Key message 2 – Government usage of mobile payments services offers significant benefits
Tax revenue authorities that allow tax payments to be made using mobile money report higher revenue collection. For example, Mauritius reported a 12% increase in tax revenues in the year after mobile payment facilities were adopted, and in Tanzania, adoption of mobile money tax payments has resulted in less tax avoidance, with users who had no history of paying taxes starting to pay property and personal income taxes for the first time (Scharwatt, 2014). It’s possible that government adoption of mobile payments could expand their tax base.
Mauritius reported a 12% increase in tax revenues in the year after mobile payment facilities were adopted, and in Tanzania, adoption of mobile money tax payments has resulted in less tax avoidance, with users who had no history of paying taxes starting to pay property and personal income taxes for the first time.
Government use of mobile money for social transfers and payment of civil servant salaries would both reduce leakage and recurrent costs of delivery. Scope for leakage is limited through digitisation of transactions and verification of necessary recipient identification that removes ‘ghost recipients’2. Delivery costs are lowered by, among other things, eliminating the need to transport cash to recipients who do not have bank accounts, a delivery system that is inefficient, unsafe, and prone to delay.
In Pakistan, bi-monthly social transfers to low-income households under the Benazir Income Support Programme are made using mobile money, as are Save the Children and World Food Programme subsidies in Malawi. In Afghanistan, teachers and members of the Afghan National Police force now receive their monthly salaries from government via mobile money (Blumenstock et al, 2013).
Government-to-Person (G2P) payments using mobile money are not without their challenges, however, as these transfer programmes indicate. They have found that, for social transfer recipients, using tiered due diligence requirements and being flexible with identification documentation are important to ease customer registration (Almazan, 2013). Working with bank partners is necessary to ensure that agents have sufficient cash float to cater for spikes in demand for cash shortly after transfers or salaries are made, particularly since these payments tend to be lumpy and recipients often withdraw the entire amount in one transaction (Almazan, 2013). Staggering payments throughout the month could ease pressure on agents for cash, as was done with mobile money payments to Ebola response workers in Sierra Leone during the Ebola outbreak.
Governments have also seen the potential of using mobile money platforms to sell products. A frontier innovation of this kind is M-Akiba, a mobile-based product that allows M-PESA users in Kenya to buy and sell a specific government security using their mobile phones.
M-Akiba in Kenya
M-Akiba was developed by the Nairobi Securities Exchange, the Capital Markets Authority, and the National Treasury, among others, to enable M-PESA users to buy and sell a government security on their mobile phones. Users can open central depository accounts using their mobile phone and purchase securities using their mobile wallets in increments as low as KES 3,000 ($28.84). The bonds pay interest into users’ mobile wallets every six months, with interest rates expected to remain higher than market inflation and standard bank interest rates. M-Akiba was designed to offer low-income households access to transformative, low-cost, secure savings instruments that remain highly liquid, and they may become tradable over the secondary market (Aglionby, 2015).
A pilot bond issue was launched in March 2017, with a larger follow up launched in July 2017. Data from the pilot sale shows that, of the 102,600 people registered for M-Akiba at the time, only 5.5% (some 5,700 people) made bond purchases – the average investment was KES 26,359 ($255) and the sale appeared dominated by larger buyers rather than the small mass market that M-Akiba had been intended to serve (Okoth, 2017).