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Drought, digital innovation, and money: How the hunger safety net cash transfer programme has transformed access to financial services in the arid lands of Kenya

June 27th, 2022

Joyce Apus is a witty mother of eight who entertains visitors with her unconventional love story. How she met the man of her dreams in Kalokol, a small fishing community by the shores of Lake Turkana.

“He was light skinned,” she says. “You can see I am quite dark. So, I thought the children would have a fair complexion.”

Love smitten, Apus walked for three days from Kalokol to her new home in Lorengelup with her new partner, spending lonely nights along the way. “It was just the two of us, cooking in the bush.”

But any hardships that Apus and her husband encountered in the early days of their marriage were nothing compared to what befell them in recent droughts.

“The drought was very bad 10 years ago. We all would have died, let alone the livestock. Although it is not the best practice, we had to cut down some trees and burn charcoal. The alternative was to starve to death,” she said.

Joyce and her family are among the millions of Kenyans living in counties situated in the arid and semi-arid lands of Kenya, constantly under the threat of drought emergencies. In these arid and semi-arid lands, about two million people are permanently on drought relief, with the number rising to 5 million during severe droughts.

Climate-related hazards continue being a serious threat, with drought being the single most common natural hazard in Kenya. 89 per cent of Kenya’s total land mass is composed of arid and semi-arid lands which remain significantly poorer and more marginalised than the rest of Kenya.

Historically, the principal means of supporting the poorest and vulnerable households living in the arid and semi-arid lands, such as Joyce’s, has been food aid, often costly and poorly targeted. Non-food interventions received limited attention as viable models for implementing social protection programmes.

Exit food aid, enter cash transfer programmes

Due to the difficulties presented to development partners supporting Kenya’s social protection programmes, they started exploring the opportunities that non-food interventions presented.

In 2005, UK aid asked FSD Kenya to design a payment solution for a proposed Hunger Safety Net Programme and take up the role of payment service manager and fiduciary risk management for the programme.

“Our journey began with a challenge from UK aid who asked us to place 20 USD in the pockets of the residents in Turkana with the most efficiency and at minimum cost,” Victor Malu who was the senior future systems advisor at FSD Kenya during the implementation of the project said.

The proposed intervention was intended to contribute to reduced poverty, hunger and the vulnerability Kenyans like Joyce living in the arid and semi-arid lands constantly face, specifically targeting the counties of Turkana, Marsabit, Wajir and Mandera.

The envisioned payment solution was supposed to deliver a long- term, regular and guaranteed cash support to chronically poor households; expand access to financial services and contribute to the development of a national social protection framework in line with Kenya’s social protection ideals embedded in the Constitution of Kenya (2010), and the Kenya Vision 2030.

The Hunger Safety Net Programme

FSD Kenya designed the payment solution for a cash transfer programme for the vulnerable populations in the northern counties of Kenya (Turkana, Mandera Marsabit and Wajir) for the Hunger Safety Net Programme. This programme was launched in 2007.

The Hunger Safety Net Programme was funded by the UK Government through UK aid under its twelve-year support to the social protection sector in Kenya.  The UK aid’s support to phase 1 of the programme was KShs 54.7 billion (£40.5 million) while total funding for phase 2 was KShs16 billion (£119.85m).

The UK government’s support for phase 1 was KShs 54.7 billion (£40.5 million) while total funding for phase 2 was KShs16 billion (£119.85m).

Phase one of the Hunger Safety Net Programme (2007 – 2013) was piloted in the poorest four arid and semi-arid counties of Turkana, Mandera, Wajir and Marsabit. Communities within these counties are traditionally nomadic and frequently at high risk of being affected by severe drought.

At its outset, the Hunger Safety Net Programme was designed to be implemented by the Government of Kenya through funding from UK aid. Other implementing partners included Oxford Policy Management; Development Alternative Inc; Help Age International and Financial Sector Deepening Kenya. Additionally, other national and county government teams joined implementation at county level.

