Social Protection Payments in the Directorate of Social Protection and Solidarity - Sao Tome and Principe São Tomé e Príncipe August, 2018 Contents Contents ....................................................................................................................................................... ii List of Tables ................................................................................................................................................ iii Abbreviations .............................................................................................................................................. iv Preface ......................................................................................................................................................... v Acknowledgements ..................................................................................................................................... vi 1 Introduction ...................................................................................................................................... 1 2 Country Context ................................................................................................................................ 2 3 Social Protection in STP .................................................................................................................... 4 3.1 Description of main DPSS’ programs ................................................................................... 10 3.2 Description of the Existing Payment Delivery Mechanism for DPSS programs ................... 11 4 Supporting Environment Review .................................................................................................... 18 4.1 Financial Landscape for SP Payments .................................................................................. 18 4.2 Policy Regulation and Legislation Legal and Regulatory Framework .................................. 22 4.3 ID.......................................................................................................................................... 26 4.4 ICT ........................................................................................................................................ 26 4.5 Summary Supporting Environment Review ......................................................................... 27 5 Payment Delivery Mechanism Review ............................................................................................ 29 5.1 Accessibility ......................................................................................................................... 29 5.2 Robustness .......................................................................................................................... 30 5.3 Integration ........................................................................................................................... 31 5.4 Summary of payment delivery mechanism review ............................................................. 31 6 Policy Options ................................................................................................................................. 33 Annex 1 Key Respondents .......................................................................................................................... 36 Annex 2 Focus Group Discussions .............................................................................................................. 38 Annex 3 Guidance for Review of a Payment Delivery Mechanism ............................................................ 39 Bibliography ............................................................................................................................................... 44 ii ii List of Tables Table 2.1: Country at a glance ............................................................................................................................................ 3 Table 2.2: Social indicators across select Sub-Saharan African countries ........................... 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Table 3.1: STP’social protection programs: Risk covered and benefits offered (to be completed) ................................... 6 Table 3.2: STP’s social protection programs: Delivery features and coverage (to be completed) ..................................... 7 Table 3.3: Classification of DPSS payment delivery mechanism……………………………………………………………………………………11 Table 3.4: Beneficiaries vs. DPSS Local Staff per district .................................................................................................. 14 Table 4.1: Banks currently operating in STP………………………………………………………………………………………………………… ....... 18 Table 4.2: Financial Access in STP ..................................................................................................................................... 18 Table 4.3: Types of payments by payer and payee………………………………………………………………………………………………………22 Table 4.4: STP: Types of government-to-persons (G2P) payments and means of delivery ………………………………………….22 Table 4.5: STP: Mobile network coverage ...................................................................................................................... 324 Table 4.6.: Summary of supporting environment review ................................................................................................. 25 Table 5.1.: Summary of supporting environment review ................................................................................................. 26 Table 5.2. Summary of payment delivery mechanism revie…………………………………………………………………………………………29 iii Abbreviations AFAP Fiduciary Agency for Project Management AML/CFT Anti-Money Laundering / Combating the Financing of Terrorism ALMP Active Labour Market Policies ATM Automatic teller machine B2B Business to business payment B2G Business to government payment B2P Business to person (individual) payment BISTP International Bank of STP BCSTP Central Bank of STP CCD Customer due diligence CCT Conditional Cash Transfer CST Companhia Santomense de Telecomunicações D2B Donor to business person payment D2G Donor to government payment D2P Donor to person payment DAF Directorate of Financial Management (MEAS) DPSS Directorate of Social Protection and Solidarity FGD Focus group discussion G2B Government to business payment G2G Government to government payment G2P Government to person (individual) payment ICT Information and Communications Technology ILO International Labour Organization ISPA Interagency Social Protection Assessment KYC Know your customer MEAS Ministry of Employment and Social Affairs MFI Microfinance institution MNO Mobile network operator MOF Ministry of Finance PENPS National Social Protection Policy and Strategy P2B Person to business payment P2G Person to government payments P2P Person to person (payment transactions between individuals) POS Point of Sale device PSP Payment Service Provider SACCO Savings and credit cooperative organisation SAFE Electronic Financial Management System (MOF) SP Social Protection SPAUT Sociedad Gestora de Pagmentos Automaticos STP Sao Tome e Principe UNICEF United Nations International Children's Emergency Fund TTL Task team leader iv Preface The Social Protection Payments tool provides guidance on how to implement a high-quality payment delivery mechanism for the delivery of cash or near-cash social protection transfers to poor and vulnerable populations in developing countries. It is designed for use by social protection policy makers and practitioners working in lower and middle-income countries seeking to improve payment delivery in existing social protection programs and for those seeking to establish a payment mechanism for a new program. The tool is a join product of Interagency Social Protection Assessment (ISPA) initiative and the Universal Financial Access by 2020 initiative which the World Bank Group and other agencies have committed to support. From September 25th to October 6th, 2017 a WBG mission travelled to São Tomé e Príncipe (STP) to: i) follow up on the deliverables of the technical assistance that is providing to the Directorate of Social Protection and Solidarity (DPSS) at the Ministry of Employment and Social Affairs (MEAS) and, ii) to discuss with the government the main components of a new project to support the government of STP in its efforts to reduce poverty and vulnerability in the country through two main components: (i) cash transfers; and (ii) skills development initiatives. Under the umbrella of the technical assistance, carried out under a Rapid Social Response (P163445) WB executed Trust Fund for STP, and in preparation of the new project an assessment of the existing payment delivery mechanisms for the DPSS programs was conducted. The assessment used the Interagency Social Protection Assessment (ISPA) Social Protection Payment delivery mechanism tool available in www.ispatools.org/payments. The main objective of the report is to provide options to the government of STP to improve the delivery of payments of DPSS programs. The report draws on desk research, key respondent interviews carried out in Santo Tome that include the DPSS team, representatives from DAF, from the Central Bank of STP, Fiduciary Agency for Project Management (AFAP), as well as with technical teams from various financial institutions including Afriland First Bank , Banco Internacional de STP (BISPT), Banco Privado, Ecobank and SPAUT and mobile network operators: CST and UNITEL. Also, responding to the interagency nature of the ISPA tool, the team had meetings with the UNICEF and ILO teams working on social protection. In addition, the assessment included structured discussions with beneficiaries of DPSS programs and local authorities in Lemba and Caue (see list of key respondents in annex 1). v Acknowledgements This application of the Social Protection Payments tool would have not been possible without the generous engagement of the Government of STP. In particular Mrs. Vilma Loureiro, Director of DPSS at MEAS, and her team: Euridice Fernandes, Lisandra Graça, Kledia Boa Morte, Atanázio Marta, Helder Vera Cruz, and Ana Maria Torres. Special thanks to Mrs. Regina Viegas de Abreu, Chief of staff Ministry of Employment and Social Affairs. The report was prepared by Luz Stella Rodriguez (Social Protection Specialist; GSPGL) with inputs from Mariana Pinzon- Caicedo (Consultant), Jordi Gallego-Ayala (Social Protection Specialist; GSP08) and Eric Zapatero (Sr Social Protection Specialist; GSP07 TTL for this task). Advice on the financial landscape and regulation was provided by Maria Do Ceu Da Silva Pereira (Sr. Financial Sector Specialist). The author is grateful to Harish Natarajan, Lead Financial Sector Specialist for the guidance and support received before the application of the tool in STP. This task was supported by a grant from the Rapid Social Response Fund (RSR; Task ID P163445) vi 1 Introduction This work was undertaken with the main objective to inform the Government of STP on how to improve the delivery of payments in the social protection programs implemented by the Directorate of Social Protection and Insurance (DPSS) from the Ministry of Employment and Social Affairs (MEAS). The methodology used to carry out the diagnostic study is the Interagency Social Protection Assessment (ISPA) Social Protection Payment delivery mechanism tool. Following the common framework for the ISPA Social Protection Payments tool, this country report presents (i) background information of the SP system, (ii) background information of the payments environment for the delivery of social protection payments, and (iii) the assessment or rapid diagnostic of the payments delivery mechanism for the programs implemented by the DPSS. The assessment approach specifically looks at the quality of payments delivery, assessing three main criteria: Accessibility, Robustness and Integration. ⚫ Accessibility concerns how convenient the payment mechanisms are for beneficiaries with respect to cost of access as well as how appropriate they are with respect to the needs of target groups including the poor, elderly, illiterate, women, and disabled. Accessibility also takes into consideration if beneficiaries are communicated about delivery of payments and if they are offered choice of their preferred payments mechanisms. ⚫ Robustness addresses the reliability of payments. Good governance of the payment process includes clearly defined roles and responsibilities, as well as timely and accurate reporting. Maintaining the integrity of the process through sound regulation and oversight is key to mitigating the risk of leakage. ⚫ Integration addresses the coordination & interoperability of payment mechanisms. Integration can involve coordination of payments from different payers within government across multiple ministries, agencies, and social protection programs. This also speaks