Demystifying Electronic & Mobile Payments: Lessons

Learned From Pathfinder on Transitioning Away From Cash

May 22, 2013

Agenda

1. Introductions

2. USAID - The Opportunity and Commitment to Electronic & Mobile Payments

3. Pathfinder Tanzania: Phasing Out Cash

4. Pathfinder Tanzania: Standard Operating Procedures

5. Q & A

6. Annex: Documentation Examples

Hamilton McNutt NetHope/GBI Twitter: @hamiltonmcnutt Hamilton McNutt is Program Manager of NetHope’s Payment Innovations Team under the cooperative agreement with USAID known as the Global Broadband and Innovations Aliiance (GBI). McNutt's work focuses on organizing and assisting stakeholders across many sectors, including private, NGO, and government, to adopt and integrate electronic payments into their everyday operations and programs as an alternative to physical cash. McNutt has a special interest in assisting NetHope’s NGO members in finding better ways to do business and deliver aide in the field through electronic payments.

Nandini Harihareswara USAID/IDEA/Mobile Solutions Twitter: @nandinish

Nandini Harihareswara is the Director of Operations and Senior Partnerships Officer in USAID’s Mobile Solutions Division. In this position, she serves as a e-payments/ mobile money technical advisor, encouraging USAID partners, donors, businesses and host governments to move towards using electronic payments, as appropriate. Previously, Nandini worked as an Investment Officer for the USAID Development Credit Authority Office, where she structured more than 25 loan guarantees and increased access to credit for entrepreneurs in health, education, energy and agriculture. Nandini has worked extensively in the public, private and non-profit sectors and enjoys bringing people together to craft innovative solutions to development challenges. She holds a MBA and Masters in International Trade and Investment Policy from George Washington University.

Nandini Harihareswara

Mustafa Kudrati Pathfinder Tanzania

Mustafa Kudrati has over 20 years of international health and development experience. He has extensive skills in the design and management of integrated health programs. His work has focused on organizational development, human rights policy formulation and analysis, reproductive health, non-formal education, micro-finance, and participatory development. As the Pathfinder International Country Representative, he leads one of Tanzania’s largest community-based health program, with a network of over 3,500 community health workers providing community and home-based HIV, Family Planning, TB, Maternal and Newborn Health, and Gender-based Violence program support. Mustafa was born and raised in Tanzania.

Mustafa Kudrati

Peter Mihayo Pathfinder Tanzania Peter Mihayo, Director of Finance for Pathfinder International - Tanzania, has over 10 years working experience in both profit and nonprofit organizations in Tanzania, both local and international. Peter has worked with different industries like publishing, airline and shipping industries at different capacities in finance. His long experience has been focused on improving the livelihood of the poor communities. He is currently pursuing a MBA at the University of Dar es Salaam, also doing CIMA studies.

Peter Mihayo

The Opportunity with Electronic and Mobile Payments

Do We Need to Work Using Cash Anymore?

• USG pays electronically to partners, but what happens next?

• Changes in technology allow for alternatives

• Electronic payments aren’t the solution everywhere

Mobile Industry by the Numbers

Source: Wireless Intelligence 2013/GSMA 2009

Country Population (2013)

Mobile Penetration (2013)

Annual Growth (2013)

% of Population with Network

Coverage (2009)

Afghanistan 33,137,358 55.31% 13.93% 65%

Bangladesh 151,929,995 64.19% 16.06% 89%

Ghana 25,984,986 94% 12.65% 79%

Haiti 10,226,679 54.12% 35.03% 78%

Indonesia 244,158,242 89.47% 13.69% 65%

Malawi 15,757,333 24.51% 16.82% 94%

Mozambique 24,338,816 27.57% 12.76% 44%

Philippines 96,066,603 93.65% 6.80% 99%

Tanzania 47,296,896 49.89% 17% 76%

Uganda 35,343,034 43.89% 10.41% 97%

Bank Penetration vs. Mobile Penetration (2011)

Source: World Bank/GSMA Mobile Development Intelligence

Why USAID Supports e-Payments

Foster cost savings and improve aid efficiency

Increase transparency and reduce leakage and waste

Reduce security risks to program staff

Improve access to financial services for the poor and unbanked

Catalyze development of new and innovative financial products for the poor and unbanked

1

2

3

4

5

USAID’s Commitment to Electronic & Mobile Payments

USAID’s Commitment to e-Payments

Encourage the transition to electronic

payments (including mobile money) in

USAID programs and operations where

appropriate

Direct funding and support to technical assistance programs and

partnerships fostering the development of e-payments

E- and mobile payments

incorporated into project design, procurement

language.

