Mobile phones can help deliver vital services to people like this migrant from Mali. Image: REUTERS/Juan Medina
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- Since the start of the COVID-19 pandemic, mobile phones have become a lifeline for many.
- However, too many people are still excluded from this vital technology, especially marginalized groups such as refugees and asylum seekers.
- Governments need to step in to ensure mobile services help the world's most vulnerable communities access aid and other essential support.
As the COVID-19 pandemic strikes poor and vulnerable people all over the world, mobile phones have become a lifeline for many. They allow wages, vouchers and humanitarian assistance to be transferred safely and efficiently. They also deliver public health information and connect people with healthcare providers. However, too many people are still excluded from this vital technology, especially marginalized groups such as refugees and asylum seekers. The economic fallout from the crisis is also putting pressure on providers, just as their services are needed most.
Mobile technology has the potential to transform lives in the long run, not just during the coronavirus crisis, as long as we take the right steps to ensure nobody is left behind. Here are three ways governments can step in to ensure mobile services help the world’s most vulnerable communities fight the pandemic and access essential support.
Mobile money services have long played a positive role in fostering social and economic inclusion around the world. In low- and middle-income countries, where comparatively few people have access to conventional banks, they were already widespread before the crisis. Since 2017, 2.7 million people in 44 countries have received cash and voucher assistance (CVA) through mobile money platforms. Due to the growing popularity of this safe and convenient way of transferring money, the ratio of digital to cash-based transactions has increased by nearly 50% since 2017. These channels have become even more important since the onset of COVID-19.
Governments and aid organizations around the world are increasingly using digital payments to avoid the infection risk of cash-in-hand disbursements. The United Nations High Commissioner for Refugees (UNHCR) provides financial assistance through mobile money in the Democratic Republic of Congo, for example.
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However, many marginalized groups such as refugees live in countries where proof-of-identity is required to access mobile services. This means they have to show documentation such as a passport and proof of a stable address in order to obtain SIM cards or access mobile money wallets - documentation that very few of them have. It’s estimated that around the world, 1 billion people face such an “identity gap”, meaning they lack formal proof of identity.
Such lack of documentation and access prevents many of the world’s most vulnerable people from receiving financial aid via their phones, receiving important information, and communicating with family members. Their inability to legally activate a mobile connection or access a mobile money wallet in their own name leaves them even more marginalized.
A lack of legal and regulatory certainty and consistency can also disrupt the delivery of humanitarian assistance. Research conducted in 2018 by UNHCR and GSMA (the global mobile industry association) found that these barriers were a common problem across 25 refugee-hosting countries.
One concrete step to facilitate such assistance during COVID-19 would be for governments to temporarily ease proof-of-identity requirements for certain services for marginalized groups such as refugees. Such measures will have to be balanced against the risk of supporting criminal activities like money-laundering or the financing of terrorism. This risk-based approach has already been adopted in countries like Ghana, Egypt, Jordan and Pakistan. For example, steps like imposing transaction and account balance limits on accounts where Identity requirements were relaxed.
Furthermore, effective collaboration and coordination between Central Banks and Telecommunications Regulators can ensure that the proof-of-identity requirements (and any temporary measures) for accessing SIM cards are consistent with those for opening mobile money accounts and in line with global recommendations.
Supporting mobile money businesses
Some governments and regulators have encouraged the use of digital payments to reduce coronavirus transmission, for instance by reducing the cost of transfers and waiving transaction fees for person-to-person transfers. While cutting these costs can boost the use of mobile money, it can have negative side-effects for businesses and entrepreneurs in the sector. In the case of person-to-person transactions, which account for 91% of the money circulating in the mobile ecosystem, waiving the fees for extended periods puts significant pressure on providers’ revenues. The drop in income can also make it difficult for providers to sustain strong agent networks, which has far-reaching implications for humanitarian assistance.
Agents are a crucial part of the mobile money system. They are often community members and recipients of humanitarian assistance themselves, as well as helping others access aid. They register new customers, deposit cash into accounts and hand out cash to customers making withdrawals.
Agents also play an important part in the wider economy and can contribute to inclusive growth. In emerging markets, the number of agent outlets has almost tripled over the past five years, and the reach of a mobile money agent is now seven times that of ATMs and 20 times that of bank branches.
If providers’ revenues are under pressure, they will struggle to maintain these agent networks and provide services for the most marginalized. Agent management and commissions make up the highest proportion of mobile money operating costs, a GSMA study showed.
Governments should keep in mind this potential knock-on effect on providers and agents when they consider waiving fees. They could for example waive fees only for a limited time to give operators some certainty and enable them to plan for the return to normal after the crisis. They could also consider limiting free transactions to the most vulnerable customers, and providing relevant tax relief for mobile money services. Expanding transaction and balance limits to facilitate the trade and purchase of essential items, including medicine, would also encourage more digital transactions and support local digital economies.
Ensuring agents are not cash-squeezed
Lockdown rules and fear of the spreading virus can prompt a rush on mobile money agents by people trying to withdraw cash. This can leave agents in a cash crisis as they don’t usually have sufficient reserves to cater to a sudden spike in withdrawals. Operators may struggle to step in and provide cash to agents if their revenues are already under pressure from lower transaction fees.
Governments can ease such a cash squeeze by encouraging the provision of interest-free emergency loans for small businesses and agents, temporarily reducing or removing taxes where appropriate, and ensuring that banks make cash available to mobile money agents. They should also consider declaring both banking and mobile money as ‘essential services’, so that mobile money agents can continue to work and let people withdraw and deposit cash.
Coordination of payments between government and humanitarian organisations may also ease pressure on agents, as official payment dates often mean agents have to hand out large sums of cash all on the same day.
Finally, governments should encourage the acceptance of digital payments by small enterprises (such as those supporting humanitarian services) to limit the risk of the virus spreading through cash-handling.
Unlocking the power of mobile services
Mobile operators have been vital allies in the fight against coronavirus. They have facilitated the delivery of emergency aid, and have provided free spaces in their call centres for first responders who connect callers to the national COVID helpline with medical providers. For millions living in precarious and dangerous situations, such as refugees, mobile money can be a safe and efficient way of accessing the services they need to survive. In the long run, the mobile industry can also play an important role in the post-crisis recovery of low and middle-income countries, creating jobs and opportunities for entrepreneurs, and offering convenient, accessible financial services to countless small businesses.
For mobile money services to achieve their full potential, governments, regulators and the mobile industry need to play their part to encourage digital payments through conducive policies, alleviate the cost of living pressure on users of mobile money services while ensuring the sustainability of mobile money businesses. For example, to the extent that identity-requirements for ‘entry’ level accounts are relaxed and transaction / balance limits are enhanced, such measures could be formalised and maintained beyond the pandemic, on the basis that mobile money services are proven low risk products in line with global recommendations and best practice guidance.
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The views expressed in this article are those of the author alone and not the World Economic Forum.
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