Delivering food aid via smart card

Last year, Malawi as a whole had a bumper maize harvest, although in some areas low rainfall resulted in local crop failures. This drought coincided with a period of very low tobacco prices. Particularly hard hit were many smallholder farmers in Dowa district, north of the capital Lilongwe, who were unable to buy sufficient food for their families.

Concern Worldwide, with support from the UK’s Department for International Development (DFID), launched a programme to provide assistance to all directly affected families in the district. Traditionally, such assistance would have involved distributing food packages to the worst hit communities, although experiences elsewhere had shown that such aid deliveries can frequently be delayed, sometimes by several weeks. Moreover, farmers had indicated that they would prefer to receive cash because this would allow them to decide for themselves how best to manage their own affairs.

Concern therefore decided to provide cash payments to the affected families rather than food packages. The Dowa Emergency Cash Transfer (DECT) programme builds on the experiences of a similar programme carried out during 2005/06 in which both food and cash were distributed. The aim of the programme was to permit households to meet their ‘food entitlement’ by giving them sufficient cash to buy the maize they needed from local markets, from traders or from other farmers with surplus stocks.

Organizing cash payments

During the 2006/07 ‘hungry season’, Concern made monthly cash payments to about 10,000 households, or about 70% of the population of TA Chakhaza in Dowa district. The amounts paid to the families averaged MK 1660, or €7.80, depending on the size of the household and the price of maize on the local market, in order to ensure that each family’s ability to buy food was maintained.

Concern, together with the Opportunity International Bank Malawi (OIBM), developed a novel approach to deliver these small amounts every month. Instead of issuing the traditional paper ration cards, which can easily be misappropriated, to each family they provided a plastic smart card with an embedded memory chip containing biometric (fingerprint) data and account information.

Each month, Concern calculated the amount of cash that each family should receive and directed the bank to load that amount onto the card. Card holders could then visit OIBM’s mobile bank – a 4×4 van that travelled around the district, stopping in different locations every day – to load their cards and to obtain their cash. To withdraw the money, the family representative simply would insert the smart card into a point-of-sale (PoS) terminal and place a finger on a biometric reading device. After proper identification by the ‘system’, they could withdraw part of or all of the money on the card. Meanwhile, the system would automatically update the account information contained in the memory chip.

The equipment needed to implement this novel approach was commercially available. In addition to 10,000 smart cards, a PoS terminal to read the chip and enter data, and a biometric reading device, they needed a webcam to take passport photographs, a fingerprint scanner to record fingerprint data, and a laptop with specialized software for inputting and backing up the data.

Implementation challenges

In introducing the system, Concern first had to overcome several obstacles. One early challenge involved registering all the families and issuing the smart cards. This took far longer than planned because prints of all ten fingers of each family representative had to be taken. Because of the hard manual work they do, farmers’ fingers tend to be worn and scarred, so that multiple scans were often required to get good prints. Concern solved this problem by requiring that only five fingers be scanned rather than ten, thereby allowing the operator to choose the clearest fingerprints. This simple solution considerably speeded up the process of registration and issuing the cards.

A more significant challenge involved data management. For the system to work smoothly, Concern, OIBM and the smart card service provider needed to have the same relevant data for each family representative. Before the launch of the programme, most of the planning had focused on hardware problems, rather than on developing data management protocols or on training staff to gather the required information. In a few cases this resulted in the recording of incorrect or incomplete information so that some families were unable to access their money electronically using their smart cards, requiring bank staff to make cash payments manually. This problem also had the knock-on effect of slowing down the recording of payments and reconciling the bank accounts.

Success

These initial problems have been far outweighed by the success of the programme, however. Providing cash rather than food aid has enabled many of the households affected by the drought to make decisions that have led to positive and significant improvements in their lives. It has given them the flexibility to use the money to buy food, or to invest in their farms or other income-generating activities. Indeed, independent research commissioned by Concern has demonstrated that for each euro provided, an additional €2.10 of commercial activity has been generated.

The mobile bank has been welcomed by the whole community. Initial fears that people would not trust the technology or value the services of the bank have been unfounded. Testimonies from many of the families that received cash assistance clearly show that they appreciate and value the technology. Private sector businesses and local traders and businessmen also indicate that having access to banking services is seen as a real gain for the community. As well as providing access to loans and enabling them to save, it has also given community members a sense of involvement in local development.

Indeed, the response has been so positive that rather than collecting the smart cards and withdrawing the service at the end of the DECT programme, Concern and OIBM are now exploring ways to maintain at least a minimum level of banking services in the area, which are expected to contribute to local economic development even without the cash transfers.

James Davey is the emergency coordinator with Concern Worldwide (Malawi).