Development of a system to

track the usage of

electronic payments

Tools and trainings to assist

partners in choosing payment platforms

USAID Procurement Executive’s Bulletin

• Evaluate e-payment alternatives, Include e-payments use in concept papers, applications & proposals, if appropriate

• Examples of operational costs that can use e-payments:(1) temporary staff salaries; (2) vendor payments; (3) travel per-diems.

• Examples of program costs that can use e-payments: (1) cash for work; (2) payments to trainers; (3) intra-value-chain payments; (4) grants to beneficiaries.

• Missions can elect to make use of e-payments an evaluation factor in solicitation documents.

USAID PROCUREMENT

EXECUTIVE’S BULLETIN NO.

2012-05 (7/12/2012)

Areas of Interest, Not just Per Diems!

Agriculture & Health

programs

• Work with program technical teams to examine key payment streams within health or agricultural value chains that experience pain points with cash management (eg., Feed the Future, Maternal and Child Health, etc.)

Capacity Building

• Encouraging programs conducting intensive capacity building activities to assess and implement alternative payment methods for per diem and travel cost reimbursement disbursed to training attendees (eg. Health systems strengthening)

Operations and Finance

• Working with implementing partners to encourage use of e-payments in the payment of per diems, travel advances, and other payments made to program staff that normally occur in cash

The Philippines

ALL SOLICITATIONS FROM THE MISSION ENCOURAGE THE CONSIDERATION OF ALTERNATIVE PAYMENT METHODS

• Request for Proposal No. SOL-492-12-000033, Facilitating Public Investment (12/8/12):

L.5 ADDITIONAL INSTRUCTIONS TO OFFERORS

(6) Electronic Payments

USAID encourages the Contractor to consider alternative methods of payment, especially electronic forms of payment, in place of cash payments when appropriate.

Afghanistan

THE AFGHAN MISSION IS PROMOTING THE USE OF E-PAYMENTS IN PROCUREMENTS •Request for Proposal No. SOL-306-13-00002, Regional Agricultural Development Program – South (#2) (1/22/13):

This RFP includes

the use of electronic payments in the Statement of Objectives

the ability to address and implement key areas of the Statement of Objectives in the Technical Evaluation Criteria.

USAID, through the Financial Access for Investing in the Development of Afghanistan (FAIDA) program and other programs, has encouraged the use of electronic payments, including mobile money . . . The contractor should utilize these services to the greatest extent feasible within its company policy to strengthen the efficiency and security of financial transactions at all stages of value chain activities.

Haiti

THE MISSION IN HAITI REMAINS A LEADING ADVOCATE OF MOBILE MONEY

•Request for Proposal No. SOL-521-12-000021, Haiti Feed the Future Partnership: Northern Corridor (2/14/12): C.6.3.3 SUB RESULT 3.3: INCREASED ACCESS TO FINANCIAL PRODUCTS …The Contractor shall also explore the possibility of utilizing mobile money technology for conducting financial transactions (payments for purchases, cash transfers, payroll, credit disbursements, credit repayments, etc.).

•USAID/Haiti included language requiring support of mobile money in a solicitation in 2011:

The implementer shall support the Haiti Mobile Money Initiative, where feasible, including the payment of staff, the purchase and sale of goods and services associated with program implementation. The Mission will determine the range of allowable cost mobile money services utilized by the contractor/grantee.

Mobile Money Resources

• Mobile Money Deployments Tracker: • http://www.mobileworldlive.com/mobile-money-tracker

• Blogs • CGAP|Blog:

• http://www.cgap.org/blog • GSMA MMU Blog

• http://www.gsma.com/mobilefordevelopment/programmes/mobile-money-for-the-unbanked/

• Statistics • Mobile Development Intelligence:

• https://mobiledevelopmentintelligence.com/ • Google Alerts

• Keywords: “mobile money” “mobile financial services” “financial inclusion” “[your country]”

• Explore Third Party Service Providers • SMS bulk aggregators • Airtime distribution aggregators

Current Program Integration

The following are illustrative examples of implementing partners already using e-payments within their operations and programs. If you know of more, please let us know.

• Indonesia, Zimbabwe, Haiti, Uganda, Kenya Mercy Corps

• Tanzania, Mozambique, Kenya Technoserve

• Philippines, Kenya Chemonics

• Uganda PATH

• Tanzania Care

• Tanzania Elizabeth Glaser Pediatric AIDS

Foundation

• Kenya PACT

60 LIFELONG 50 BIRTH 10 20 30 40

Implementing Innovative Electronic Payment Solutions Mustafa Kudrati, Country Representative Peter Mihayo, Director of Finance

Pathfinder Tanzania What We Do

Pathfinder in Tanzania since 1959

Integrated community health programs in 11

regions and 45 districts.

