Ngos and Electronic Value Transfer Providers: Tips and Recommendations for Picking the Right Partner Part One

We use the term EVT in this paper because the term “mobile money” is, and should be, a discrete term that refers to the sale and purchase of electronic value for the purpose of storing, transacting, transferring, or re-converting purchased electronic value back into physical currency. Vouchers, however, refer to transactions with varying levels of conditionality placed on them that restrict how the recipient may use them. These conditions typically apply to the type of transaction permitted (e.g. medical supplies or basic food stuffs), how long it is valid for, where it can be redeemed (e.g. specific district or department), and with whom (e.g. affiliated merchant/vendor or some other authorized location). Voucher recipients are also not permitted to convert the value received into physical currency. That said, many of the platforms that provide mobile money services can be modified or customized to provide electronic voucher services.

The growing use of EVTs offer potential benefits to both implementing organizations (i.e., cost reductions, increased operational efficiency, and enhanced monitoring capabilities) and recipients (i.e., increased privacy, speed of delivery, reduced time and transport costs) when compared with existing alternatives.⁴For organizations focused on the design, delivery, and management of development and humanitarian aid initiatives where EVT services have recently been introduced (such as Haiti, Colombia, Brazil, Niger, DRC, Nepal and Pakistan to name just a few), local staff are testing, integrating, and expanding the use of electronic transfers to more rapidly and reliably reach intended beneficiaries.

When successful, relationships between the private sector and NGO/aid agencies can yield benefits on a wide scale. For instance, the World Food Program (WFP) and MasterCard recently decided to combine their respective expertise in delivering food aid at scale in challenging environments and in managing electronic payment systems by creating a global partnership dedicated to the delivery of “digital food”.⁵  And by 2046, WFP has committed to expanding its use of electronic cash and voucher transfers by 40 per cent.

However, while some NGOs/aid agencies have succeeded in capitalizing on these new opportunities, the realities of partnering or contracting with EVT providers (be they a bank, MNO, or 3rd party provider) often prove challenging. We distinguish between partnering and contracting here because EVT services are in various stages of maturity throughout the world and the nature of the supply does not always meet the needs or expectations of institutional clients such as NGOs/aid agencies. Therefore, the level of effort required on the part of NGOs/aid agencies to receive specific services (e.g. bulk payments/disbursements) varies. Where EVT service deployments are in a pilot or initial launch phase (operational for less than 2-3 years), this often leads to relationships that are more time and labor intensive for NGOs/aid agencies than if they had simply contracted a provider. As a result, they often take on characteristics of a partnership; whereby strategies and resources are shared, roles and responsibilities are formalized, and a division of labor is established (e.g. enrolling and training users).

We elected to focus on these types of relationships for two reasons: 1) given how recently the majority of EVT providers has emerged, they are more likely to be the norm for some time, and 2) they require more thought and effort to achieve the desire result—i.e. a program that can reliably deliver direct assistance via electronic means. So, why the challenge?

In this first of three installments, we directly address this question by presenting a conceptual blueprint for NGOs/aid agencies to better understand and leverage these partnerships. Although we focus our observations and recommendations on EVT services provided by MNOs, we believe these observations are applicable to a range of EVT providers. Below, we pose and then answer fourstrategic partnership questions that NGOs / aid agencies should ask themselves before embarking on a potential partnership.

In the second installment, "EVT Partnerships 101: Service Level Agreements", we will dive into greater detail on issues of operational and technical support, how this support is defined and formalized, as well as provide guidance to NGOs that are about to begin formal contract negotiations with an EVT provider. In the third and final installment, we consider practical, actionable paths forward for both NGOs and donors serious about fully leveraging these products and services as a means of increasing financial access and empowerment, and not simply viewing EVTs as an alternative disbursement mechanism for humanitarian relief or short-to-medium term development.

But let us be clear on a number of important points from the outset:

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  We believe that the efficiencies, cost savings, and other benefits associated with EVTs versus non-EVTs are real and quantifiable for implementing organizations and program participants.
  
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  When it comes to offering the under-banked and unbanked in vulnerable communities more than just a mechanism for receiving direct assistance and, instead, providing them with a meaningful transaction and value storage alternative as well as increased access to basic financial services, we believe EVTs possess the greatest potential to do so.
  
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  We do not subscribe to the notion, however, that EVTs are always the “best" disbursement option when compared with other, traditional alternatives (e.g., paper vouchers or cash disbursements done directly or via 3rd party).
  
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  Nor are we convinced that one type of EVT serviceis inherently better than another (mobile handset-based vs. card/POS terminal-based). On both points, these decisions must be made on a case by case basis following a careful examination of local market conditions, service provider capabilities, and participant capacity.
  