to the issue of flexible payment delivery mechanisms that allow for changes in transfer values and for dynamic beneficiary registry lists to reflect program entry and exit. Integration also reflects the ability of the payment mechanism to facilitate financial inclusion and for other payment needs, such as making and receiving remittances and bill payments and more generally, to function as a full-fledged transaction account. This report draws on desk research, key respondent interviews, structured interviews with beneficiaries and local authorities, following the standardised questionnaire proposed by the ISPA Payments tool. 1 2 Country Context The Democratic Republic of Sao Tome and Principe is a small island state with a low-middle income that has experienced good economic growth in the last few years. STP does not have a single economic activity that drives growth, and typically relays on agriculture and tourism as stronger economic sectors. According to the World Bank (2014), STP’s economic growth from 2008-2015 was 5% on average. Despite this good economic performance, poverty headcount (at national poverty line) is high (62,2% by 2015), more than a third of the population live with less than $1,9 per day, and at least 11,5% are extreme poor (2014). Poverty is paired with relatively high levels of unemployment, particularly for youth and women (see Table 2.1). In addition, poverty is greater among children and in female headed households. In social indicators, the country performs high compared to selected Sub-Saharan countries, mainly in terms of education attainment, including progression to secondary both for boys and girls, child mortality, and immunization rates (See Table 2.1). However, challenges remain to access quality basic services that vary geographically. Table 2.1: Social indicators across select Sub-Saharan African countries STP SSA Madagascar Cabo Verde Haiti Maldives East Timor Poverty (below $1.90/day ppp) 32.3 (10) 41.0 (13) 77.8 (12) 8.1 (07) 53.9 (12) 7.3 (09) 46.8 (07) Years of schooling (adults)* 4.7 NA 5.2 3.5 4.9 5.8 NA Primary completion (%) 92.4 69.1 (13) 68.8 (14) 99.8 (14) 108 (14) 114.4 (09) 98.4 (14) Progression to secondary (% male) 100.0 (14) 79.4 (12) 76.1 (13) 95.2 (13) NA 100.0 (12) 90.3 (13) Progression to secondary (% female) 99.4 (14) 77.5 (12) 75.6 (13) 97.4 (13) NA 100.0 (12) 92.4 (13) Youth literacy (% male) 97.4 (15) 76.3 (10) 65.4 (15) 98.1 (15) 82.5 (15) 100.0 (15) 81.8 (15) Youth literacy (% female) 97.2 (15) 65.8 (10) 64.8 (15) 98.6 (15) 81.6 (15) 99.5 (15) 82.7 (15) Child Mortality under 5 (per 1000 live births)** 38(14) 83.2 (15) 49.6 (15) 24.5 (15) 69.0 (15) 8.6 (15) 52.6 (15) Immunization DTP3 (%)** 93.0 (14) 75.8 (15) 69.0 (15) 93.0 (15) 60.0 (15) 99.0 (15) 76.0 (15) Stunting (%)** 17.2 (14) NA 49.2 (09) NA 21.9 (12) 20.3 (09) 57.7(09) Life expectancy at birth 66.4 (15) 58.6 (15) 65.1 (15) 73.1 (15) 62.7 (15) 76.8 (15) 68.3 (15) GNI per capita (Atlas method, current 1,730(16) 1,628 (15) 420 (15) 3,290(15) 820 (15) 6,670 (15) 1,920 (15) US$) Source: WDI, except *UNDP-Human Development report (latest available data); and **MICS2014. 2 SPT is highly dependent on foreign assistance: its debt/GDP ratio is nearly 93% (World Bank, 2017). Foreign assistance funds both recurrent and capital expenditures which poses great risks for the sustainability of actions aimed at reducing poverty and promoting growth (see table 2.2). Table 2.2: STP at a glance Indicators Most recent data Year Source Economic indicators GDP per capita in current $ 1730 2016 WDI GDP per capita in PPP$ 3240 2016 WDI CPI index 140.9 2014 Jobs Data baseWBG Inflation, DPG deflator (annual %) 6.5% 2016 WDI Economic growth 4.5% 2014 WBG Foreign investment 1.9% 2013 WBG Minimum wage No minimum wage for private 2013 minimum wage.org workers. 750,000 dobras for public servants ($747 per year aprox) 1 National debt $325 million 2016 WBG Debt to GDP ratio 92.78% 2016 WBG Demographic indicators Total population 199,910 2016 WDI % female Demographic distribution population: Ages 0-14 42.47% 2015 Indexmundi.com Demographic distribution population: Ages 15-24 20.33% 2015 Indexmundi.com Demographic distribution population: Ages 25-54 30.66% 2015 Indexmundi.com Demographic distribution population: Ages 55-64 3.7% 2015 Indexmundi.com Demographic distribution population: Ages 65+ 2.85% 2015 Indexmundi.com Life expectancy (at birth) 66.4 years 2015 WDI Labour market indicators Total Unemployment 13.6% TBC Operationalization of NSP Policy and Strategy Youth Unemployment (those ages 15-24) 23% 2011 Female/male labor force participation rate 60% 2016 ILO Gender Statistics Social indicators Poverty headcount (at national poverty line) 62% 2015 Operational manual PAFPE Poverty headcount according to international poverty 32.30% 2010 WDI line Income inequality (Gini coefficient) 30.8 2016 HDR Food security: prevalence of undernutrition (FAO) 8.8% 2014 WDI Human development index (HDI) 0.574 2015 United Nations Human development index (HDI) Rank 142 out of 188 2015 United Nations 1 Information to be confirmed with MEAS team. 3 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE 3 Social Protection in STP In the last decade STP has made important progress in social protection. The country has set the basis of the legal framework for social protection with the approval of the Social Protection Framework Law in 2004. This Law proposed the creation of the National SP council that reports at the Prime Minister level. Also, in 2014 the Second National Poverty Reduction Strategy (2012-2016) was approved giving high relevance to social protection.2 The National Social Protection Policy and Strategy (PENPS) was issued in 2014. Following this legal framework, social protection in STP is organized in three levels: i) social protection of the citizenry (non-contributory social assistance), ii) obligatory social protection (contributory, mandatory social insurance), and iii) complementary social protection (contributory, optional social insurance). Despite this progress, STP still has a long way to go in terms of operationalization of proposed legal framework. Regardless of the existence of the legal bases for the implementation of SP, the Social Protection Framework Law of 2004 has not been regulated and the SP Council started working in late 2017. The administration of the citizenry programs (social assistance) is implemented by the MEAS and other social line ministries, local authorities and NGOs working in social services. Mandatory social insurance is managed by the National Social Security Institute (NSS) and the optional social insurance is not operative yet. STP is divided into 6 districts and the independent region of Principe. The main target for social protection in STP is 11.5% of population living in extreme poverty (21,574 individuals by 2014). Extreme poverty is greater in urban (13,1%) than in rural areas (9.8%). Extreme poverty is greater in Lemba (20.6%), Agua Grande (13.7%), Principe (12,8%), Lobata (12,1%) and Caue (11.1%) districts. Me -Zochi and Cantagalo are the districts with lower rates of poverty (8 and 4.4%). SP programs in STP are diverse but most of them are underfunded and have low coverage and generosity. Since the country has very tight fiscal conditions and it is highly dependent on international funding (foreign resources financed 92% of public investment in 2013), the budget allocated to social protection in STP is scarce, unreliable, and does not allow to provide benefits that are compatible with the needs of the population. According to the WB (2015), in relation to GDP, social assistance expenditures have been declining from 1% in 2009 to 0,3% in 2013 (See Table 3.1). The main social assistance programs in STP are managed by the DPSS within MEAS. DPSS currently implements three main safety net programs: i) the Needy Mothers program (Programa Mães Carenciadas) provides financial support to poor mothers with 3 or more children, ii) Subsidy to the unknown a social pension program that targets the elderly who on occasion had contributed to their retirement yet without reaching the minimum level necessary for the INSS pension, and iii) the Continuous subsidy for the elderly poor who have never contributed towards their retirement and for poor people with disabilities. DPSS also provides one weekly hot meal to poor elderly (World Bank, 2017). For these programs targeting and eligibility mechanisms are not clear, there is not a beneficiary registry 3 , payments are manual and unreliable, and there are limited mechanisms to monitor the implementation and impact of programs. In addition, the administration has scarce administrative registries to follow up the delivery of benefits. (See Table 3.2) 2 Information to be confirmed with MEAS team. 3 During the time of the preparation of this report, the government was working, with support from the WBG, in the implementation of a National Registry of Beneficiaries (Sistema de Informacion de Proteccion Social, SIPS) that covers extreme poor population of the 7 districts and 550 localities of the country. With this registry, the government aims to have information of nearly 3,500 households (total of extreme poor population in STP). SIPS will serve as the main tool to identify existing and potential beneficiaries of DPSS programs. 44 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE In social insurance, there is a regime for salaried workers (public and private) that covers nearly 1 of each 5 employees (17% of total active population) and another regime for self-employed (independent workers) that still has not been fully operationalized. Regarding ALMP, there are not significant programs since the apprenticeship programs have been developed in a discontinuous manner. 55 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE Table 3.1 : STP’so cial protection programs: Risk covered and benefits offered (to be completed with support from MEAS) SP BRANCH & Program/ benefit Risk covered / function Target population Benefit level and PROGRAM category indexation method 1. CITIZENRY REGIME (Non-contributory social assistance) Food supplementation School feeding Child and family benefit 0-5 program Preschool feeding School feeding Child and family benefit 0-5 program School feeding School feeding Child and family benefit 6-17 One daily meal program School transportation Other food/in-kind Child and family benefit Secondary students Transportation to program public school secondary students Sexual health and Other food/in-kind Health Care Youth (18-35) reproductive education program In country study grant Scholarships benefits Child and family benefit Youth Educational grant Study grant abroad Scholarships benefits Child and family benefit Youth Educational grant Knowledge and power Other food/in-kind Health Care Youth (18-35) Capacity building to program program reduce teen pregnancy Needy mothers Poverty targeted cash Poverty and social Poor mothers with 3+ 5.4 euros/month (paid transfers exclusion children every three months) Food supplement Nutritional programs Sickness HIV/AIDS people program for HIV (therapeutic, receiving antiretroviral receiving ARVT supplementary and PLHIV) Direct Temporary Nutritional programs Sickness HIV/AIDS and other Support Program (therapeutic, chronic patients supplementary and PLHIV) Groups of Interest in Public works, workfare Unemployment 37 euros/worker/km of Road Maintenance and direct job creation asphalted road (GIME) maintained, 42 euros/sidewalk, 45 euros/km of earth road maintained. Wages 37.8 euros (higher than public sector's minimum salary). Subsidy to the Old age social pensions Poverty and social Elderly poor 4.1 euros/month unknown exclusion Continous subsidy Old age social pensions Poverty and social Elderly poor /Disable 2.9 euros/month exclusion por 66 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE 2. Contributory Social Insurance Programs/Schemes Compulsory social Contributory/earnings Old age Elderly (60+)/ Mínimum pension 19.2 insurance related pensions and Survivors/ Invalid (5400 euros Average savings programs pensioners by 2013 - pension 39.8 euros 45% old age). 