FP/RH advocacy programs at district and

national level

National capacity strengthening programs Model PHE Program

Programmatic Themes

23

Slide title goes here • Text goes here

• Text goes here

12%

Dar

Dodoma

Arusha

Kilimanjaro

Tanga

Pwani Moro-goro Lindi

Mtwara Ruvuma

Iringa

Singida Tabora

Mbeya

Rukwa

Kigoma

Kagera

Mwanza

Mara

Manyara Shinyanga

Non-Implementation Regions

Implementation Regions

Pathfinder Implementation Areas in Tanzania

Zanzibar

Field office

Field office

Field office

Head office

Field office

Field office

Field office

Phasing out Cash

Transitioning to mobile payments

Mobile Payments Implementation Timeline

2010 - CFO Mandate

2010 – Shift to wire transfer

payments

March – June 2011 –

Exploration of SP options

July-October 2011 –

Partnership with mPesa and Systems development

November 2011 – Dar payments initiated

April 2012 – Arusha

payments initiated

June 2012 – National roll

out

Key Start Up Activities

Service Provider Engagement

Staff Buy In/Training Activities

Recipient Buy In/Training Activities

Piloting the Product

Service Provider Engagement How did Pathfinder engage service providers?

Key to successful service provider engagement

• During our implementation, only M-Pesa

was rolling out on a national scale • Received standard agreements and cost

structure from Service Provider and Super-distributor

• Worked out costs – chose best provider • In-house lawyer negotiated Service Level

Agreement and contract

Ask the right questions •Does the Service Provider provide discounts for bulk payments? •Does Service Provider provide free SIM cards and on-site registration? •What kind of call center support is there? •Check network and agent coverage maps – are your areas covered? •How quickly and through what process will amounts not collected be remitted back to the organization? •Have you analyzed the comparative advantages of a direct agreement with an SP vs. working through an agent?

Staff Buy In How did Pathfinder foster staff buy in? Keys to a successful implementation

• Staff briefings • Involvement in development of systems • Live tests with staff • Direct training from M-Pesa team

Advice and lessons learned on staff buy in

•Explain process clearly to staff •Train staff on the system •Have a backbone – shift to e and m-banking not optional •Send money to staff first •Discuss how to handle potential problems •Develop job aide for staff – key reasons why transactions fail, how to avoid mistakes •Accept criticism in a positive manner

Recipient Buy In How did Pathfinder foster recipient buy in? Keys to a successful implementation •Early messaging – 2-3 months before actual payments •On site training at large meetings – M-Pesa staff available to participate •Ongoing repetition of key messages •Over time, with M-Pesa staff

Advice and lessons learned on recipient buy in

•Utilize a more systematic approach •Focus on key messages and in collaboration with mobile money service provider •Train on what to do when receiving payments •Collect names and numbers, verify printout, and then pay

Pilot Pathfinder’s Pilot Stage Activities Keys to a successful Pilot • Based pilot In Dar es Salaam – where our

national offices are based • Criteria Used for Pilots

• proximity to national office and SP HQ • familiarity with new mode of payment • availability of agents • Ability to adapt program as needed

• Problems encountered – non-receipt of payments, missed messages, agents not agreeing to pay full amount

• Pilot ran for 4 months and paid 500 Community Health Workers.

• After pilot decision was made to scale nationally

Advice and lessons learned on pilot implementation •Be systematic – gain supporters •Slowly roll out process geographically, otherwise can overwhelm systems •Consider having one point person on finance staff •Work with SP to create clear documentation process •Get your forms and internal approval/audit process right •Engage with your auditors – they can be the slowest to adapt to new systems •Check signal strength/availability in rural areas – especially in collection points. •Link it to shift to electronic payment mechanisms

18 months in…

By the numbers

Sent over USD 1.8 million (TSH 2.9 billion) through the M-Pesa platform

20,000 recipients have been paid through M-Pesa

3,500 CHWs and around 500 supervisors and local government counterparts receiving allowances on a monthly basis.

Phased out all cash payments made by Pathfinder Tanzania with the exception of transactions in one district that has no mobile network coverage

Benefits of Mobile Payments Ability to scale

Were able to process payments for over 200 meetings in 3 months

Lowered the need for increased staff on site

Enabled operation to be centralized at Headquarters

Less physical cash management

No need to arrange transportation

Less security risks to staff and recipients

Increased transparency and traceability

Decreased opportunities for fraud

Improved ability to track funds in real time

Standard Operating Procedures

Request for payment initiated – by program or administrative

team

Send file to payment authorizer for final

authorization

Approve costs Issue check to bank officer closest to

activity site Treat expenditure as an advance

Arrange transport of Finance Officer to site with cash in hand

Verify names and presence of participants at meeting

Prepare envelopes, pay cash

Retire expenditures Deposit unused cash

in bank Verify forms received

Confirm payments Verify forms received

Post expenditure (remove from advance)