A key factor that led to the success of the Hunger Safety Net Programme according to the National Drought Management Authority’s Chief Executive Officer James Oduor, was the unique collaboration among several stakeholders within key government institutions, non-state actors and the donor (UK aid). The first Phase of the Hunger Safety Net Programme was fully funded by the UK Government while the second phase was funded by both the UK and Kenya Government. The third phase is fully funded by the Government of Kenya.

“Initially we felt the setup would be a very heavy investment by the government but in the long run, we realised this infrastructure was permanent. Beneficiaries could use the bank accounts for other purposes other than the cash transfer programmes. In future we could use other cash transfer methods such as mobile money transfers or even increase the pool of paying banks in order to give more flexibility to beneficiaries,” Oduor said.

For the Hunger Safety Net Programme to overcome the transparency and accountability issues that plagued the food assistance programmes it was designed to replace, the target beneficiaries needed to have been correctly identified.

In Marsabit County, this process was coordinated by John Bulyar, a Programme Coordinator at the National Drought Management Authority.

One of his key responsibilities during the project was to oversee the Hunger Safety Net Programme’s community-based validation. In this process, the list of beneficiaries is brought to the local community, who, in a public forum (baraza) check if those listed are truly deserving cases. Once validated, their contacts would be added to beneficiary lists of both county and national government officials who would receive bulk messaging when payments were affected.

“My team and I were also in charge of making sure pastoralist communities were reached with correct information. We did this by reaching out to local radio stations that broadcast in the local languages,” Bulyar said.

Procurement of the most suitable payments service provider

As the payment service manager, FSD Kenya procured a payments services provider to make cash payments to beneficiaries in the most remote parts of Kenya through an open call for tenders.

Equity Bank emerged the top bidder for both phase one and phase two of the Hunger Safety Net Programme based on cost (value to recipients/ beneficiaries); the ability to deliver payments to recipients; the ability to improve financial access to the general population of non-recipients, and strength of solution architecture.

The bank was responsible for the identification of recipients, preparation of bank accounts using accepted identification documents, opening bank accounts, distributing transaction instruments and effecting payment to beneficiaries.

However, the target arid and semi-arid lands presented the Hunger Safety Net Programme with significant challenges. Majority of the population did not have access to formal financial services; most of the target communities had poor or no phone network coverage and to make it worse, many of them did not even have basic documents (like the national ID) to enable them to access formal financial services.

However, working with the government and the local communities the project team worked towards several solutions.

One of these solutions was civic registration. Government agencies mobilised registration exercises to ensure deserving households were given the required documentation to grant them access to the cash transfer programme.

The other solution to overcome the scarce financial services in the arid and semi-arid lands counties was the design and roll out of what is now known as agency banking. 

The advent of agency banking in Kenya

FSD Kenya designed agency banking as a delivery solution for cash transfers to reach the remote Hunger Safety Net Programme’s beneficiary households.

The programme deployed an agency banking solution, using small businesses, in very remote parts of Kenya to act as bank agents and dispense funds during payments cycles. Initially, 50 Hunger Safety Net Programme agents were onboarded to pay cash transfers to the beneficiary households.

The Central Bank of Kenya gave the Hunger Safety Net Programme a special dispensation to roll out agency banking before the Central Bank issued regulations governing agency banking to the rest of the industry.

“With a special dispensation from CBK we set up an agency banking system in Turkana and registered about 500 beneficiaries initially using biometrics to make sure we could authenticate the individuals receiving these funds while also making sure that the solution would be used even by those who were not literate,” Victor said.

For the agency banking model to succeed, entrepreneurs in the four target arid and semi-arid lands counties needed to have been persuaded about the business opportunity, onboarded, and supported to be effective banking agents.

One such agent was Joseph Odhiambo Sumba, a 50-year-old entrepreneur and a father of three. Joseph began his entrepreneurial journey in 1994 when he opened a small kiosk in Napetet. Napetet is a small commercial centre located about 25 km from Lodwar town, Turkana County.