3. Labor Market Measures and Services Apprenticeship Training (vocational, ALMP Youth programs for young life skills, cash for people training), internship Employment and Training (vocational, ALMP professional training life skills, cash for fund training), internship Institute for Training (vocational, ALMP Employment and life skills, cash for Vocational Training training), internship Support to the Training (vocational, ALMP Young and adult development of life skills, cash for artisans Artisanal Production training), internship 4. Social care services Activities for the elderly Care for older persons in day centers and residencies Abused and abandoned Care for children children and families Source: World Bank " STP : Operationalization of the National Social Protection Policy and Strategy" (XXX) 77 Table 3.2 : STP’s social protection programs: Delivery features and coverage ((to be completed with support from MEAS) SP BRANCH & Universal/ Targeting Periodicity Responsible Geographical areas Number of beneficiaries Total Expenditure Notes PROGRAM method implementing agency covered LCU Value Most recent Value Most recent year year 1. CITIZENRY REGIME (Non-contributory social assistance) Food supplementation Categorical Discontinued WFP 0 2014 0 Discontinued program since 2011 Preschool feeding Categorical WFP& MECF 7,421 2014 11,585 2014 program School feeding Categorical WFP& MECF WFP Principe, Caue and 30,403 program Me-zochi/ Government 4 additional districts. School transportation Categorical MECF Not available 1,833 2014 Sexual health and Categorical Youth institute + NGOs Not available 450 2014 reproductive + UNFPA+ Medicos do education Mundo In country study grant Categorical/algo mas? MECF 409 2014 Study grant abroad Categorical/algo mas? MECF 432 2014 Knowledge and power Discontinued Terminated in program 2013 Needy mothers Community based Every 3 months MEAS (DPSS) National 1,224 2014 816 2014 Not reliability on payment Food supplement Categorical Discontinued WFP Discontinued program for HIV since 2011 receiving ARVT Direct Temporary Categorical Discontinued MEAS (DPSS) Does not receive Support Program funds since 2012 Groups of Interest in INAE +FED 1,700 2014 Graduated as a Road Maintenance social protection (GIME) program Subsidy to the Community based Every 3 months MEAS (DPSS) National 1,021 2014 1,012 2014 Not reliability on unknown payment Continous subsidy Community based Every 3 months MEAS (DPSS) National 2,024 2014 357 2014 Not reliability on payment 8 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE 2. Contributory Social Insurance Programs/Schemes Compulsory social Universal Monthly INSS National 12000 active 2014 3/4 of register insurance members and population are 22000 in active civil servants members 3. Labor Market Measures and Services Apprenticeship Discontinued Government of Cuba Discontinued programs for young people Employment and professional training fund Institute for Directorate of Labor Pending for Employment and and Employment and ministerial council Vocational Training Vocational Training approval (Timor Leste/UE Cooperation) Support to the Discontinued Brazil/ (CPLP)/Mazal 135 357 2012 Finalized development of Institute of Brazil/ Artisanal Production Youth Institute 4. Social care services Activites for the elderly DPSS, Santa Casa da in day centers and Misericordia, Red residencies Cross Abused and MEAS (DPSS) National abandoned children and families Source: World Bank " STP : Operationalization of the National Social Protection Policy and Strategy" (XXX) 9 9 3.1 Description of main DPSS’ programs DPSS at MEAS is responsible for implementing the three most relevant social assistance programs in STP. The Maes Carenciadas program (Needy Mothers) provides a cash transfer to poor mothers with 3+ children. Currently it covers over 1,200 households that represent nearly one third of the extreme poor population. The other two programs are old age non-contributory pensions targeted to the poor. The first program, Subsidy to the Unknown (2,024 beneficiaries), is targeted to the elderly poor who had contributed in the past towards their retirement without reaching the minimum age required by INSS pension. The second, Continuous Subsidy (1,021 beneficiaries), is aimed to cover elderly/disable poor who have never contributed towards retirement. DPSS programs’ benefits is very low and therefore not compatible with the needs of the target population. For the operation of these programs, DPSS is organized at national level in one team that is responsible for the coordination of the delivery of the social assistance programs described before as well as for the provision of social care services targeted mainly to the elderly and those affected by emergency situations (Graph 1). DPSS has district coordinators that among other activities support the delivery of payments in the seven districts. Staff working at the district level have typically graduated from secondary education and some of them have received additional training (as social workers) with resources from the Portuguese cooperation. A number of district level staff are from the same district where they operate. Although part of district staff has been working with DPSS for several years, others have decided to look for other options due to uncompetitive remunerations and lack of incentives as well as for the difficult conditions to operate in the field (limited infrastructure, lack of training, unavailability of financial and human resources, unreliability of payments, etc.). During the preparation of this report, district coordinators reported that there is not significant difference between district coordinators and technicians since the responsibilities and the level of compensation tend to be similar. Graph 1 – National structure DPSS as per October 2017 Source: Diagnóstico organizacional e funcional da Direcção da Protecção Social e da Solidariedade do Ministério do Emprego e dos Assuntos Sociais da República Democrática de São Tomé e Príncipe, 2016. 10 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE Although DPSS is committed to create comprehensive, efficient, well targeted social assistance programs for the extreme poor and vulnerable, it is currently constrained for fiscal space due to the current economic crisis which has affected budgetary allocation to the social assistance sector (GDP expenditure in social assistance is very low 0.3% of GDP) as and operational constraints such as DPSS understaff to implement and monitor programs. DPSS targets its beneficiaries using community based targeting (CBT); however, DPSS is in the process to couple CBT approach with the Proxy Means Test to enhance beneficiary targeting. Access to the program is currently restricted and DPPS has a waiting list of potential beneficiaries. The agency does not have open registrations to apply to the programs; new beneficiaries have access to the programs only if spots are freed up due to the decease or the permanent move of existing beneficiaries.1 Beneficiaries are supported with unconditional cash transfers that are delivered manually by DPSS staff, depending on the availability of resources in the Ministry of Finances. Transfers range from a minimum of $2.9 to a maximum of $5.4 euros per month and do not have conditions attached to their delivery. 3.2 Description of the Existing Payment Delivery Mechanism for DPSS programs As mentioned before, DPSS payments are delivered manually by their own staff operating in the different districts. Although the transfer is supposed to be delivered every three months, DPSS payments are highly irregular since they are subject to budgetary constraints. Payments are received by the authorized member of the family (mother, elderly member, etc.). Table 3.3: Classification of DPSS payment delivery mechanism Payment approach In-house Payment Service Provider1 None Payment instrument Manual – Cash Account None provided Payment point2 Government administrative office Payment point administrator3 DPSS Local coordinator Authentication approach4 Manual – unregular program ID check 1 Payment Service Provider – usually has a contract or MoU with the SP program to deliver payments to recipients. 2 May be more than one type. 3 May be more than one type involved in payment distribution at the pay point. 4 Verification of the identity of the recipient at the point of payment. Currently, payments are delivered as described below: - DPSS develops beneficiaries’ lists (in excel spreadsheets) that are kept at the national level and managed by an administrative officer. These lists are updated with the information provided by local coordinators. Beneficiary lists are stable, but may include new beneficiaries from the waiting lists. In other words, while there may be changes in the composition of the list (some beneficiaries may be replaced by others), the number of 1 If spots are freed up in a particular region, the local coordinator verifies the waiting list to identify who could be included as new beneficiary of the program. The local coordinators visit the potential candidate to verify his/her eligibility with the programs criteria. 11 11 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE beneficiaries is static since the programs do not have the means to open registrations or to include additional participants. - DPSS prepares a letter (oficio) for the Ministry of Employment and Social Affairs requesting the funds to pay the cash transfers. Information is discriminated by program and district. The lists of beneficiaries are attached to this oficio. - The Ministry makes the decision to approve (or not) the payment and forwards the request to the Director of Finances and Management (Direccion de Administracion e Financas, DAF). The Ministry’s decision depends on the availability of funds (national resources, Portuguese, Angolan and other donors’ cooperation) as well as on the competing needs of other programs. - If approved, DAF’s director verifies if the budget line for the specific program has enough resources to comply with the payment. A new oficio requesting the disbursement is prepared to be signed by MEAS to the Budget Department (Direccao de Orcamento) of the Ministry of Finance (MOF). - If approved by MOF, the information about the disbursement is registered in the Electronic Financial Management System (SAFE). - The Treasury (Direccao do Tesouro) transfers the money to Afriland or to other financial institutions as per MEAS instructions. - Once the resources are available in the bank accounts, DAF informs DPSS so one (or more) check(s) for an amount equivalent to the value of the transfers can be signed jointly by the Director of DPSS and the Director of DAF. The general process to deliver the payments to the beneficiaries is described below. - When the resources are available in the Afriland Bank account of DPSS, staff from DPSS cash out the check(s) at the Afriland branch in Sao Tome and brings the cash to the central office where it is recounted and distributed by district. - The administrative team at DPSS makes sure the beneficiary lists are updated and organizes excel spreadsheets with the list of beneficiaries by district, zone, and program. - DPSS central team issues Guias de Entrega with the detail of the amount to be delivered per district and program (see Illustrations 1 and 2). These guidelines are signed by each of the local coordinators who will be responsible for the delivery of the payment in each district. 12 12 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE Illustrations 1 - Local coordinators travel with the lists of beneficiaries and the cash to their districts, with no security, and set the process to deliver the payments to beneficiary families. - Simultaneously families are communicated about the payments, including dates, amount to be paid, and payment points. For this process the government uses mainly national radio stations, District Camaras, and community (local) radios stations. - Payments are delivered manually at the DPSS offices (if available), district Camaras or other social/community centres facilitated at the local level (See pictures of Camaras of Lemba and Caue and DPSS district office). Typically, payment points have precarious infrastructure with inadequate conditions to provide service to the communities as well as with very limited privacy, connectivity or electricity. Illustrations 2 and 3 13 13 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE - Payments are delivered by DPSS district staff on top of their additional activities. There are between 3 and 4 payment points per district, and a total of 31 payment points. Depending on the population and characteristics of each district, DPSS staff delivers on average 140 payments per district (See table 3.4). DPPS local staff does not receive additional retribution for the delivery payments. They receive a transportation subsidy to travel from DPSS central office to their respective districts. - Local control officers (veedores) are present during the payment process as well as other members of the community like neighbourhood leaders (WB, 2015). Table 3.4: Beneficiaries vs. DPSS Local Staff per district District #DPSS staff # Beneficiaries Beneficiaries/Staff Agua Grande 5 + Coordinator 1,135 189 Cantagalo 4+ Coordinator 616 123 Caue 2+Coordinator 288 96 Lemba 2+Coordinator 511 170 Lobata 2+Coordinator 675 225 Me Zochi 4+ Coordinator 689 138 Principe 5+ Coordinator 355 59 Total 24+7 Coordinators 4,269 137 Source: STP: Payment Systems Assessment for DPSS Programs, November 6 th, 2015 (World Bank) - Authorized/registered household members line up at the payment point to collect their transfers. Proof of their identity should be carried to the payment point to authenticate