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Communication – The Achilles heel of direct benefit transfers – Part I
Imarti Devi is an 84-year-old widow in Magalsi village in Faizabad district, Uttar Pradesh, and receives an old age pension under the National Social Assistance Program (NSAP) each month-end. She has no idea of the actual date when she is supposed to receive her pension payment, but the Sarpanch (village head) usually (but not always) pays her pension in cash some time at the end of each month. If she does not receive the payment in any particular month, she receives the cumulative amount for 2-3 months the following month or the month after. She does not know why the payment is irregular. Imarti Devi does not count the cash she is given but goes back home satisfied when she receives money. She does not complain about anything.
Imarti’s story is not an exception but the rule about the plight of social benefits recipients in India. They are content and do not complain when and how they receive benefits under various G2P schemes. Possibly Imarti Devi and millions have grown used to, and to accept the way they are treated, and believe this is the way it is supposed to be. And do not raise objections, queries or complaints about fear of losing what benefits they receive.
Ever since Direct Benefit Transfer (DBT) was launched, an emphasis has been on operational issues such as bank account opening and linking the government department’s database and the beneficiaries’ bank accounts. The lack of “last mile transaction points” (typically the cash in/out agents) is discussed only sporadically. But the real situation is far from satisfactory, as is evident from recent studies undertaken by MicroSave about the status of CSPs and the state of agent readiness in selected districts.
The finer aspects of implementation have taken a backseat. One of these is communication. Surprisingly, “communication” has never become a center stage issue. No one seems to have considered that lack of communication could be one of the major reasons behind inconvenience caused to beneficiaries.
Not that it was completely ignored –Above The Line (ATL) communication media were used by some of the implementing agencies and intermediaries, but (at best) these were disjointed efforts. Atop down approach of communication was adopted with an assumption that once the implementation was in progress, information would automatically reach beneficiaries. Evidence shows that this led to a lot of misinformation amongst beneficiaries. In their hurry to get things done, agencies paid scant attention to ensuring the right messages were reaching the beneficiaries. Consequently, beneficiaries received different pieces of information from various sources. This left them confused and apprehensive of new schemes and processes.
This might be understandable for communities living in remote locations, or for illiterate segments, or those not having regular access to information media. However, the communication challenge is evident even in urban programmes, including, for example, Dilli Annashree Yojna. This scheme was launched in Delhi and covered population that is definitely more mobile, aware and media savvy than most parts of India. But, beneficiaries still faced issues due to lack of clear and comprehensive information about the scheme.
Sunita is a beneficiary for Aadhaar-based Dilli Annshree Yojana(DAY) under which she receives cash subsidy for food every month directly into her bank account. She is only aware of the amount of benefit she should receive every month. She opened a new account as directed by the bank and other government/ quasi-government agencies. She knows only as much as she was told by the staff and officials of these entities. She is hardly aware of:
- the eligibility for receiving such benefits,
- why she was supposed to open a new bank account,
- why was she asked to link her Aadhaar number to this account,
- whether she could have used her existing account to receive the benefits, and
- many other similar queries that she would like to know (or should have been told in the first place).
She is not aware because the ad-hoc communication never contained this information, and gave no option for her to ask questions. She did not try to seek more information, perhaps due to her reluctance to go to banks or government departments implementing such schemes. Or maybe it was lack of time.
The absence of proper communication has led to a lot of apprehension and myths in the mind of Sunita and many other beneficiaries like her. According to a study conducted by MicroSave, DAY beneficiaries used to withdraw all money from their account (opened for DBT under DAY) and never saved any money in these accounts.[1] Many beneficiaries confirmed that they were asked (by banks/ government agencies) not to leave any balance in these accounts. The logic given was that the government might take the money back on the basis that if they could leave money in their accounts, they are not poor enough to warrant benefits. After withdrawing the money from the benefit account, if the beneficiary wanted to save some portion of it, she had to save it in a separate account sometimes with the same bank, but in most cases with some other bank … or (more likely) secreted at home. Hardly the optimal recipe for financial inclusion!
At the same time during a similar study in rural hinterlands of Jharkhand, we discovered that all DBT beneficiaries did not withdraw the full amount, but invariably left some funds in their accounts. This was quite contrary to our initial assumption that city dwellers were more aware, better informed and therefore would use the DBT/saving account to save. When we dug deep we discovered that it was once again because “they were told to do so”. Beneficiaries in Jharkhand had been informed that if they did not keep funds, it would become inactive and thus they would no longer receive benefits.
Results of this study prove that DBT beneficiaries are doing whatever they think they should be doing in order to continue receiving funds – they do what they are “told”. Do beneficiaries really deserve such scant attention? Are they not supposed to be at the center of the delivery mechanism? What could have been done differently in order to make entire DBT experience more convenient and useful to beneficiaries? We believe the answer lies in effective and standard communication. This is discussed in the next blog.
