Opportunity overview for Kenya and Malawi: differing prospects for digital ID and mobile money in welfare provision
Two East African nations fared very differently in how they use mobile phones for distributing welfare payments, according to a detailed report by global mobile telecoms body the GSMA. Kenya and Malawi shared some of the same benefits and problems and both showed examples of opportunities for digital identity firms as well as mobile operators across ID scheme roll out, welfare program operation and mobile infrastructure management. The two countries provide different landscapes, but both show opportunity for supporting national and internationally-funded programs.
Social welfare programs are a key way to raise people out of poverty but depend on recipients being able to prove their eligibility, according to the report. While in developed economies those receiving state benefits may receive them directly into their bank accounts after initial ID verification, elsewhere the recipients may have to visit a bureau and line up with a physical credential. The penetration of mobile phones rather than formal banking in parts of Africa, plus digital ID systems for remote verification, means beneficiaries can accept the payments directly to their mobile phones and then cash them locally.
Separated by Tanzania, Kenya is distinctly East African, while Malawi straddles the Eastern and Southern regions of the continent. Although relatively close, their economies are significantly different. Kenya has a human development index of 0.579 ranking 147th worldwide, compared to Malawi’s 0.485 in 172nd place. Kenya enjoys far deeper mobile penetration at 89 percent compared to Malawi’s 51 percent and greater technological know-how. Its M-Pesa mobile payments platform is a world-leader, and 93 percent have mobile banking compared to around 20 percent in Malawi.
Both countries have welfare systems (or ‘social cash transfers’) which were not fully digitized. The study of 540 recipients, mobile industry experts and private sector stakeholders identified the shared factors in terms of the opportunity for digital identification and verification across the two countries. Those factors include the ID system already in place and whether or not it is only foundational, plus how these systems are managed, along with the mobile environment and mobile money penetration, and finally the size and level of digitisation of the welfare program.
In Kenya, recipients must have a national ID card (91 percent penetration rate nationally) and then undergo biometric capture to join the welfare scheme. Data is checked against the IPRS – the central registry of all biometric IDs (see Huduma Namba) – for a fee of KSh 5 (US$0.05). 98 percent of Malawian adults are registered in the foundational ID system, but the application of ID in Malawi is far less established, and only 57 percent of respondents in the quantitative sample reported having been asked to show ID during registration for welfare. This can have some advantages as coverage is so nearly universal in Kenya that not having ID is far more problematic.
The governments in both countries saw significant value in introducing mobile money transfers paired with remote biometric verification, especially voice recognition which removes the need for scanning equipment. Recipients showed a preference for facial over voice recognition, especially in Malawi. This could be due to more familiarity with the technology and greater appreciation of the uniqueness of faces compared to voices.
But significant issues in both countries for recipients were cashing out payments, including verification processes but also opening hours and availability of agents, with a particularly pronounced urban/rural divide in mobile agents in Malawi. Beneficiaries expressed interest in greater flexibility in being able to send proxies to collect money.
In terms of industry opportunity, there are ways for multinationals to aid governments or other stakeholders in overcoming the issues throughout the process. Multinationals which can help the two countries play to their differing strengths in terms of what data is already held and technology already available, across SIM registration and KYC, SMS prompts, OTPs and biometric verification, or find ways to enable the use of proxies, for example, could benefit from collaborating on national and regional welfare programs, the study finds.