identify. Since DPSS do not have a functional ID (with the exception of Lemba where the district coordinator managed to print an ad-hoc program ID), beneficiaries can proof their identity by using their national, electoral card, or birth certificate. - Once they have received their transfer, beneficiaries sign the pay roll or provide their finger print when illiterate (see Illustration 4). If the beneficiary cannot access the payment point due to illness or competing responsibilities at home the payment could be collected by another person, provided she/he brings proof of ID of the beneficiary. Beneficiaries do not receive any document as proof of payment. - Per the information provided by the district coordinators during the preparation of this report, the payment process is open from 7.30 am to 15.30 pm for up to a month to make sure that all beneficiaries have the 14 14 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE opportunity to collect their payment. There are not rules or guidelines about how people can get organized to receive their payments (i.e. by ID number). Also, when beneficiaries are not able to travel to the payment points, for instance due to illness, DPSS staff visit their homes to deliver pending payments. - The programs currently do not have a Grievances and Redress System or a mechanism to systematically respond the queries of beneficiaries. - When questioned about the distance that beneficiaries travel to collect the payment, district coordinators and DPSS staff confirmed it is typically not very far. The longest they will need to walk is between 30-40 minutes. Only in occasions, families need to incur in transportation costs to claim the benefit. Transportation to and from payment point could cost from 0.5 - 1,25 euros, that is equivalent to 8-20% of the benefit of Maes Carenciadas, the program with the higher benefit. Illustration 4 - There is not systematic process for cash desk closure and the information of payments is only backed with the payment lists (duly signed by beneficiaries) that is maintained by district coordinators. There are not registries of unclaimed benefits. The programs do not have payments manuals. Payments reconciliation is not done neither at the payment point or at the DPSS. While the initial part of the flow of funds is electronic (from MOF to DPSS), STP payments delivery is mainly a manual and cash based process. Although in informal conversations with the district teams they revealed that they devote a good percentage of their time to delivery payments, it is not clear what the actual cost of payment delivery is both because there are not processes to determine administrative budgets and because the time devoted for payments is not disaggregated from other administrative activities at the central level. The entire payment process as it currently happens in STP is described in Illustration 5. Illustration 6 presents a general description of how digital payments work in social protection programs globally. 15 15 Illustration 5 16 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE Illustration 6 17 17 4 Supporting Environment Review This review looks at the key components of a supportive environment for payments delivery of one or more social protection programs. The following framework is used to provide a diagnostic of: i) the policy and legal environment, ii) a rapid review of the financial infrastructure available in the country, iii) identify potential payment service providers, and iv) consider the requirements of beneficiaries. The premise is that regulatory certainty, greater choice of providers, products and larger numbers of financially included people creates a more supportive environment for the delivering social protection payments. This is not meant to serve as an assessment of the national payment system but rather a mechanism to identify how enabling or supportive the environment is for SP payments delivery. An understanding of this environment should help determine the future direction of payment delivery based on an understanding of the opportunities and challenges and hence feasible options (Pulver, 2016 and 2017). Criteria for assessing supporting environment Areas Indicators Financial sector Financial institutions Financial access points Interoperability Policy, regulation and Agency rules for banks/non-banks legislation Proportionate KYC requirements e-money guidelines Basic bank accounts Financial inclusion Procurement ID National ID ICT Mobile Network Coverage 4.1 Financial Landscape for SP Payments This section primarily focuses on the retail payment services landscape but also considers the provision of additional financial services to SP program beneficiaries. When outsourcing SP program payment delivery to a payment service provider there are usually various types of providers to choose from. Typical payment providers include commercial and state banks, post offices, mobile network providers, microfinance institutions, SACCOs/Credit Unions and Non- Governmental Organisations (NGOs). When reviewing the suitability of different providers for a social protection program there are three key characteristics that a potential provider should exhibit: i) large distribution network; this might include their own branches and third party agents who deliver services on their behalf, ii) corporate interest in providing services to SP beneficiaries (typically low income customers, with no previous experience in the financial system, and frequently illiterate); and iii) technology that allows them to deliver payments in the right time, to the right people, in the right amount. An ideal environment for SP program seeking to select a PSP would be one in which there is a large variety of financial institutions (potential PSPs) operating in a competitive market some with direct experience of delivering social cash transfers (Pulver, 2016). 18 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE 4.1.1 Providers of Payments and Other Financial Services STP is one of the smallest independent financial systems in the world. Total assets of banking system by 2015 were close to US$214 M, which is equivalent to 77% of gross national product. STP has a volatile financial institution landscape that is permanently influenced by the expectations of oil exploration. According to the Plan De Acão para o desenvolvimiento do sector financeiro 2017-2019, currently, STP financial system has 7 commercial banks (98% of financial sector assets), 2 insurance companies, and 4 suppliers of consumption and credit. Despite the low number of banks, the government faces challenges to supervise all the banks. The Banco Internacional de STP (BISTP) is the only local bank, with 48% of local ownership (See Table 4.1).. Although the government is working in setting up a new legal framework that enables the modernization of STP’s financial system, as of now, there is not presence of additional potential payment service providers: post office is not authorized for delivering payment, telephone companies do not have authorization to cash out payments, there are not consolidated microfinance institutions. In addition, the regulation for the operation of agents is not yet in place. In STP costs of financial services are high operational due to low number of clients. Liquidity is unevenly distributed among banks, and mainly concentrated in largest banks while small banks have difficulties to comply with minimum levels of mandatory reserves. In addition, there is lack of bank branches across the country and scarce financial services (including mobile money). For the development of this report, four banks were visited to explore their existing capacities and their interest to work in the delivery of social G2P.1 Most of the potential payment service providers visited during the mission expressed they are cautiously enthusiastic about the possibilities to enter in this new niche of the market. Doubts revolve around their consideration that most beneficiaries will proceed to cash out the total value of the transfer which does not generate additional revenues for the bank or will be unlikely to apply for additional services at the bank (i.e. loans, insurance) due to their limited income. 1 In addition to the Central Bank, the WB team interview staff from Afriland, Banco Privado (BGFI), BISTP, and Ecobank. Similarly, the team had meetings with both telcos: CST and Unitel, as well as with a team from Sociedad Gestora de Pagmentos Automaticos (SPAUT), a company created by the Central Bank and commercial banks to manage the national electronic payment system. 19 19 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE Table 4.1: Banks currently operating in STP 2 4.1.2 Financial access payment points Table 4.2: Financial Access in STP compared with other small island states Indicators 2014 2015 ATMs per 100,000 adults 24 26 Bank accounts per 1,000 adults 710,47 908,02 Bank branches per 100,000 adults 31,93 31,13 Source: Global financial development (2015) Together to the concentration of the banking system in STP the country has a limited financial infrastructure that limits their capacities to deliver social payments throughout the country. Most bank branches (26 in total see Table 4.2) and ATMs (33 in total) are concentrated in Agua Grande while other districts have scarce banking presence. In addition, the country has around 125 POS that are mainly used to buy air time for telcos and buy merchandise in certain shops (SPAUT, 2017). With enabling legislation and funding, PSP eventually may have the incentives to invest in technology that will allow them to expand their services to currently underserved areas and populations. 2 Banco Equador and Commercial Bank of STP where intervened by BCSTP IN 2015. 20 20 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE Table 4.3: ATMs and POS in STP (per district) District ATMs POS RAP 2 6 Agua Grande 26 115 Me-Zochi 1 2 Lobata 1 0 Lemba 1 0 Cantagalo 1 1 Caue 1 1 Total 33 125 Source: SPAUT (2017) Table 4.4: POS by Bank (per district) District POS BISTP 107 BGFI 13 ECOBANK 1 AFB 4 Total 125 Source: SPAUT (2017) 4.1.3 Interoperability The level of interoperability determines what proportion of the total number of financial access points can be accessed by an individual payment service provider and their customers. Payment system interoperability makes it easier to make and accept payments and benefits all participants in the payments system. Well-functioning interoperability arrangements include banks and non-banks and cover most channels and instruments. The Sociedad Gestora de Pagmentos Automaticos (SPAUT), a company created by the Central Bank and commercial banks, is the agency responsible to manage the only nationwide interoperable electronic payment system. SPAUT was initially created to develop and manage payment instruments enabling electronic payments in STP. To that end, SPAUT is the operator of the only electronic payment platform in the country which manages transactions initiated at ATMs and POS with the Dobra 24 debit card. The card Dobra 24 is issued by banks and users can get a Dobra 24 card when opening a bank account. Whereas there is a cost for issuance of the card, cash withdrawals at ATMs are free. SPAUT also purchases and installs EFTPOS devices in commercial stores for banks. Regarding international transactions, STP has very low levels of interoperability that for example prevents tourists from using their debit and credit cards due to the lack of connection with foreign banks. SPAUT in particular does not have 21 21 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE the level of operational security that is required by international card schemes to be able to process transactions initiated with Visa, Mastercard or other international brands. Currently SPAUT is adjusting their capacity with support from the African Development Bank. 4.2 Policy Regulation and Legislation Legal and Regulatory Framework The ability to choose a payment mechanism for delivering social payments is dependent on the quality and level of development of the payment system. A safe, efficient and robust payment system that provides various payment options to customers is therefore critical in supporting economic activity and delivering payment services to the public at large. Banco Central de Sao Tome e Principe (BCSTP) is responsible for supervising banking system. Although Central Bank's capacity to supervise the banking system has gradually improved, it still faces a number of challenges. For instance, the financial system in STP is regulated by several legal acts, amongst which the Financial Institutions Law (Lei No.9), Lei das Instituições Financeiras (LIF), and Lei do Banco Central (LBC), all approved back in 1992 when financial service providers were mainly banks and insurance companies. Therefore, LIF did not regulate institutions providing payment services than commercial banks. To overcome these challenges and to modernize the financial system in STP, the BCSTP is working on a Law of financial institutions to reflect technological, economic, and financial changes in the country. With the new law the government is aiming to make the distinction between credit institutions, financial companies and insurance companies. Also, the government is planning to expand financial and economic concepts and introducing new financial business models. The new law will include provisions on how to liquidate a bank, how to protect and even increase the autonomy of the BCSTP vs. the government, mechanisms to encourage financial inclusion and regulations for pension funds. The CBSTP has also recently approved a new law covering the national payment system, which should pave the way for non-banks to be able to provide payment services and create the conditions for safe and efficient payment systems. This Law has been transmitted to the government for further approval by the Parliament. This effort has been supported by the WBG and is being complemented by the drafting on Central Bank regulations on electronic funds transfers, oversight of payment systems and instruments and the use of agents. In addition to the legal framework, current financial infrastructure in STP is insufficient to offer safe and sound payment services to support an efficient and dynamic economy. 