Government mobile salary payments in Afghanistan

Project Active from to State and State Effectiveness

Governments must pay their employees for states to function. The current salary payment system in Afghanistan involves a combination of cash transfers and bank-based electronic funds transfers (EFTs). It is subject to frequent delays and, in some cases, severe leakage.

Mobile Salary Payments (MSPs) hold the potential to simplify and improve the payment process, as salaries will be transferred directly to civil servants using mobile money. This removes a number of stages in the disbursement process, eliminating several points of potential leakage or delay. This system also requires verification of individual identity for registration and automatically creates accurate and real-time records of disbursements and receipts, making the salary payment process much more transparent. If implemented successfully, it can also eliminate costly delays in payments frequently experienced by government employees. It also offers the potential for a wider range of withdrawal and vendor options that could reduce the time and travel associated with the existing system.

Afghanistan’s President Mohammad Ashraf Ghani has expressed interest in transitioning the entire government payroll to MSPs. This goal is reaffirmed in a draft national financial inclusion strategy intended to broaden and deepen participation by Afghans in the formal economy.

One potential indirect benefit of enrollment in MSPs is that it will generate a large increase in regular mobile money users in Afghanistan, spurring network externalities that could dramatically increase mobile money use. This may be an important step toward formalising Afghanistan’s economy, which would contribute to growth. In order for that process to proceed, the President has requested a detailed assessment of the direct costs and benefits of a transition to this new payment system.

This study has partnered with the Ministry of Labour, Social Affairs, Martyrs and Disabled (MoLSAMD), which will be the first to transition its approximately 3,500 Kabul-based employees to mobile salary payments. The implementation of mobile salaries will be evaluated by randomising the phase-in of the program at the individual level. Baseline and endline survey data will be collected on employee salary experience, transaction costs, satisfaction and related outcomes from approximately 1150 employees. This will be complemented with administrative records and mobile transaction data from all participating employees.