Financial technology in the service of disaster-resilient communities
A mother and merchant during a cash out transaction in Barangay Palanas. (Photo: PDRRN)
Over time, there has been a growing acknowledgment that cash transfer is an efficient strategy for deliveringaid because it provides recipients the power and flexibility to decide and acquire what they need and, in theprocess, jumpstart the local economy.
Consider these facts – seven out of 10 Filipino adults are still considered financially excluded, having noformal access to financial services like savings, micro-insurance, micro-credit, payments, and remittance;one-third of the total number of municipalities and cities in the country have neither bank nor automated tellermachines; and Eastern Visayas, one of the most calamity-prone areas in the country, has only 44 out of 143 banks (BSP, 2017).
As the country heads towards a more inclusive financial system, humanitarian organizations – in partnership with the public and private sectors – have turned to digital financial services platforms forhumanitarian cash transfers. Since STY Haiyan battered the country in 2013, digital financial services haveplayed a key role as a means of supporting the early recovery of Filipinos affected by disasters.
Between 2016 and 2018, Oxfam, PayMaya and other partners have reached more than 42,000 individuals in providing access to digital financial products in the aftermath of typhoons that hit Eastern Visayas and BARMM through the iAFFORD Project. The project also provided 11,538people, a majority of whom are women, access to digital and conventional financial products for life and livelihood assets protection.
Learning from the harsh experiences continues to push these organizations to find more proactive ways forfinancial technology innovations to be used for pre-emptive or anticipatory disaster risk reduction in an effort to save more lives and protect assets of the most vulnerable sectors in the country’s poorest communities.
Palacios says that pre-emptive cash dPalacios says that pre-emptive cash disbursement is called suchbecause of the intent to provide digital financial accounts to recipients in preparation for [an emergency] so that there is an opportunity for them to be sent money, and to receive emergency cash instantly, withouthaving to line up anymore.
“But what made the B-READY Project different from the other projects we’ve had, is that it makes an effort to acquire new merchants within their [own barangays],” he says, explaining that previous projects werefocused more on enabling wallet holders or the project participants.
One of the unique things about the project is the creation of a digital financial ‘ecosystem’ where it not onlyprovides a [digital] wallet to the project participant, but also acquires specific merchants or MIMOs (which stands for ‘money in, money out’ conduits). MIMOs are registered micro/small merchants or agents in the villages that handleelectronic financial transactions. They are mostly entrepreneurs who own sari-sari stores in their villagesthat have been equipped for cashless transactions.
“The B-READY Project aims to show that if we’ve invested time, effort and energy to educate an individual to have access to digital means, then when something happens, it becomes easy enough for us to be able to send money to them so that the support is immediately available to them,” Palacios explains.
The B-READY partners were crucial in laying down the operationalization of the project, particularly thebeneficiary verification, merchant recruitment, and on-the-ground operations, especially the face-to-faceacquisition of all the information needed to set up the accounts. But lessons from previous post-emergency cash disbursements have led them to optimize ways in conducting these processes.
“But the bigger component is user education. Educating people is critical so that they would know how to use the [digital] wallets – and those are the things that we should be very patient about because these are the things that will need to be done over and over,” notes Palacios.
Access to mobile phones and coverage
During the implementation, one of the key challenges was the access to mobile phones by the projectparticipants. Although some did not have their own phones, majority of the households had at least onemember who had a cellphone that could access the PayMaya mobile application.
The B-READY Project covered the most vulnerable areas of Salcedo town in Eastern Samar where somepeople lived in geographically isolated and disadvantaged areas (GIDA) — far-flung areas and island communities — which meant limited access to the internet signal and stable connection needed for recipients to use the digital platform.
To address this limitation, PayMaya sought the support of its sister company, Smart Telecommunications, to ensure that coverage will be increased in areas where they would be deploying their services.
Adoption of positive financial behaviour
For PayMaya, continued use of the wallet is key to sustaining the B-READY Project. “More than inviting people, the harder working element of the program is how to keep people to use the service,” he says.
Project participants must see that there is money going into their digital wallets and that as they use it, theywill better understand its systems and see the benefits such as discounts on airtime (mobile load) and other services which they canuse to, for instance, develop businesses. They will also realize that now they will be able to put money in the wallet themselves.
To jumpstart this activity, PayMaya will allocate a budget and send digital cash to the project participants forthree to four months in order to train them in using the platform and to convince them of the benefits, suchas getting a 5% rebate which they can use to buy airtime load. Palacios points out that from an execution perspective, this is the biggest shift for PayMaya- using the budget beyond the pilot and the program in this way instead of allocating funds to acquire more agents.
“Every month, for three to four months, the recipients will receive cash incentives in their wallets so that theycould use it to buy airtime load, buy from a sari-sari store, or do whatever they want according to their needs. This is one of the last-minute adjustments of the project. At the end of the day, we want this to scale, and we want people to remember,” Palacios points out.
For PayMaya, one of the ways moving forward is to continue engaging and supporting the LGU to provide themaccess to the digital platform and expand to other locations as needed or for other purposes.
“The most important thing is that the LGU can use it [digital platform] to disburse money to those who need itthe most, the recipients of the B-READY Project. If these are the same people who fall under the category of individuals that they should extend their services or support to, they can easily send them aid using the platform. One issue that might arise there, though, is data privacy. That concern is not yet in the scope of this particular project, but one that can be addressed later,” Palacios says.
He also believes that the EWS is beneficial and hopes that this will be made available in different channelseven beyond the B-READY Project.
“As participants, we should be able to identify where else we can tap into the EWS or notifications, so that, atleast even selectively, other people can benefit from it because it is valuable to receive alerts and informationfor them to be prepared. It allows the recipients to react proactively, rather than after a disaster has already happened,” he notes.
Source: 2017 Financial Inclusion Survey: Moving towards digital financial inclusion. Bangko Sentral ng Pilipinas. Retrieved from: https://www.bsp.gov.ph/Inclusive%20Finance/Financial%20Inclusion%20Reports%20and%20Publications/2017/2017FISToplineReport.pdf
The Building Resilient, Adaptive, and Disaster-Ready Communities (B-READY) Project is a two-year pilot project that aims to better protect vulnerablehouseholds from natural disasters through a pre-disaster cash transfer program using two innovations: first, the use of digital weather forecasting and risk modeling technologies as part of the local communities’ early warning systems (EWS) and trigger mechanisms for early response; and second, the use of financial services provision technologies and a local financial ecosystem that would allow for safe and secure pre-disaster cash transfer programming.
The B-READY project was a collaboration of a consortium of partners, namely: Local Government of Salcedo, Eastern Samar; People’s Disaster Risk Reduction Network; PayMaya Philippines; Global Parametrics; and Plan International. Over the past two years, the project reached almost 9,300 individuals in nine barangays (villages) in Salcedo with access to digital financial services, literacy trainings, and pre-disaster cash grants for two devastating typhoons; supported theaccreditation of 17 community-based cash agents for disbursement of cash grants; jointly developed and tested the triggers of typhoon parametric index; strengthened safeguarding mechanisms during emergencies; and facilitated local government adoption of a resolution for using parametric index as part of disaster EWS.