4.2.1 Agency Rules for Banks and Non-Banks Agency rules specify how banks and non-banks may use agents including which types of agents may be used and the services that they may deliver. Agency rules are important because their existence can support the extension of financial services into previously underserved areas. This is because delivering financial services through agents is a lower cost option than delivery through bank branches; meaning that lower income individuals can be potentially serviced through agents without PSPs incurring losses (ISPA Payments tool, 2016). The existing legal framework does not allow financial institutions to extend their coverage through agents. However, the government is working in new regulations to promote payment services, including innovative ones like mobile payments and the use of agents, which should be implemented in the next 18 months. 22 22 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE 4.2.2 Proportionate Know Your Costumer (KYC) Requirements Having a comprehensive anti-money laundering and combatting financing of terrorism (AML/CFT) regime in place is critical to protect the integrity of financial systems. If AML/CFT requirements are implemented overly conservatively by either a national regulator or individual financial services firms this could lead to financial exclusion of low income population, even though they may be low risk customers. Frequently low-income individuals do not have the necessary proof of identification and proof of address documentation to meet these requirements (passports, national ID, proof of employment and utility bills) and therefore are unable to open bank accounts or access other formal financial services. These customer due diligence requirements (CCD, often referred to as KYC requirements) could pose obstacles to disbursing SP payments digitally through accounts. Proportionate AML/CFT requirements can facilitate access for low risk /low income customers who can enjoy access to financial services, and receive social assistance through transaction account (Pulver, 2016 and 2017). In STP there are basic requirements to open a savings account, consisting on filling up an application form, two photos, copy of national ID (bilhete de identidade), number of fiscal identification (número de identificação fiscal), and a minimum amount equivalent to $10-25 (depending on the type of account and financial institution). Although technically there are no Low Value Accounts in STP, in 2009 the government adjusted the regulations about minimum amount to facilitate the delivery of social insurance payments to civil servants through the banking system. This precedent may be evaluated for the determination of the payment mechanism of DPSS cash transfers. 4.2.3 E-Money Guidelines The existence of e-money guidelines is a positive innovation that can greatly increase payment options for SP programs. These formal rules should ultimately allow e-money issuance by both banks and non-banks and ensure that there is a level playing field between different types of providers (ISPA Payments tool, 2016). Currently there is not legal framework that provides the guidelines that banks and non-banks retail payment services require to offer electronic retail payments in STP. One of the banks visited for the preparation of this report, expressed they already have an e-wallet service that is mainly used to cash out remittances from abroad. In this service, people receive an SMS with the PIN, they travel to the ATM to cash out the money using the PIN provided via SMS. The PIN is valid only for a limited time to avoid fraud. This bank expressed they may be eventually interested in expanding this e-wallet service for a larger base of clients. 4.2.4 Basic Transaction Accounts Basic transaction accounts or low value accounts are designed to serve the needs of low-income customers. They are characterised by limited features and low pricing. The definition of features such as pricing may be set by regulation or voluntarily by banks. In STP there is no basic transaction account mandated or defined by the existing regulations. 4.2.5 Financial Inclusion Financial inclusion is a policy goal that seeks to extend financial services to all citizens by ensuring that services are accessible, affordable, and appropriate. Increasing numbers of policymakers from a large number of countries have recognised that financial inclusion is an important ingredient for economic and social development. Access to financial services helps households to reduce their vulnerability to shocks, notably by supporting opportunities for income 23 23 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE generation and asset accumulation. In the context of SP programs, the most relevant aspect of financial inclusion is for the recipient to have access to a transaction account to which SP payments are delivered (ISPA Payments tool, 2016). According to the Plan de Acção para o Desenvolvimento do Sector Financeiro: 2017-2019, it is estimated that only 7% of SMEs have a bank loan and 5% of adults take consumption loans from non-regulated establishments. 48% of the population have saving accounts, a relatively high level compared to Subsaharan African countries. The reasons for the relatively high penetration of saving accounts are the relatively favorable conditions to open accounts in terms of minimum amount and documentation. There is no data on demand of financial services in STP. The government of STP is currently working, with support from the World Bank and the African Development Bank, in the design of a survey to gather evidence about financial inclusion to inform a National Strategy of Financial Inclusion that is expected to be implemented in 2018. On the other hand, payments include a wide varied of modalities that ranges from government to government transactions to development partners to persons payments (see Table 4.2). Government is usually the largest user of the payment system in the country: collecting taxes as well as distributing salaries, pensions and social transfers. If the Government has a specific policy supporting the transition from manual to electronic payments, delivering SP transfers electronically can contribute to meeting such a target (ISPA Payments tool, 2016). Such a target can also support a Government’s cash-lite and financial inclusion agendas. 24 24 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE Table 4.5: Types of payments by payer and payee PAYEE Government Business Persons Government G2G G2B G2P Budgetary allocations, funding of Grants, payments SP programs, programs for good and salaries, pensions services Business B2G B2B B2P Taxes for fees, licences and Payments for Salaries and PAYER permits goods and benefits services in value chains Persons P2G P2B P2P Taxes, Utilities Purchases Remittances and gifts Development D2G D2B D2P partner Taxes Payments for Cash transfers goods and services Source: BTCA (2015) The World Bank Survey on Payments (2015) does not have information available about STP. However, for the preparation of this report, it was possible to get preliminary information on G2P payments. In STP cash transfers and social benefits have lagged other types of government payments, mainly using non-electronic means of transfer. However, the National Strategy of Financial Inclusion that the government is currently preparing identifies G2P as one of the main strategies that could be used by the government to promote financial inclusion. Therefore, the government is exploring the possibilities to facilitate alternative payment systems, using new technologies, including mobile payments. However, the government is aware that the development of new payments mechanisms will require not only a suitable and enabling legal framework but also the interest of payment service provider to enter in the market and to explore the option to provide services to a new segment of the market. Table 4.6: STP: Types of government-to-persons (G2P) payments and means of delivery STP Mainly cash Mainly cheques Mainly electronic G2P Public sector salaries X Pensions payments x Cash transfers and social benefits x Currently salaries are paid manually to public officers- printed payment lists are sent to banks with money orders to transfer the funds-. There is a project to pay salaries of civil servants between MOF, Banco Central and SPAUT. The idea is to create a platform between MOF and Central Bank. SPAUT will receive the lists, upload then and commercial banks will access the information and do the payments (World Bank, 2015). On the social security front, Afriland pays 2,700 INSS pensioners (average pension is 460,000 dobras or 18 Euros). For this purpose, Afriland introduced some flexibilities in the conditions to open accounts (reducing the amount to open an account from 1 million to 500,000 dobras (20 euros)). The monthly payments cost approx. 0.27 euros/transaction (World Bank, 2015). 25 25 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE 4.3 ID The presence of national ID is important for SP payments in three respects: (i) to ensure uniqueness – that is making sure that one individual is registered and hence is paid by the program only once, (ii) to meet KYC requirements set by the financial services regulator and or the payment service providers, iii) to authenticate the identity of a recipient during a payment transaction (ISPA Identification tool, 2016). ID documents are frequently used to verify the identity of an individual recipient of a government payment. Having a legally acceptable form of identification that verifie s a customer’s information is a pre-requisite to accessing financial services, including bank accounts. STP has a national ID (bilhete de identidade) that is issued to adults over the age of 18 years by Direccao Geral dos Registos e Notariado (DGRN). BI is laminated and contains an individual number, nationality, full name, affiliation, DOB, marital status, photo, finger prints, height and signature. Currently, there is not data on national coverage of ID, however anecdotal information suggests that most voting age population has a BI (World Bank, 2017). According to the information collected for this report, there are not major barriers for accessing BI, however the current BI does not have a unique identification number (number of ID cards and birth certificates are not the same) and still is very rudimentary (biometric data is not sufficient for authentication process). BI does not have the proper conditions to guarantee uniqueness (ensuring that citizens are not entered in the database more than once) and security (accurate and reliable and able to prevent fraud). Also, the existence of a unique identifier would facilitate interoperability between the different data bases for service provision, including payments. One of the main problems with the BI is that it needs to be updated every 5 years for those under the age of 20 and every 10 years for those over 20. Anecdotal information suggests that many of DPSS beneficiaries have a BI, but a large proportion is expired. If they would need the BI to authenticate identify (to collect their benefits) they will most probably will need to incur in a private cost (or will need to be covered by the program). Regarding functional or programs ID, DPSS has not issued beneficiary cards for the beneficiaries. Only in the district of Lemba, the coordinator took the initiative to issue an ad-hoc beneficiary card to facilitate the process of payment and other service delivery. Hence, in Lemba a pink card is issued for Mães carenciadas and a blue card for non-contributory pensions. The number of the beneficiary card is the same number assigned in the DPSS database (World Bank, 2015). 