Abe Holland on Mobile Payments for Earthquake Reconstruction in Nepal
CEGA Program Associate Ale Wall talks with financial inclusion grantee Abe Holland, PhD candidate in Public Policy at Harvard’s Kennedy School of Government, about e-payments and earthquake reconstruction in Nepal.
In April 2015, a 7.8 magnitude earthquake rocked Nepal, killing nearly 9,000 people and damaging over 600,000 structures. Since then, the Nepalese government has faced the seemingly impossible task of reaching over 530,000 beneficiaries — many of whom are poor and located in rural, mountainous areas — with critical cash payments for reconstruction and relocation. With a pilot grant from CEGA’s Financial Inclusion Lab (FIL), Affiliate Michael Callen and Harvard PhD student Abe Holland jumped at the chance to explore whether mobile money could be used to swiftly and safely deliver the payments (similar to Haiti’s approach after the 2010 earthquake).
Ale: What inspired this project and how did it come together?
Abe: Our conversation with NRA officials began in the summer of 2016. We identified a range of shared policy and research interests, with an emphasis on helping government officials find the most efficient and effective way to allocate resources in an environment of uncertainty and scarcity. As economists, this is the type of thing we love to do! We have a wonderful working relationship with Nepal’s National Reconstruction Authority (NRA) largely due to Dr. Bhisma K. Bhusal, the Joint Secretary for the NRA and an active co-investigator on our research team.
Ale: What’s the current status of the project?
Abe: We just completed in-depth surveys and discussions with 573 households in Laprak, a village severely damaged by the 2015 earthquake and one of the first communities to be slated for relocation to an area with lower geological risk. The survey included questions about mobile phone ownership, financial behavior, and households’ perceptions of mobile payments as a mechanism for distributing payments. In addition, we’re gearing up to provide technical support to government officials who will use a residential land assignment lottery to safely relocate the community. The lottery system, which is still being designed, will allocate geologically safe, private plots of land to inhabitants from Laprak and other communities where safe housing options no longer exist.
Ale: What is interesting about the lottery?
This is a great learning experience because there are still many unknowns in designing and conducting a successful relocation lottery and reconstruction program. Although there are multiple ways to run a fair lottery, not all protocols are equally understood or supported by community members. One goal of our initial research effort is to understand local preferences for residential plots and the local perception of different lottery systems. We can then take what we learn and share it with the government, in hopes of deploying approaches that are both fair and sensitive to the context and understanding of local residents.
Ale: Have you seen any interesting or surprising results so far?
Abe: Through our household surveys, we were surprised to find that mobile phone ownership is remarkably high: 91% of the households we surveyed own a mobile phone with an average of 2 cell phones per household. We didn’t anticipate such high rates of mobile phone ownership — and it’s encouraging to see such a strong mobile reach even in really remote and very mountainous regions of Nepal. It’s particularly exciting news for the possibility of mobile payments, especially given the additional challenges of accurately and effectively reaching internally displaced communities.
Although there is high mobile phone ownership, mobile phone network towers in the area are solar powered, which tend to only provide 2G service even during sunny daytime hours. I hear things have improved recently and more regular 3G service may be available in the area now. Follow-up work will refine our understanding of the types of phones owned by households — whether basic feature phones or “smart” phones. This will help determine opportunities and constraints to setting up a mobile money payment process with the necessary infrastructure.
Ale: What does the mobile money payment scene look like in Nepal?
Abe: Well, there’s nothing like M-PESA (in Kenya), where it could potentially be used as an almost total physical money replacement. In Nepal, there is some electronic banking (e.g. eSewa) for typically over-the-counter services like remittances, but often there’s still an in-person component to the process or the payees are limited in some way — it’s not completely digital or instant. Remittances are a significant component of the Nepalese economy, close to 30% of their GDP. It actually wasn’t until September of 2016 that the central bank of Nepal finally set up regulations around mobile payments, so opportunity for the sector is very new and has significant potential in Nepal.
Ale: Can you share any challenges or set-backs you and your team have experienced during the course of this pilot study?
Abe: As I mentioned before, the mobile payments industry in Nepal is still in a very early stage. We’re conducting this study in an environment where a solid foundation for mobile payments doesn’t yet exist and where there are a lot of infrastructure and regulation hurdles. As far as survey implementation goes, carrying out this study in a relatively remote, high altitude, and mountainous area has come with its challenges. We (the research team) are used to using certain technologies, for example GPS. But GPS accuracy has been an issue because the integrated antennas within tablets for the electronic surveying don’t work well in this environment. So, like other social scientists in this context, we have to explore solutions for this.
Ale: More than two years after the quake, where is the government of Nepal in the process of issuing housing reconstruction payments?
Abe: I believe the intention of the international community was to set up a direct government-to-person (G2P) payment system for reconstruction. But it’s been very hard to operate, and what currently exists is much less direct. It’s not that the government isn’t trying — I sympathize with the officials who are running this program. They have to work remarkably hard to get this money out the door. They’re working within an outdated, multi-step paper and computer-based system to issue tens of thousands of payments.
To give you a better picture of the current government payments system, the reconstruction funds move from the central government to the district level, then from the district level to the commercial banks, and then the banks distribute specific amounts into individual accounts. The government-to-district lump sum transfer is done electronically, but then the district’s office physically walks paper checks over to the banks. At this point, the money is still in a lump sum so the banks allocate the money into individual bank accounts. There are obvious government concerns about this process being opaque and not being able to see the “last mile.”
Ale: How will your research contribute to the larger story of mobile money payments (and digital credit) in Nepal?
Abe: So far, we have focused on opportunities to use mobile phones in the reconstruction context. We have been able to support the NRA, which is still grappling with how to use mobile technology to deliver payments. While it’s challenging to provide government support to individuals in remote communities — let alone identify individuals who have been displaced and lack proof of identification — we’re hopeful that mobile phones (with unique phone numbers) will allow governments to improve service delivery in the future. Perhaps this effort could help pave the way for broader application of mobile payments in Nepal, but I won’t oversell it this early in the research.
This research was funded with a pilot grant from the CEGA-Visa Financial Inclusion Lab (FIL). For more information about this research portfolio, please visit http://cega.berkeley.edu/our-work/financial-inclusion%20/
Note: This interview was conducted in April 2017.