He first registered as an Equity Bank agent in 2008. He thereafter received a contract from the bank to act as an agent to Hunger Safety Net Programme beneficiaries. Becoming an agent was an investment opportunity that he took a risk on as there were no other agents in the region then. Thanks to his consistency, between 2011 to 2014, he experienced exponential growth in his agency business. The number of beneficiaries using his agency grew to 1,000, increasing his commission earnings to KShs100,000.

Successes of the Hunger Safety Net Programme

By the end of phase two of the Hunger Safety Net Programme in 2019, the programme was reaching over 100,000 households (600,000 people identified as chronically poor) in Turkana, Mandera, Marsabit and Wajir counties.

The bi-monthly cash transfers gradually increased to KShs 5,400 paid through an improved model. Instead of pre-paid biometric smart cards, full bank accounts were opened for all beneficiaries. Payments were accessed using bank cards via biometric or PIN recognition through either a network of nearly 500 Equity Bank Agents[1], or Equity Bank branches. The programme paid out over KShs 20 billion in aggregate over the entire period.

The Hunger Safety Net Programme payment system has demonstrated success in doing exactly what it was designed to do. To provide a better, more efficient alternative to the food aid programmes that were previously in place using digital channels.

With reduced leakages and reaching a wider pool of beneficiaries, the success of this project eventually convinced the Kenyan Government to shift from relief food to the adoption of digital strategies for the delivery of social assistance.

According to Anthony Njage, the Team Leader, Resilience, Equity, and Inclusion at the British High Commission in Kenya, evidence shows that providing cash is two to seven times more efficient than providing food aid.

“Cash Transfers have been shown to have wider impact including on supporting the local economy and small traders within the communities affected. It also preserves dignity and has positive effects on the mental wellbeing of individuals during a crisis,” Njage said.

In addition to delivering assistance to vulnerable households, the cash transfer initiative has also improved financial infrastructure and subsequently access to formal financial services in the four-target arid and semi-arid lands counties.

According to Saralyn Wairimu, the General Manager, Social Protection, at Equity Bank, when Phase 1 (2008-2012) and Phase 2 (2013-2019) of the project started, the bank worked with public agencies in creating enabling infrastructure such as power and good road networks. Where there was no power from the grid, solar panels were put up to assist the agents to transact.

“The infrastructure has improved. Currently, only two of our agents rely on VSAT connectivity. In addition, where there was insufficient or no electricity to charge point of sale devices, solar-powered electric units, including a solar panel linked to a battery pack were installed to recharge the payment devices” Saralyn said.

Plounne Oyunge, who was FSD Kenya’s digital payments specialist during the implementation of the project agrees with Saralyn. “Financial inclusion in HSNP areas of Turkana, Mandera, Marsabit and Wajir has increased from 8% in 2009 to 67% in 2019. There is evidence to show that HSNP contributed to this increase,” Plounne said.

The future of the Hunger Safety Net Programme

The design of the Hunger Safety Net Programme from the onset was to create a sustainable programme that would be eventually handed over to the Government of Kenya.

FSD Kenya, as payments service manager, achieved its goal, and sufficient capacity was developed and transmitted through transfer of skills to the National Drought Management Authority to implement the HSNP Phase 3.

Hunger Safety Net Programme phase 3 is currently being implemented in eight counties (Turkana, Marsabit, Mandera, Wajir, Isiolo, Samburu, Tana River, and Garissa), aiming to serve a total of 100,000 beneficiary households (approximately 600,000 people) by the year 2024 and up to an additional 250,000 households (approximately 1,250,000 people) during drought emergencies.

Additional reporting and writing by Daniel Wesangula 

Reporting for this story was made possible with funding from UK aid. However, the views expressed do not necessarily reflect those of the UK government or the UK government’s official policies. 

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