4.4 ICT Telecommunications are important because electronic payment devices such as POS need to communicate transaction information with a central service provider. Therefore, the extent of mobile networks in a developing country defines the extent of affordable real-time online payments facility, because fixed telephony and broadband networks do not typically extend as far. In areas without a functioning communications networks there are two options for delivering electronic payments. Either transactions can be carried out in an offline mode which requires the use of smart cards and delayed settlement and reconciliation which increases the risks of fraud and errors occurring. Alternatively, satellite communications technology can be used to create the necessary communication link to allow real-time online transactions (Pulver, 2016). ICT infrastructure is particularly important to the rapid and accurate transmission of payments information. There are nearly 146,000 mobiles phones and 86% of the population has a mobile phone (World Bank, 2016). STP has a relatively good coverage of its mobile network, with the exception of mountainous areas and the low density south of the country. There are two main phone companies in STP (CST and Unitel) that are regulated by the General Authority of Regulation (AGER). 26 26 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE CST has more than 158,0003 clients and nearly 90% of the market share (CST, 2017). CST has a growing network of external agents (nearly 300 people buy mobile time to CST in order to resale it in the market). Due to regulatory restrictions, the firm does not offer the option to cash out payments but it offers the option to transfer air time between customers. CST has expressed interest in entering the mobile payments market once the Central Bank opens the options for telcos. CST is exploring possible partnerships with financial institutions, and they foresee the possibility to use CST shops as additional payment points. However, they are aware that entering in this business will require time since they will need to guarantee sustainable profits. On the other hand, UNITEL provides telecommunications services mainly in Agua Grande district and face the same restrictions of CST to explore the option to become payment service providers. Table 4.7: STP: Mobile network coverage Indicator Data Date % population covered by mobile network 90% 2015 % individuals who own a mobile phone 86% 2016 % mobile account ownership rural 77.8% 2015 Source: World Bank (2015 and 2016). 4.5 Summary Supporting Environment Review STP is going through an important transition of its financial regulation that is aimed at introducing high quality and innovative financial products provided by banking and non-banking institutions to better respond to the current needs of citizens. In particular, the country is working in a regulatory framework that is conducive to the development of electronic payment mechanisms that also favour financial inclusion. Although the financial system does not impose significant barriers for the financial inclusion of low income customers, there is need to have more incentives to facilitate the provision of financial services to low income customers. In addition, there is need to guarantee there is business case for potential payment providers to access and remain in this segment of the market. In sum, although the future is promising, there is a still long way to go for the delivery of fully digital social protection payments in STP. Table 4.8: Summary of supporting environment review Areas Indicators Level of development Financial sector Financial institutions Emerging Financial access points Latent Interoperability Latent Policy, regulation and Agency rules for banks/non-banks Emerging legislation Proportionate KYC requirements Moderate 3 Need to confirm with telcos. 27 27 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE e-money guidelines Latent Basic bank accounts Latent Financial inclusion Emerging ID National ID Moderate ICT Mobile Network Coverage Moderate 28 28 5 Payment Delivery Mechanism Review The assessment approach specifically looks at the quality of delivery, assessing three criteria; accessibility, robustness and integration. It should be noted that these scores do not define a ‘perfect’ payment delivery mechanism because there are some trade-offs between objectives and between the objectives of different stakeholders. Table 5.1: Criteria for assessing payment delivery Criteria Description 1. Accessibility Cost of access Appropriateness Rights and dignity 2. Robustness Reliability Governance Security 3. Integration Financial inclusion Coordination Source: ISPA Payments tool (2016) The assessment tool uses a colour graded four-level “scoring system�. Within each sub component of each criteria, the more advanced examples of payment delivery are awarded “Advanced� whilst less developed criteria are awarded a “Latent�. Given the trade-offs between some criteria it is unlikely that any single payment delivery mechanism would receive the same grade across all objective sub-components. This assessment approach should rather help to identify areas that may benefit from strengthening, in line with best practice, as well as ensuring that trade-offs between criteria are made explicit to policy makers. 5.1 Accessibility Accessibility concerns how convenient the payment mechanisms are for beneficiaries with respect to cost of access-- are the payment access points close to their homes and can they easily access the payment? An accessible payment system should also specifically consider its appropriateness with respect to the needs of target groups including the poor, elderly, illiterate, women, and disabled. Are they trained in the use of the payment mechanism and is it clearly communicated to them when and how to collect payments? There also needs to be active and have continuous communication with recipients to ensure they understand when payments will be delivered and any changes to the process. Lastly are beneficiaries offered choice, are they able to select their preferred payment mechanism? To support rights and dignity the needs of beneficiaries should have been considered in the design stage, a grievances and redress mechanism should consider payment issues and where possible, payments should be made using mainstream payment infrastructure through private transactions. 5.1.1 Cost of Access Beneficiaries are gathered at the pay-point, typically in the district office, the local camara or the community centre determined by DPSS. Beneficiaries line up to collect their payment that is delivered by DPSS district staff. Given the precarious conditions of the facilities, beneficiaries do not necessarily have proper places to sit or wait for their payment. Per the information received from the district coordinators as well as from the beneficiaries waiting time may vary from 15 minutes-3 hours. Pay points are both urban and local and typically within walking distance from beneficiaries (30-40 minutes from payment point). As said by district coordinators and beneficiaries, only in occasions, families need to incur in 29 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE transportation costs to claim the benefit that could add up from 0.5 - 1,25 euros, that is equivalent to 8-20% of the benefit of Maes Carenciadas, the most generous program of DPSS. 5.1.2 Appropriateness As per it was reported by the beneficiaries in the field visits, although they are informed through local actors (local radio and tv stations) of when and where they will receive the payment, they do not receive information about the amount to be transferred. In addition, there is no choice of payment delivery mechanism for beneficiaries - all payments are delivered through DPSS district staff. 5.1.3 Rights and Dignity Given the low coverage of DPSS programs, an important number of vulnerable people are excluded from the transfers and the programs do not include a mechanism to collect inputs or suggestions from beneficiaries about the program or the payment mechanism. Currently there is not grievances and redress mechanisms but DPSS is working with support of the WBG in the design of mechanisms to raise and resolve queries. 5.2 Robustness Robustness includes various considerations. Are payments made reliably to allow beneficiaries to depend on the funds? Is a payments calendar used, communicated and adhered to? If a payment service provider is used is there a business case for their continued involvement. A robust delivery mechanism has good governance of the payment process which requires clearly defining roles and responsibilities and establishing timely and accurate reporting. Even in those cases where government has outsourced payments to a payment service provider such as a bank or post office, they remain responsible for overseeing the process and ensuring that they have sufficient levers and information to control the quality of payments. The last aspect of robust systems is security. Security in the context of SP payments refers to ensuring the safety of the flow of funds across the process chain, the stakeholders’ systems, and the recipients’ personal and financial information. Consideration should also be given to the integrity of the process related to preparation and exchange of payment instruction files by, where possible, separating the process of creation of the list from the payment itself. Maintaining the integrity of the process is key to mitigating the risk of creating ghost beneficiaries as well as reducing the risk of accidental changes to the list. At the point of payment, the identity of recipients should be verified. Lastly if payments are outsourced to a third party, that institution should be regulated by the relevant public authority, typically the central bank (ISPA Payments tool, 2016). 5.2.1 Reliability Given the difficult financial situation of STP and the lack of dedicated sources for financing social protection programs, government contribution to the program has not been constant and therefore transfers to families have been highly unreliable and no mitigation measures seem to be taken to reduce delays. Though payments are supposed to be made on quarterly basis, beneficiary households received only one payment with a year delay (2015 benefits were paid in block in December 2016 and 2016 payments (from January from September) were paid in June 2017) (World Bank, 2017). The programs have a payments calendar, however, it is not met. 30 30 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE 5.2.2 Governance There is not an overarching Operations Manual for DPPS programs, and there are also no written procedures guidelines or rules concerning payments delivery. The program has very rudimentary mechanisms to deliver and report payments. 5.2.3 Security In terms of security, although robbery does not seem a very frequent problem in the island, the program has weak systems and to prevent fraud or robbery. For instance, the program requires DPSS staff to cash out and transport large amounts of cash without oversight and protection. In addition, the program has manual payment authentication process, that includes beneficiary provision of ink finger print. Equally, there is not security in the creation and transmission of the payroll which create risks for the information to include accidental errors or deliberate changes. 5.3 Integration Integration concerns the payment mechanisms ability to support the receipt of a variety of payments. Integration can involve the coordination of payments from different payers within government across multiple ministries, agencies and social protection programs. This also speaks to the issue of flexible payment delivery mechanisms that allow for changes in transfer values, for example in response to an emergency, and for dynamic beneficiary registry lists to reflect program entry and exit. In addition, integration concerns the ability of the payment mechanism to be used to facilitate financial inclusion by providing a transactional account and enabling beneficiaries to save. Some cash transfer programs go further by employing mechanisms to encourage savings behaviour. 5.3.1 Financial inclusion Physical cash is delivered to beneficiaries with no account provided and no ability to make a partial withdrawal. No additional financial services are offered currently and also there are no interventions are in place to encourage or support the use of financial services. 5.3.2 Coordination Payments are implemented in the same form for the three different programs of DPSS. This is a positive feature that will facilitate in the long term the introduction of procedures to strengthening accessibility, robustness and integration of social protection payments. 