Procedures Using Cash or Check

Procedures Using Mobile Payments

YES

NO Request for payment initiated – by

program or administrative team

Verify names and numbers against database and with recipients Alert field program officers of date and timing of payments

Collect names and numbers at event (e.g. workshop/training) Verify with participants

Send to Pathfinder Head Office via internet

Process payment Convert to CSV file Upload to mPesa

Prepare payment voucher and entry into accounting system

Alert program officer on site that payment initiated

Send file to payment authorizer for final authorization

Remind program officer to collect signatures and confirm payments (via phone) Verify forms received

It Is Not That Different Cash/Check Procedure

Mobile Payments Procedure

Request for payment initiated – by program or administrative team

Request for payment initiated – by program or administrative team

Send file to payment authorizer for final authorization

Send file to payment authorizer for final authorization

Confirm payments, Verify forms received Post expenditure (remove from advance)

Remind program officer to collect signatures and confirm payments (via phone), Verify forms received

Process payment, Convert to CSV file, Upload to mPesa Prepare payment voucher and entry into accounting system

Alert program officer on site that payment initiated

Approve costs Issue check to bank officer closest to activity site

Treat expenditure as an advance

Sample Documents

• Sample Documents we will provide you in the annex of this presentation are: – Sample Payment Voucher – Sample Mobile Payments Account Reconciliation – Sample .csv file from field managers – Sample transaction statement from M-Pesa bulk

payments platform

Challenges and Solutions Challenge Possible Solution Many mobile money services are very new. This can lead to a lack of understanding on how it works.

Introduce services systematically: 1. Staff 2. Key national/local opinion leaders 3. End users

Rural roll outs are challenging, and both mobile network and internet connectivity are a must

1. Start with urban centers, then move to rural areas.

2. Be prepared to adapt and pay more attention to the service provider’s ability to support agent network management

3. Provide field staff with wireless networking cards

Reconciliation of off-net transactions 1. Improved training for end users 2. Register all participants with same mobile

money service 3. Work with third party aggregators

A lack of call center support 1. Work with service provider to ensure specific corporate client call center support

2. Increase dialogue with service providers

Time for Q&A

Thank you for joining us!

This webinar is a product of the USAID Innovations for Development Alliance’s Mobile Solution Division under the Knowledge-Driven Microenterprise Development (KDMD) project, funded by USAID’s Microenterprise Development office.

Upcoming Events Share Feedback Stay In Touch

Please take our 3 minute survey: http://bit.ly/18Zqeai

Contact Us: For Implementers, contact Hamilton McNutt: hamilton.mcnutt@nethope.org Twitter: @hamiltonmcnutt For USAID, contact Nandini Harihareswara nandini@usaid.gov Twitter: @nandinish

June 4, 12pm EDT: “What is a mobile intrapreneur?” video podcast | follow us on twitter for the invite: @msolutionsusaid

Annex: Documentation for Mobile Payments

Payment Voucher Example

Account Reconciliation Example

CSV Field File Example

TABORA PROVIDERS CLAIMS

UYUI DISTRICT

TRCS CLAIMS: JULY - SEPT, OCT & NOV 12 ALLOWANCES

S/N FULL NAME WARD TYPE OF CLAIM AMOUNT (TSH) MOBILE

NUMBER Comments

1 Recipient 1 Isikizya July-Sept & Oct 12 allowances 100,000.00 255769801293

Recipient 1 and recipient 4 have already confirmed with tabora vodacom

2 Recipient 2 Isikizya Oct 12 allowances 25,000.00 255764987835

3 Recipient 3 Isikizya July-Sept 12 allowances 75,000.00 255757651269

4 Recipient 4 Goweko July-Sept 12 allowances 75,000.00 255756340302

5 Recipient 5 Goweko July-Sept 12 allowances 75,000.00 255757342926

Total Reg#s 350,000.00

Vodacom M-PESA Reporting Example

Mobile Money Resources

• Mobile Money Deployments Tracker: • http://www.mobileworldlive.com/mobile-money-tracker

• Blogs • CGAP|Blog:

• http://www.cgap.org/blog • GSMA MMU Blog

• http://www.gsma.com/mobilefordevelopment/programmes/mobile-money-for-the-unbanked/

• Statistics • Mobile Development Intelligence:

• https://mobiledevelopmentintelligence.com/ • Google Alerts

• Keywords: “mobile money” “mobile financial services” “financial inclusion” “[your country]”

• Explore Third Party Service Providers • SMS bulk aggregators • Airtime distribution aggregators