[1] The study was conducted for a client, and therefore has not been published or available in the public domain.
Communication – The Achilles heel of direct benefit transfers – Part II
We strongly believe that an integrated communication approach should be the starting point of a large Direct Benefit Transfer (DBT) programs. It certainly helps to be as clear and succinct as possible to manage expectations. In the previous blog, we highlighted how poor and often contradictory communication is leading to mass confusion and apprehension amongst beneficiaries. In this blog, we present a case for beneficiary centric communication.
Is communication really a challenge?
The first step is to assess why communication is confusing to beneficiaries?
There are multiple entities and interlinked processes in the DBT delivery channel. This is, understandably, a real challenge for beneficiaries to understand.
For example, Sita Devi, a 45-year-old in Ramgarh district in Jharkhand, was supposed to receive MNREGS payments directly in her account from January 2013 onwards. Previously she used to receive her payments from the Sarpanch (village head) every fortnight.
However, it did not turn out to be that simple. She was asked to open a new bank account for which she was asked to visit the bank that was 12 km. from her village. She could not do this for long because she could not go by herself. When she finally reached the bank branch, she discovered that she was also required to bring along her job card to open the bank account. She had to wait for another three weeks before she could go back to the bank, but again her account could not be opened as she did not have proper KYC documents in place. Finally, after two months of running from pillar to post, she managed to open her account. All this while, she was not aware that there was one BC agent of the bank working in her Panchayat. This agent was just 2 km. from her village but having opened an account at the bank branch, she could not transact at an agent location.
Though now she had a bank account, she was using it only for withdrawals as she was not clear she could use it for other banking services such as savings or fund transfer. She assumed that it was the government’s account thus she should not leave any money in an account. Many others in the area were aware of agent location and services offered but were unsure whether they could open accounts to receive MNREGS or government benefits there.
Thus Sita’s is not an isolated case. Most of the DBT beneficiaries have faced/are facing similar challenges, for want of a proper communication strategy.
Successful examples from past
MicroSave worked on an assignment to improve communication to beneficiaries of Dilli Annshree Yojana (DAY) in Delhi. Under this scheme, beneficiaries receive the cash food subsidy directly in beneficiaries’ accounts based on Aadhaar authentication. The communication campaign prepared and delivered under the assignment had a far-reaching impact on the knowledge and awareness of beneficiaries of the scheme. Before the campaign, DAY beneficiaries had very little knowledge about the very basic issues such as:
- The need to open an account
- How linking such accounts to Aadhaar can help the payment of future benefits etc.
- Whether they are required to withdraw all money or can leave balances in the account
- Whether they needed separate accounts for the different DBT schemes
They were under an impression that DAY accounts cannot be used for personal savings; that one should not leave any money in the DAY accounts; and that different accounts were required for each benefit they received. These myths and apprehensions were removed after a comprehensive Financial Education (FE) module were developed and delivered to a representative sample of beneficiaries.
Particularly in the case of Delhi, the impact was evident when we compared the awareness of beneficiaries after the campaign. For example, 69 percent of sample beneficiaries believed that Government can access individual account and therefore if they save money in this account, the government might remove them from the beneficiary list. But after the campaign, this figure came down to only 26 percent of beneficiaries. Similarly, there was a substantial positive impact on their understanding of the utility of their account, the need for Aadhaar linking and so on.
The fundamental reason for the success of this campaign was its bottom-up approach. Rather than carpet bombing information, MicroSaveconducted a need assessment survey to understand the communication gap. Based on this assessment, communication content, media, and manner were decided. For example, MicroSave found that for this population segment, communication material should not be written, but pictorial, because the latter enhances understanding and retention of the message.
Examples of the few pictorial posters embedded here depict the user-centric approach of a campaign.
The results of the campaign prove that with beneficiary centric communication, a lot of pain can be prevented. This is a win-win proposition for all the stakeholders. The scale and scope of DAY communication campaign can be considered small, given the huge volumes in all G2P benefit schemes, but it can be customized and scaled up for a larger impact. The only thing we need to keep in mind throughout the exercise is that beneficiary must be at the center of all activities and decisions.
Mobile money and microfinance: A match made in heaven or marriage gone awry?
Use of mobile money in microfinance seems to be an idea whose time has come. It has also figured in our publications as potentially the next big idea in financial inclusion (see Can MNOs Lead the Way for Banking the Excluded 1 and 2 as well as Mobile Money – Influencers of Success and Speculation on the Future of Financial Services for the Poor in India). On the face of it, it seems to be a “no brainer” as it offers tremendous value propositions for all parties involved. These propositions are the basis of a few such partnerships that took place in India.