5.4 Summary of payment delivery mechanism review The summary in table 5.2. has been completed based on observations made during field visit, discussions with program managers and technical team, representatives from districts, beneficiaries, financial services regulators, as well as from the review of reports, studies and manuals. For the existing programs and for the implementation of a future program to be funded by the World Bank, DPPS will need to implement a serious of measures to strengthen payments delivery reliability and governance. 31 31 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE Table 5.2: Summary of payment delivery mechanism review Criteria Description Score 1. Accessibility Cost of access Moderate Appropriateness Latent Rights and dignity Latent 2. Robustness Reliability Latent Governance Latent Security Latent 3. Integration Financial inclusion Latent Coordination Emerging Given the characteristics of STP: small scale of their financial system, very tight fiscal space, out dated financial legal framework, limited institutional capacities at DPSS, it is understandable that it scores low in most criteria. The first two criteria (accessibility and robustness) are the necessary focus of newer schemes and it is generally only when they reach scale that they consider financial inclusion and their position in the broader social protection sector. Additionally, it should be noted that issues of integration are not solely the responsibility of DPSS but require cross sectoral engagement. 32 32 6 Policy Options 6.1.1 Short term options The government of STP can introduce relatively simple reforms to improve the delivery of the existing transfers programs currently implemented in DPSS. The objective will be to standardize the rules associated to payments delivery and optimize the existing manual payment to benefit both DPSS beneficiaries and MEAS. Short term recommendations include: • Internally explore within MEAS the mechanisms to mitigate payments delays for DPSS programs. • Prepare a payments’ calendar including the programs that will be deliver ed in 2018, before the implementation of the new WG project. • Prepare and implement a Payments Manual for the existing programs, clarifying the mechanisms to manage (and keep safe) beneficiaries’ lists, provide information about payments to the families, deliver payment in existing points (including the delivery of some form of receipts for the families), and report back to central management (including adequate process for cash closure and reconciliation of payments). • Introduce mechanisms to ensure the communication campaign that is implemented adequately informs people about the amount being transferred as well as the nature of the benefits. Make sure that communication messages refer to social transfers and not to ‘salaries’ or ‘gifts’. 6.1.2 Medium term options (for implementation of new project) 6.1.2.1 OUTSOURCE PAYMENTS DPSS programs could benefit from finding an independent payment service provider to deliver social transfers. Outsourcing payments, will allow DPSS district coordinators to devote more time to other activities that are related to the social role of the Directorate, monitoring and accompanying beneficiaries closely and at the same time could improve appropriateness, governance, and security of payments. Given the constrained financial environment of STP, the government may contract out one or more banks through a competitive process. Banks would deliver transfers in cash or using electronic payments instruments (e-money, prepaid payment cards, debit cards, smart cards). It will be desirable that payments would be linked to a basic transaction bank account to encourage financial inclusion in the medium and long term. The relationship with the PSPs should be regulated by contracts that will clearly describe all the activities that will need to be implemented to guarantee successful payment delivery. The contract will include number of payment points, number of families to be paid at each payment point, method of payment, timeline to collect the payment, mechanisms to authenticate identity, mechanism for proof of payment for beneficiaries (receipts), mechanism for payment reconciliation, mechanism for grievances and redress, process to manage uncollected payments, among others. Any payment options to be chosen by the project should guarantee that is: 1) accessible for beneficiary families, 2) robust, and desirably 3) facilitate financial inclusion. Delivery of CT payments should comply with the following requirements: 33 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE • Beneficiaries of Maes Carenciadas ACCESIBILITY AND ROBUSTNESS should be treated as a regular client by the PSP • Accessibility refers to the accessibility of SP payments from without any forms of discrimination. the point of view of the beneficiary of the payment. It is important to consider this point of view because of the often- • PSP should allow a certain number of vulnerable nature of beneficiaries and the typical purpose of transactions with no cost for the beneficiary. SP programs, which is preventing or protecting all people • Beneficiaries should be able to check (particularly vulnerable groups) against poverty, vulnerability, their balances through the channels provided and social exclusion. The requirement for accessibility is by PSP with certain regularity. described in three parts: cost of access, reliability, and rights and dignity. • When using electronic or digital payments they should guarantee immediate • Robustness refers to the importance of designing and access to cash. implementing a payment mechanism that can be depended on to reliably deliver transfers on a regular basis to the correct • PSP should provide information to recipient. The active monitoring of the PSP by the SP program beneficiaries about payments calendar, points, is a proactive process of communication and coordination delivery mechanisms, etc. The contact centre (governance) between the SP program and its PSP. The should define levels of service (what to do in security of the delivery mechanism and the risks that it may the first contact, when to scale up to an expose beneficiaries to should also be considered. additional level). • Equally PSP, in coordination with DPSS, should provide basic modules on financial literacy to families including the same topics mentioned above as well as elementary concept on personal finances. Beneficiaries should receive basic training on proposed financial instruments and usages, and channels to cash out their transfers (i.e. pay points jointly determined between PSP and DPSS, ATMs, and if the regulation allows them financial or commercial agents, mobile payments, etc.). 6.1.2.2 ESTABLISH A PAYMENT MANAGER IN DPSS To manage the relationship with the PSPs, and to report back to MEAS and MOF when necessary, it will be important to have dedicated staff. The payment manager will be responsible to set up the payment calendar and oversee the whole cycle of payments delivery (from WB disbursement to reconciliation of payments to beneficiaries). The payment manager also will be responsible to monitor if communication with beneficiaries (on payments) is appropriate and if payments are being delivered to the right person, in the right time, in the right place and the right amount. It is desirable that the payments manager has experience working with or for financial institutions (i.e. banks or other payment service providers). 34 34 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE 6.1.2.3 INTRODUCE ELECTRONIC/DIGITAL PAYMENTS Although due to the restricted financial environment of STP there is possible that in the beginning a number of payments will be delivered in cash by PSPs, it is desirable that the country rapidly transitions to electronic payments to enable beneficiaries to collect their payment in private transactions whenever is convenient for them. However, this will require an adequate and enabling regulation to encourage business case for payment service providers (so they have incentives to offer alternative mechanisms different to cash (i.e agents, ATMs, additional channels)). The WBG has completed a technical assistance project with the Central Bank of STP that includes a series of legal reforms to facilitate the entrance of non-banking payment service providers. If the project is approved by the legislative body, new players will be available in the market in the medium term. Considering the limited financial infrastructure of STP, a model based in efficient and secure mobile payment agents could be advisable as a first step for the development of a more enabling ecosystem for the delivery of social protection payments. However, it will be advisable to work on financial education both on the supply and the demand side. On one hand it will be important to work on creating incentives in both banking and non-banking payment services providers to enter in this new segment of the market (guiding them on potential clients needs and demands). On the other hand, offering financial education to beneficiaries to make them aware of their options, to train them on how to use non-cash mechanism, and to provide information about the benefits and costs of using non-cash delivery mechanisms. Financial education will help to sensitize beneficiaries about their rights and responsibilities. 35 35 Annex 1 Key Respondents Organisation Name Title DPSS Mrs. Vilma Loureiro Director of DPSS at MEAS DPSS Mrs. Regina Viegas de Abreu Chief of Staff MEAS DPSS Euridice Fernandes Téc Sup 3ª Classe DPSS DPSS Lisandra Graça DPSS Kledia Boa Morte DPSS Atanázio Marta DPSS Helder Vera Cruz DPSS Ana Maria Torres. DPSS Celia Neto Coordinador Cantagalo DPSS Eugenio Santos Coordinador Agua Grande DPSS Nelson Encarnação Coordinador Me-Zochi DPSS Vladimir Fonseca Coordinador Lemba DPSS Agueda Mota Coordinador Lobata DPSS Nadia Almeida Tecnica Superior DAF DPSS Helder Vera Cruz Chefe de Secção DPSS UNICEF Ainhoa Jaureguibeitia UNICEF Teresa Soures ILO Lourdes Banco Central Lisandro Aldo Consultor Banco Central Angela De Santiago Tecnica AFAP Alvaro Leal Coordinator AFAP Adalio Alves Financial Management Advisor Caue Americo Pinto Presidente Carama Distrital Caue Caue Cosme Director de Gabinete Afriland First Bank STP William Tadoum Financial Director Afriland First Bank STP Adaiso D’Asuncion Marketing Director CST Gracia Augusto Legal and Human Resources Area CST Walker Viana CST Emery D’Alva UNITEL Jose Sonnemberg General Director SPAUT Calixto Moniz Executive Manager SPAUT Abulay Pires de Santos SPAUT Ibladehim Alves de Carvalho SPAUT Edmon Castro BISTP Acacio Bomfin Administrative Manager BISTP Jorge Nilda Silvestre Human Resources BISTP Adail Lima Control Coordinator 36 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE Ecobank Dalton Goncalves General Director Banco Privado Stephano Financial Director Banco Privado Francois Goumou General Director 37 37 Annex 2 Focus Group Discussions (to be completed) In addition to key respondent interviews the team also undertook field work. The mission team carried out two informal focus group discussions (FGDs) with DPSS beneficiaries in Caue and Lemba. Illustration A2. 1: DPSS beneficiaries in Caue Illustration A2.2: DPPS beneficiaries in Lemba 38 Annex 3 Guidance for Review of a Payment Delivery Mechanism Latent  ----------------------------------------------------------------------------------------------------------- → Advanced Criteria 1 2 3 4 Average payment collection takes Payment collection takes 2-4 hours Payment collection takes 30 mins-2 Payment collection takes Less than over 4-6 hours. Collection time hours 30mins includes waiting time and transaction time. Very few points available hence long Travel times 2-3 hours Travel times 1-2 hours Travel times Less than 1 hour travel times from beneficiaries’ Cost of homes average travel times over 3 access1 hours The cost of access (transportation 40%-25% 25%-10% >10% costs, charges, informal payments) represent over 40% of the value of the transfer for large numbers of beneficiaries A minority <25% of beneficiaries Only a small number 25-50%of A large proportion 50-75%of The majority Over 75%of Accessibility understand how to collect payment beneficiaries have a full beneficiaries understand the beneficiaries have a deep and the basis for the calculation of its understanding of how they collect payment process but confusion may understanding of the payment value. This may be due to a lack of their payments, how values are remain amongst the illiterate and /or process and how to raise initial training. calculated and how to complain. This other vulnerable groups. This may be queries/complaints. This may be may be due to inadequate initial due to inadequate initial training achieved with very accessible training training. and/or a very complex payment material (e.g. picture based) which is process. continually reinforced and/or a very Appropriaten simple/self-explanatory payment ess process. A minority <25% of beneficiaries Only a small number 25-50% of A large proportion 50-75% of The majority over 75% of understand when they will receive beneficiaries know when they will beneficiaries know the date of their beneficiaries know the date of their their next payment or its value. This receive their next payment and its next payment well in advance and next payments well in advance and may be due to no/ poor ongoing value. This may be due to ineffective also understand what its value will know what the value will be. If there communication with beneficiaries or very short notice ongoing be. are any delays in payments these are communication with beneficiaries. clearly communicated in advance to beneficiaries. 