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  And finally, as many others before us in development have observed, technology is an essential tool not a panacea. Its value and utility are entirely a function of how it is understood and applied.
  

Before an NGO/aid agency engages a prospective EVT provider, it’s worth spending a little time internally reflecting on how this potential partner might perceive the organization and how that might impact their approach to a potential partnership. Based on our own experiences supporting, engaging, and observing these interactions, there are a number of concerns that may cause the private sector to be hesitant or skeptical of such a relationship.

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  NGO Counter/Reply - Depending on the market context, programs may have short, medium, or long term objectives. It will be important for NGO/aid agencies to be transparent with their private sector partners as to whether the EVT services they require will support shorter term disaster relief/post-conflict efforts or longer term economic/livelihood development efforts. NGOs/aid agencies would also be well-served to outline their strategic commitment to the country and the overall history of the organization, provide a brief summary program activities in other sectors that might potentially involve EVTs (e.g., SME loan disbursement/ repayment, Ag value chain payments, social welfare payments), as well as any major relationships/ partnerships public, private or civil society actors they have cultivated.
  

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  NGO Counter/Reply - Private sector partners may have limited knowledge of/experience with how an NGO/aid agency functions. NGO and aid agencies, especially those with a regional or even global presence, have considerable experience procuring goods and services from private sector vendors. They have the internal structure, personnel, tools, and other resources to draft and review contracts, implement, monitor and audit projects.  Be prepared to discuss your country office structure, how key strategic and operational decisions are made as well as speak to past project management experience, with an emphasis on reporting requirements and internal auditing processes designed to ensure operational quality.
  

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  NGO Counter/Reply - Many EVT providers are unaware that NGOs/aid agencies are contractually obligated to record and provide certain types of information to donor governments or other institutions.  If the NGO/aid agency takes the initiative to explainto the EVT provider what information they are required to gather, they may be able to devise an acceptable proxy for data formatting and reporting based on the information currently being generated and stored on the platform. This would require the NGO/aid agency to engage the donor to secure the proper authorization or waivers but would certainly help to alleviate concerns within their own Finance Department and remove the need for any platform modifications on the part of the EVT provider.
  

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  NGO Counter/Reply - While vulnerable or disadvantaged communities certainly have lower income levels and less reliable employment status, many within these communities perceive airtime to be a priority expense and will regularly spend disposable income on airtime and other mobile related services. Therefore, to an MNO with an EVT product, these individuals are not just potential new EVT product users. They may also be entirely new subscribers who will generate additional revenues over the long term. Also, if NGOs have a more in-depth understanding of these client segments (e.g., consumption patterns and revenue sources), the case for reaching these groups can be more easily made to an EVT provider. Finally, as many MNOs with EVT services already know, the largest remaining “untapped” segments in markets where NGOs/aid agencies operate are located in rural areas--same areas that NGOs/aid agencies know well and are well-positioned to engage and serve.
  

Ideally these partnerships should be built deliberately over time but operational realities and program priorities may force NGOs/aid agencies to accelerate certain steps. While the exact steps will vary from market to market, the steps listed here are common in markets where EVT providers are less well-established:

On the NGO/aid agency side, their role should focus on end user engagement and field support to ensure adequate knowledge and comfort using the service. On the EVT provider side, their role should focus primarily on service provision, management of all technical aspects of the product, as well as issues of remote customer support (e.g. call center). The respective strengths of each organization are listed in the tables below.

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  EVT Providers
  
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    Providing mobile network connectivity to support EVT transactions
    
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    Providing basic technical support (i.e., PIN number reset, access to an online account and dashboard to monitor transactions and request reports on a real-time)
    
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    Managing a dedicated platform and software to enable EVT transactions to be made
    
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    Establishing and managing an adequate presence of transaction points
    
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    Ensuring sufficient levels of physical and electronic liquidity are present at agent locations
    
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    Provide sufficient client support to NGOs through dedicated institutional client accounts
    
  
  NGOs
  
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    Ability to mobilize, sensitize and train beneficiaries, which is equivalent to client engagement / customer awareness activities for EVT providers
    
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    Institutional knowledge and best practices make them well equipped to establish trust and communicate effectively with beneficiary communities
    
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    Ability to engage, evaluate, and enlist merchants to take part in EVT programs as either acceptance or distribution points (developing viable networks of acceptance points and agents are essential for EVT provider; therefore, this ability to should be recognized, highlighted, and valued in the partnership)
    
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    Securing donor funding for relief or development programs that involve recurring disbursements, thus creating new EVT service enrollment and adoption opportunities
    
  
  