MicroSave has been closely involved to study such partnerships in India. The most recent one was a pilot test in Uttar Pradesh between a large MFI and an MNO. However such partnerships have not yielded expected results. In most of these cases, MFI and MNO partnerships are built on the following assumptions:
- “Option C” (see diagram) was chosen for partnership due to limited other alternatives.
- MFI provided initial support in marketing and building a customer-MNO relationship.
- MFI repayment was positioned as the anchor product with additional services like saving, payments and fund transfer.
Challenges in Mobile Money for Microfinance Uptake
Clients are reluctant to pay mobile money charges: MFI is in the business of extending loans at clients’ doorstep with largely manual approaches. The clientele is low income and often they are not quick to adopt new technology. In addition, they are highly cost conscious. As long as these charges are lower or equivalent to the current transaction cost (including opportunity cost), they are likely to shift to this option; otherwise, they are unlikely to do so. Clients living close to an MFI’s branch, in particular, are unlikely to see any compelling reason to shift to mobile money.
Initially, partners wanted to test the water and understand clients’ inclination to pay the MFI repayment fee. But when clients were reluctant, neither MFI nor MNO wanted to bear those charges. MFI viewed clients’ mobile money usage and subsequent efficiency gain and additional revenue generation (if any) only in the long run. While the MNO had to bear the cost of channel management and did not want to forego revenue. Also, it considered that as a channel partner, the MFI should either bear the cost or at least pressure clients for mobile repayments. But the MFI feared that pressuring clients could impact their credit business.
- No compelling anchor product: MFI repayment was not a compelling enough anchor product to pull customers to use mobile money. MFI clients are accustomed to their manual repayment process and for economic reasons outlined above do not want to shift to the new channel. Other products like saving, remittance, mobile recharge and bill payments could not be pitched as most partnerships faltered in the initial stage.
- Low penetration of MNO points: Even when clients wanted to try MNO for repayments, (typically where branches were far from the center – the meeting point of MFI client groups), they demanded that the agents should not be more than two-three kilometers away from the centers. But for the MNO, this would require considerable investment in infrastructure, training cost and other expenses to set up agents.
The HelixInstitute of Digital Finance estimates that the total cost of setting up an agent varies between $300->1,000 depending on the market in which they are operating. Some of these costs are borne by the agents themselves and their master agents, but MNO still has to make significant investments. MNO wants to see the proof of a business case before investing, whereas MFIs insist that business would only come if there are enough points close to the users.
Conclusion
Though most of the partnerships have failed to scale-up in India, it is helpful to understand the challenges. Specific takeaways that should be considered to scale-up these initiatives are as follows:
a) Ride on an existing mobile money network: Building an agent network from scratch for MFI repayment is a costly and complex proposition, that can yield many benefits (see NBFC-MFIs As Business Correspondents – Who Benefits? (Part-II), but has its fair share of challenges and draw-backs NBFC-MFIs As Business Correspondents – What Will It Take?. On another hand, many MFIs do not want to start as an agent network manager (business correspondent) since this is complicated and removes takes away the key value proposition of de-risking cash handling. For smaller MFIs, a better proposition for an MFI and MNO partnership is to ride on existing network (please see BanKO example in the Philippines or Musoni in Kenya).
b) Choice of an anchor product: A client bears limited economic and opportunity cost since she carries cash to the branch only 2 times in a year. Especially in rural areas, MFI repayments also provide an opportunity for women members to visit the town and many times they do not consider traveling as an additional cost. An MNO and MFI partnership has a greater probability to succeed if the anchor product is chosen carefully after studying the paint points of the consumers.
c) Building new behavior takes time: Success in case of technology adoption requires a change in customers’ existing behavior. Thus, we should provide adequate time for a client to grasp changes in the repayment process, adapt to using technology and build capacity to facilitate behavior change. It is difficult to put a defined timeline for this and it will depend on clients’ socio-economic background. A pilot test and subsequent reviews should provide an indication as to whether clients are demonstrating the behavior, or need more nudges in form of product promotion, incentives or new and refined financial literacy (How To Make Financial Education Better.. May Be).
Under the current circumstances in India, where mobile money market is still evolving and agents are widespread only in certain pockets, MFI and MNO partnership could entail a huge cost to build the required infrastructure. Thus their partnerships should be built on solid value propositions by putting clients’ needs and requirements at the center. There is no doubt that MFI and MNO will benefit, but in the end, clients need to see enough value proposition to shift from the existing channel. Mobile money could attract the clients, provided (and only if) it solves a compelling problem for them and MFI-MNO are willing to invest in building clients’ capability to use it.