39 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE Latent  ----------------------------------------------------------------------------------------------------------- → Advanced Criteria 1 2 3 4 No choice of payment mechanism. No choice of payment mechanism but There may be a variety of payment Beneficiaries are able to select the Payments are collected from one the program aims to provide choice mechanism but beneficiaries are not payment mechanism based on their type of place and at one time in the short to medium term. clear about how to make their choice informed choice. A wide range of Payments are collected from one and the relative merits of the payment points are offered and type of place but at a range of times different choices. Payments may be payments may be collected at any collected from a range of places at time any time Large numbers of Particular categories of beneficiaries Small numbers of There is no evidence of vulnerable beneficiaries/vulnerable groups are are excluded from or disadvantaged beneficiaries/vulnerable groups are groups being excluded or excluded or disadvantaged by the by the payment mechanism. Some excluded or disadvantaged by the disadvantaged by the payment payment mechanism. This may be aspects of the implementation of the payment mechanism. The design and mechanism. This may be because because an off the shelf approach has payment mechanism may take implementation of the payment special consideration was given to been used with no beneficiary account of some types of mechanism takes account of some of the needs of vulnerable groups centred design of the payment beneficiaries. the needs of beneficiaries/ vulnerable during the initial design and mechanism. groups this may be through informal subsequent implementation. Formal mechanisms and documented procedures are in place for dealing with vulnerable Rights and groups, e.g a process for the dignity nomination of proxy to collect a payment. No complaints and appeal There is a program complaints and The program and PSP have The complaints and appeals process mechanism (grievance and redress) appeals mechanism but complaints and appeals mechanisms. clearly articulates/reflects or if there is one, large numbers of insufficient/incomplete consideration Although there is poor beneficiaries’ rights, providing the beneficiaries are unaware of its has been given to payment issues. coordination/incomplete coverage accessible channels that are widely existence or how to access it between the two. Standard types of known by beneficiaries. This is issues have been identified but supplemented by the PSP’s own timelines may not have been set for process for identifying and resolving their resolution Both program and beneficiary issues. Reporting of issues PSP are clear about the process is shared to support coordination. It is not clear how long it takes to There is a broad understanding of There is a detailed understanding of A detailed written list of every stage Robustness Reliability secure upstream funding. No process where delays regularly occur within every stage of the fund flow this is of the fund flow is captured. This is the flow of funds from written but may be out of date and 40 40 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE Latent  ----------------------------------------------------------------------------------------------------------- → Advanced Criteria 1 2 3 4 mapping exercise has been carried Government/donors although this may not reflect a complete and regularly reviewed and updated to out to determine this. may not have been written down. accurate picture. ensure continued accuracy. Over the last 12 months more than 50-30% of expected disbursements 30-10% of expected disbursements Delays are rare less than 10% of 50% of expected disbursements are are delayed. are delayed expected disbursements are delayed delayed. No mitigation measures taken to Some local ad hoc short term Sound mitigating measures are in Comprehensive mitigating measures reduce delays in payments mitigating measures are in place to place to cover some areas/risks but are in place following a regular and reduce delays in payments some areas/risks are not covered systematic review of risks. If there are delays, there is a review of their cause and an improvement of the process. No payment calendar in place There is a schedule of payments but The payments calendar is known by A calendar of payment dates is clearly it is rarely met and may not be widely most participants although there may communicated to and understood by shared. be occasional delays. all involved in payments, payments are generally made without delays. There may be dis-incentives for the The business case for the PSP is under There is a business case currently for There is a strong and continuing PSP (and its agents) to deliver threat in the short term due for the PSP delivering payments but the business case for the PSP and hence payments such as financial loss example to a pending change in long term business case remains strong incentives to deliver associated with delivery regulation or a legal opinion/case unclear payments. No written procedures guidelines or Weak or incomplete written Adequate written procedures exist Strong and comprehensive written rules concerning payment delivery procedures, some but there is little regard for these records which are adhered to by the overlapping/incomplete roles and procedures by implementing officers majority of staff who have clear roles responsibilities and some confusion about roles and and responsibilities. Clear service Governance responsibilities level agreement with PSP. No monitoring and evaluation of M&E irregular and incomplete/weak Regular schedule of (internal) M&E Regular schedule of (independent) payment process and there may be some areas not M&E which is comprehensive covered 41 41 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE Latent  ----------------------------------------------------------------------------------------------------------- → Advanced Criteria 1 2 3 4 No review and adjustment of Changes to procedures very difficult Ad-hoc adjustment of procedures Procedures are regularly reviewed payment procedures to enact. and strengthened based on evidence, usually from M&E reports/. Weak reporting on payments – Summary reporting is accurate but Detailed transaction level reporting is Real-time reporting at the individual inaccurate or summary information may be take some time and available but with a delay transaction level is available and/or slow significant effort to gather Weak systems with a high risk of Incomplete systems are in place to Strong and effective anti-fraud Strong and effective anti- fraud loses due to fraud or robbery. For control loses due to fraud or robbery controls were implemented at the controls exist and their effectiveness example, a manual system requiring start but these have not been is regularly tested. Controls may be staff to handle large amounts of cash checked with fiduciary risk adjusted according to their without oversight or protection. assessment. effectiveness. Manual payment authentication. For Electronic payment one factor Electronic two factor authentication Electronic two factor authentication. example, payment made to authentication. For example, entering but with weaknesses of Security beneficiary on provision of ink an ID/account number. implementation (e.g. Beneficiaries do fingerprint and or program ID card not enter their own PIN the PIN is not unique.) No security surrounding the creation MIS creates the payroll but this is MIS creates payroll with checks to Straight through processing. and transmission of the payroll. High exported to Excel and emailed to the ensure data quality and a secure file risk of manual accidental error and PSP. Risk of deliberate changes to is transmitted to PSP. deliberate changes. payroll still exists. Physical cash out of 100% of the A store of value is provided that A transaction account is provided A fully functioning transaction benefit is the only option. For allows for partial withdrawals e.g. although with restrictions on the use account is provided. Additional example, payment of physical cash by pre-paid card of this account e.g. no additional deposits can be made by the program staff deposits can be made, funds must be customer and any other payer Financial withdrawn within a specific time nationally or internationally. The Integration period. amount of payment may vary. inclusion No other financial services available A safe store of value allows partial A transaction account allows for Other financial services are accessible withdrawals and hence enables partial withdrawals and additional through the transaction account/PSP saving of part of a beneficiary’s savings. beyond savings e.g. microcredit, transfer insurance. 42 42 SOCIAL PROTECTION PAYMENTS IN THE DPSS – SAO TOME E PRINCIPE Latent  ----------------------------------------------------------------------------------------------------------- → Advanced Criteria 1 2 3 4 No interventions provided to A basic program of financial A comprehensive program of A range of interlinked interventions encourage/support access/use of education for beneficiaries is financial education provided to are employed to ensure financially appropriate financial services. provided. This may not be well beneficiaries. Other interventions capable beneficiaries are deliberately tailored to the needs of beneficiaries may encourage savings behaviour linked to appropriate financial and may leave them at risk from e.g. seed account, matched savings, services this may be part of a scheme unscrupulous providers lottery to support their graduation. Fragmentation by default not design. Coordination on payment strategy Coordination on payment strategy There is regular review by relevant Different SP programs have different between a small number of between a majority of programs. institutions, regarding payments mechanisms, providers, contracts, programs. Maybe those within the Maybe those within the same between all programs. Deliberate quality, prices. There are no or same department, Ministry or department, Ministry or Province. choices are made; the same criteria limited mechanism in place to Province. There may be coordination on may be used to make decisions but support coordination continuous programs but no planning with different weights according to to accommodate emergency program specifics to ensure payments. consideration is given to any trade- offs. Multiple providers, channels and Coordination2 instruments may be used or multiple programs may pay to the same transaction account. The payment mechanisms used can accommodate varying payments including payments from multiple payers and occasional emergency payments. No common ID across SP Programs Some programs share ID Majority of programs share ID Common ID providing access to multiple programs 1Collectiontimes are the most important measure as travel times are more reliant on local context. That is in an area where the normal travel time to reach the nearest health centre or primary education facility is 4 hours it would be acceptable for payment delivery to be made within the same travel time. 2This concerns the program under review and its relationship to other programs in the SP sector. 43 43 Bibliography Better than Cash Alliance, Development Results Focused Research Program: Country Diagnostic Colombia (January, 2015) ISPA, Social Protection Payments Delivery tool (September, 2016) Marques, Jose Silverio Politica e Estrategia Nacional de Proteccao Social, Proposta, UNICEF (November, 2013) Pulver, Caroline. Social Protection Payments in the Productive Social Safety Net Program in Tanzania, ISPA (May, 2016) Pulver, Caroline. Assessment of the PATH payment delivery, World Bank (August, 2017) World Bank, STP: Operationalization of the National Protection Policy and Strategy (2015) World Bank, Payment Systems Assessments for DPSS programs (November, 2015) World Bank Group, Plano de Accao para o Desenvolvimiento do Sector Financeiro: 2017-2019 (September, 2016) World Bank Group, The State of Identification Systems in Africa (2017). 44