme attractive to the
payment provider 5. State of infrastructure development has huge impact on cost 6. Aid agencies can try and drive innovation in infrastructure development but risks
being costly and difficult 7. A key determinant of cost is the amount of new activity required in a programme,
not just for payment mechanism (new partners / new beneficiaries / new location / new equipment)
8. If cost is driving force in selection of payment mechanism there is a risk that innovation will be lost
9. Therefore probably more appropriate to make decisions about payment mechanism on factors other than cost
© 2013 Oxford Policy Management Ltd
Recommendations
1. Understand the state of infrastructure development 2. If you wish to use e-transfers, perhaps for reasons unrelated to cost, donors
should consider how to get infrastructure established in areas prone to crisis 3. Consider when higher set-up costs of e-transfers will be offset by savings during
disbursement – may be long after emergency is over. May wish to coordinate with long-term programmes
4. Think how to improve attractiveness of programme to the payment provider (eg. more beneficiaries or fewer?)
5. Don’t assume that ‘cheaper’ means ‘better value for money’. Investment may be necessary to make programmes more cost-efficient in the long run
6. May be more appropriate to make decisions about payment mechanism on factors other than cost