To the extent that NGOs/aid agencies can quantify key aspects of their program, they will more effectively capture the attention and interest of an EVT provider. NGOs/aid agencies will also be using terminology that providers can more easily translate into concrete benefits resulting from the proposed partnership. In particular, EVT providers are interested in the activities of a cash transfer or voucher program for the following reasons:

For service providers that have matured beyond the preliminary launch phase, NGO / aid agencies offer a cheaper path to service expansion, particularly those programs targeting communities in peri-urban and rural regions. Given their community-oriented approach that actively seeks to tap into existing social networks as a way to deepen program awareness and reach, NGOs/aid agencies create opportunities for service providers to engage these same networks to conduct sensitization, promotion, and training activities as well as customer enrollment.

Staff can also support product awareness by integrating EVT training and sensitization into program mobilization activities. NGOs /aid agencies also frequently deploy field staff to provided on-going support and monitoring, allowing them additional opportunities to instruct program participants on EVTs. Finally, because many of the cash transfer or voucher distribution programs launched by NGOs / aid agencies involve a network of affiliated, time agents, field staff are also well-positioned to support agent identification, recruitment and training activities on behalf of EVT providers.

Therefore, we propose that NGOs / aid agencies ask themselves the following set of questions, or at least have them in mind, before they engage a prospective EVT service provider:

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  How many participants are there?
  
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  What districts or regions will the program operate in?
  
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  What is the average disbursement amount?
  
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  How often do disbursements take place?
  
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  How long will the program run?
  
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  How will the funds be used (e.g., immediate consumption, inventory/re-stocking, durable goods/asset acquisition) and would they stimulate additional economic activity?
  
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  What other partners are you working with to implement this program (e.g. MFIs, Agrodealers, major commodities distributor/exporter)?
  
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  Are similar programs planned for the future, with the same parameters and objectives (e.g. regular disbursements, desire to stimulate local economic activity)
  

Programs with an EVT component have the potential to impact strategic planning, management policies as well as day-to-day operations. Therefore, relevant departments and senior managers need to understand the inherent differences, trade-offs, and benefits before moving forward. Questions of the service’s commercial sustainability and an NGO’s internal capacity to replicate these activities across sectors or programs should also be considered whenever this type of partnership assessment is conducted. If the provider’s services and product are sound, supported by a growing network of acceptance points and transactions, the NGO's investment of time, energy, and resources will allow it to utilize EVTs on a larger scale, with increasing speed and cost-effectiveness. If the service and product fail to meet basic needs of the NGO/aid agency or if the provider is unable to build out its network and increase transaction volume independent of aid/development funding, NGOs/aid agencies will want to proceed cautiously—avoiding any major commitments to use EVTs within its programming on a large scale—and develop a reliable fall-back option that can be activated on relatively short notice.

The type of internal exercise recommended here would fall under the typical cost-benefit assessment that is mandatory for most NGOs/aid agencies seeking access to specific services via contractual agreement. NGOs/aid agencies must take the time to think through what they want from a possible EVT partnership and capture those objectives in concrete terms. If they do not, NGO/aid agencies will conduct these assessments without the proper context or awareness. How then can they be sure they are identifying the right “costs” and “benefits”to support an informed decision?

The objectives of an EVT partnership can typically be articulated on three levels:

Once the objectives have been identified and agreed upon internally, NGOs/aid agencies will know where to look for potential benefits and costs. A common practice among NGOs is to calculate only the cost of disbursing funds via an EVT provider and then, perhaps, compare them to existing alternatives (e.g., NGO/aid agency-led or third party-led). While this is undoubtedly animportant consideration, basing a decision to partner with an EVT provider on this figure alone can be misleading.

To begin with, the per person cost of an EVT service versus an alternative (e.g. contracting a locally-based MFI to disburse funds) could actually be higher. But this is not the only cost to consider nor does it accurately capture other benefits and costs associated with an ET service versus this alternative. A more accurate picture of the costs and benefits of an EVT service would include a comparison of the time, labor, and other costs associated with each step in the disbursement process, from preparing/authorizing disbursements to post-disbursement reconciliation and monitoring.⁶ NetHope recently published a detailed, user-friendly calculation tool to help organizations conduct a more comprehensive assessment of the costs associated with migrating from cash/paper voucher-based disbursements to electronic.⁷

We hope the above has proven useful to NGOs/aid agencies at different stages of thought or action vis-a-vis ways to integrate EVT services into existing or planned programs. In our second installment, EVT Partnerships 101: Service Level Agreements, we will take up specific issues related to overall negotiation strategy and content as well as explore what practical next steps should follow the conclusion of one of these agreements.