Strengthening SACCO Societies in Kenya
In this video, MSC’s David Cracknell speaks in length about the initiatives to support SACCO Societies in Kenya. He further mentions how MicroSave in cooperation with Sacco Societies Regulatory Authority (SASRA) in Kenya will be introducing training curriculum for credit, delinquency management and Institutional risk.
How to make financial education better… maybe
It may just be a branding problem. “Financial Education (FE)” and “Financial Literacy” really do sound both condescending and boring. Its new and improved name, “Financial Capability (FC)” is slightly less insulting (perhaps), but still fails to clarify what’s on offer to very poor people whose only real incapability is very limited financial resources and no prospect of more money any time soon.
The World Bank is aware of the less than optimal impact the often biased marketing materials (guised as FC materials) from banks and microfinance institutions (MFIs) have on these audiences. For more background information, visit Financial Education: Time for a Rethink and MicroSave’s online library to see our research on this issue.
We’re ready now to suggest some alternative ways we might approach this issue and hear your thoughts. Of course, we too have a new name – in-house, we refer to it as Alternate FE. But since we understand “AFE ” is unlikely to solve the branding or any other problems under discussion, our principal focus is imagining what relevant, meaningful information financial service providers and international donors might usefully offer that isn’t just a sales pitch or theoretical financial management concepts. (For more specifics on how to design AFE programmes, please click here.)
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Products come first not FE An interesting example of this type of smart product design includes Flexi and Flexi Plus, an LIC (Life Insurance Corporation of India) offering that allows variable deposits and maturity benefits more compatible with erratic cash flows and shifting priorities. Flexibility for monthly recurring deposits is especially important for this target market—and a more realistic way to encourage long-term savings. |
Here’s what we already know:
- Poor people are smarter about money than most Financial Educators may realize. (See Breaking Free from the Myths of Financial Education),
- Their failure to save or invest won’t be solved by ignoring the obvious. Their saving condition is quite different- unpredictable income and short pressing needs make regular saving sometimes difficult.
- Consumers need products and services that actually fulfill their needs, not whatever the marketers are selling this week (see an example in the box).
Recent field research has also taught us a fair amount about human nature and what makes people in all income brackets feel more secure and less secure, about money. An essential component of AFE is promoting more individual control and confidence about personal finance.
In many Financial Education/Literacy/Capability classes, the attendees are expected to learn the same material at more or less the same speed, from an external trainer with whom they have no personal connection. In real life, however, very few of us actually retain and implement information this way.
The making of mavens
Most of us look to what Malcom Gladwell calls a “maven” (see here), the most well-informed, trusted person in a group, to guide us—and to share the blame if something goes amiss. Given enough relevant, persuasive facts to work with, almost everyone enjoys being a maven. Expert knowledge confers status and authority (which lead to the control and confidence, noted above, necessary for competent money management).
Here is where AFE gets a bit tricky. The goal is to create as many confident experts as possible, not just one maven who metes out factoids and advice on an occasional basis. And, of course, factoids and figures alone are boring. They are necessary to substantiate the claims that “Flexi Plus”, or any other savings option under discussion, works better for most of its customers than the alternatives. To be compelling, however, these details have to be part of a story—ideally one that sounds real and local and personally credible.
The best mavens understand instinctively how to relate such stories and real-life examples. They realize that the details of an ignominious financial failure are always more compelling and useful for a group discussion than a tiresome little parable about rigorous frugality and its rewards. Everyone can feel superior, and thus more expert, than the failure. Varying paths to success and tales rife with seeming contradictions are also useful story-telling techniques to encourage participation and share knowledge. Taking a cue from the maven story, AFE incorporated a key strategy to identify mavens and with their support create as many mavens as possible to reach a tipping point for a social change.
Other alternate FE alternatives
An integral part of maven effectiveness is envy and insecurity. Aspiration is all very well and good, but the most powerful motivators to exploit are sometimes the negative ones. Anxiety about old age, illness, other family emergencies generally prove to be excellent AFE anchors and effective learning tools, as highlighted in the behavioral science theory of loss aversion.
A final point, worth keeping in mind for all financial education that changes in attitude (read commitments and perceptions) are equally relevant. We may not see an increase in savings amount immediately for savings are indeed difficult. Even a very wealthy country like the United States has a deplorable savings rate (almost half the salaried population puts 10% or less aside each year; those with more variable incomes usually save nothing). Their personal debt ratio is even more alarming and, in most states, increasing steadily. Emerging economies may fare better in the short term—their needs are more urgent and thus incentives may prove stronger—but all those lessons in human nature should remind us that change happens slowly, if at all, and usually for reasons, we didn’t expect.