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GSMA recommends careful digital identity use for more effective subsidy programs

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Programs where subsidies for utilities or other essentials can be delivered via a direct link to a digital identity or Cash and Voucher Assistance (CVA) are paving the way for more effective schemes, especially in many low-middle income countries and rural communities, according to a GSMA blog post. However, GSMA writers note there is a renewed need for ‘smarter’ and more targeted subsidies in order to avoid exclusion.

The post identifies the growing space for digital innovation in the delivery of subsidies to end-users; particularly how the expansion of digital identity programs is facilitating this move. With an estimated 1.5 to 2 percent of GDP in low and middle-income countries spent on water and sanitation subsidies, the potential benefit of more efficient subsidy delivery is quite significant.

Last year, the African country of Togo was working on a plan to distribute biometric ID cards nationwide to co-function as a platform for access to public services and ensure the targeted distribution of aid in the social sector. The country is also running a program to enable access to Pay as you Go (PAYG) solar home systems for half a million rural households via mobile money transfers. This answers a need where some without a connection or access to services are unable to benefit from consumption subsidies.

Biometrics and mobile technology can help improve the efficiency of verifying the correct delivery of subsidies, as in the case of a small pilot in Somaliland supported by GSMA, in which voice biometrics were used to confirm subsidy deliveries, allowing the program to eliminate staff travel requirements.

Pakistan’s Benazir Income Support Program (BISP) and India’s Aadhaar are noted as examples of digitized social assistance programs. Exclusion from these digital programs is a risk, however, if the innovations are not designed with the needs of marginalized communities at the core, according to GSMA.

This observation is consistent with one made last year by Dr. Keren Weitzberg, a researcher and Teaching Fellow at University College London, that many of these identity programs are not specific enough to be inclusive; “intergovernmental organizations, government companies do often have a very flattened view of the African user and often don’t recognize that there’s huge variations across African countries. I see a lot of cut and paste models being applied across different African countries and all actually across the global south.”

The problem persists that exclusion is a self-reinforcing cycle; gaining a digital identity often requires previous legal documentation, and registering a mobile phone to access such national digital services or subsidies requires a proof of identity in 157 countries (as part of KYC requirements), according to GSMA. Though many ID requirements were relaxed over the pandemic for SIM and mobile money services.

The authors point out that streamlined or ‘tiered’ KYC requirements can help reduce exclusion. While digital identity programs and related services have been successful for many and enabled crucial access to resources, there remains a real risk of exclusion in purely digital programs.

Creating smarter targeted subsidies also means either using existing government data, or using novel data to target more effectively (such as via a survey or satellite data), GSMA writes.

If the right balance is struck, governments can use digital identity to deliver more targeted subsidies, with reduced administrative costs.

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