Government mobile salary payments in Afghanistan

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), and is subject to frequently delays and, in some cases, severe leakage. The system we will evaluate – Mobile Salary Payments (MSPs) – holds 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. The system 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, and 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, and 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 enrolment of Afghan government employees 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.

In this study, we have partnered with the Ministry of Labor, Social Affairs, Martyrs and Disabled (MoLSAMD), which will be the first to transition its approximately 3,500 Kabul-based employees to mobile salary payments. We will evaluate the implementation of mobile salaries by randomising the phase-in of the programme at the individual level. All employees are being enrolled together in the mobile money system during summer 2016, and 50% will be randomly assigned to begin mobile salary payments immediately while the remaining 50% remain in their existing payment system for 3 months before also beginning mobile salary payments. This phased roll-out will provide the government with an opportunity to better understand the systems and processes required to successfully manage mobile salary payments, and the 3-month period will allow the researchers an opportunity to compare directly the cost and benefits of the existing and new systems while both are still operational in the same Ministry. We will collect baseline and endline survey data on employee salary experience, transaction costs, satisfaction and related outcomes from approximately 1150 employees, and complement this with administrative records and mobile transaction data from all participating employees. Future research plans are being developed to study longer term impacts of MSPs, and to study the national rollout of MSPs with other Ministries.

Outputs

  • Research in progress.

    Project last updated on: 4 Jan 2018.