Direct payments to Pakistan’s flood victims: A smart option for US assistance

However, a new approach has the
ability to leapfrog over these impediments. Pakistan has launched a system to
provide direct payments to two million flood-affected households to pay for
them to rebuild their homes and replace lost property. The system uses
machine-readable smartcards called Watan Cards that use modern biometric technology to ensure a unique identity for
each recipient and reduce fraud. The cards are issued by major banks, meaning
that recipients can receive cash from existing networks of local agents as well
as branch offices. The program is scaling up rapidly, with nearly one million
cards issued in the last 45 days.  

Similar systems have been used in
a number of developing country contexts. Starting off from pension payments in
KwaZulu-Natal province, South Africa has almost two decades of
experience.  Biometric and card-based systems have been used in Malawi to
provide emergency support to drought-stricken farmers, in the DRC to provide
demobilization payments to ex-combatants, and in Andhra Pradesh, India to
provide employment guarantee and social payments to some 5 million people.
Globally, systems differ in a number of dimensions, whether in the mechanism of
identification (fingerprinting, iris recognition etc.) and in the mechanism of
delivering transfers (electronically into bank accounts, cash payments at
mobile points-of-service with biometric or pin-based smartcard systems,
etc).  But the basic principles are similar – unique identity, and secure,
direct, and verifiable payment to the designated recipient. 

While there are no guarantees of
success, Pakistan has the technology, expertise, and experience in place to
implement the Watan Card program well. It is well into the rollout of an even
larger program, the Benazir Bhutto Income Support Program, which aims to
support 5 million poor families by next summer and has delivered payments to
those displaced by fighting in the country’s northwest. Pakistan has already
built a national biometric identity database with 96 million citizens
registered through fingerprints.

These systems have worked well
even in extremely difficult conditions. Especially for large programs, their
setup costs are modest, and they economize on delivery costs. Technology allows
the transfer system to bypass layers of entrenched bureaucracy, eliminating
opportunities for extortion. Finding and training suitable operators has not
been a problem, even in conflict-torn central Africa. And these programs have
often produced striking side benefits. The program in Andhra Pradesh, India
empowered female recipients by offering them a source of income independent
from male relatives (many of those employed by the program were also women).
The South African transfers program opened up a whole range of financial
services to beneficiaries—households can now purchase insurance plans directly
from their new savings accounts. In Malawi, a study found that cash transfers
to drought-affected farmers were highly effective at restarting local
economies, spurring demand and in turn creating jobs. Each dollar spent through
the program drove more than two dollars in new economic activity, researchers
concluded.

As a tool for flood
reconstruction, the Watan Card program could be invaluable. Given the promise
of this program, the United States could usefully offer up to $500 million to
help households from flood-affected areas to reconstruct homes and recapitalize
farms. It should challenge other donors to join in, and should work with the
Pakistani government to ensure that allocations go only to those in the flood
areas.  It could also ensure the publication of accurate information on
donations to the program and its disbursements, all the way down to the district
level. If the United States wants to demonstrate its support directly to the
people of Pakistan, U.S. funded cards could easily be marked with an American
flag. Aid contractors have engaged in a spirited debate with the U.S. government over the branding of aid
projects. Stamping cards to be distributed through Pakistani channels might be
an effective, low-risk way to symbolize the U.S. commitment while using and
strengthening local capacity.

This sort of biometrics-driven cash transfer program is
not science fiction. It is technology proven in cases around the
world—including in Pakistan itself.  Now, facing a disaster that could set
Pakistan’s long-term economic prospects back by years, policymakers are looking
for a way to deliver aid quickly and securely to those who need it most. The
Watan Card fits the bill.

Caroline Decker is a research assistant and Alan Gelb
is a Senior Fellow at the Center for Global Development.  Alan is a member
of the CGD study group on a U.S. development strategy in Pakistan.