Social cash transfer payment systems in sub-Saharan Africa

Working paper number:452
Author: Lena Gronbach
Unit: CSSR


Social protection programmes in the form of social cash transfers (SCTs) to vulnerable households and individuals have been adopted at an unprecedented scale across the Global South. While most programmes initially relied on manual cash disbursements, digital ‘financially inclusive’ payment technologies have been on the rise since the early 2000s. Yet the existing literature on SCTs has paid little attention to the payment modalities, focusing instead on policymaking processes, impact evaluations and affordability. This paper addresses this gap through an overview of current practices and trends with regard to SCT payment systems in sub-Saharan Africa. The paper explores the use of different payment instruments and providers, as well as the considerations, practicalities and implications of different payment systems, based on an extensive review of the scholarly literature, as well as a variety of non-academic sources.

The findings reveal an increase in the use of electronic payment instruments, such as bank transfers, card-based payments and mobile money in the majority of SCT programmes in the region. However, as cash continues to be the dominant means of payment across the continent, transfers paid via electronic channels are often ‘cashed out’, rather than leading to greater financial inclusion or the use of digital financial services among beneficiaries. Most programmes use a combination of cash-based and electronic disbursements to account for low levels of financial inclusion, limited financial infrastructure in certain regions, and the needs of different beneficiary groups. Further, payments are increasingly delivered through private financial institutions, although states continue to play a key role in terms of oversight, administration and coordination. The prominent role of international organizations in the funding, design and delivery of SCT programmes in sub-Saharan Africa has been an important factor in this regard.

Yet limited financial infrastructure and administrative capacity continue to hamper digitization efforts, particularly in low-income countries and rural areas. Moreover, unregulated digitization and privatization of SCT payments has led to adverse impacts on beneficiaries in some cases, highlighting the continued importance of state-owned payment channels such as postal networks. Overall, the SCT payment landscape in sub-Saharan Africa is changing rapidly, and payment reforms, pilot projects and digitization efforts can be expected to continue as more and more countries enter the digital age and expand their SCT programmes to tackle poverty and inequality.

Publication file:gronbach.pdf