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All authors are consultants at Oxford Policy Management who have been involved in the evaluation of cash transfer programmes in Kenya. For more information, please see www.opml.co.uk or contact ian.macauslan@opml.co.uk.

Cash transfers have gained prominence in recent development programming as a result of several successful programmes, principally in Latin America but also in South Africa and elsewhere in Asia.  They are increasingly being piloted in sub-Saharan Africa, where current evidence suggests that they have positive impacts both as emergency and long-term social protection programmes.  As with any programme, the operations of cash transfers strongly influence their impact, but in analyses of cash transfers, targeting has been given much more attention than payment systems.  This paper argues that payment systems are important in terms of programme impact, provides a framework with which to analyse them, and considers three different payment systems from three cash transfer programmes evaluated by Oxford Policy Management (OPM) in Kenya.

The three programmes are:

• The Hunger Safety Net Programme (HSNP), which distributes cash for three years using smartcards to 60,000 food insecure households and operates in the drought- and conflict-prone north of the country; an area with low incomes, pastoralist livelihoods and very limited infrastructure (few roads, little or no mobile phone coverage or electricity, and extremely low levels of financial access). Cash is transferred electronically to the smartcard and can be redeemed at any time at participating shops (known as dukas) using fingerprint scanning.

• The Cash Transfer Programme for Orphans and Vulnerable Children (CT-OVC), which distributes cash on a permanent basis through post offices to households (30,000 in May 2009) containing orphans or vulnerable children (OVCs) in four rural and urban provinces.  Cash is delivered to post offices and recipients collect it at specified times.

• The Post Election Violence Recovery (PEVR) cash transfer programme, run by Concern Kenya, which provided short-term cash transfers using mobile phone technology (known as M-PESA) to food insecure households in rural and urban areas affected by the violence after the 2007 election.  Using M-PESA, money is transferred electronically to (or between) mobile phones and can be retained or redeemed at any time at registered M-PESA agents.

We suggest that payment systems could be analysed in terms of their implications for programming and for recipients, and compare the programmes using this framework. The results are summarised in Table 1.1 below:

Table 1.1 Framework to assess payment systems: HSNP, CT-OVC and PEVR compared

To conclude, no payment system is perfect and programmers need to consider trade-offs between different objectives, such as between flexibility of when and how recipients can collect transfers and the predictability of those transfers.  If large investments in infrastructure can be made, there is the potential for payment systems to overcome many challenges and contribute to the extension of financial services or mobile networks, which have additional benefits. Flexibility and innovation in the choice of payment system is essential to take advantage of recent technological advances. The advantages and disadvantages of each of the three payment systems described (smartcards, post offices, M-PESA) are summarised in Table 1.2 below.

Table 1.2 Advantages and disadvantages of the three systems

To read the full paper, click here.