4.4 Payment
This decision is two-fold:
- Choosing the payment mechanism or payment agent: bank, post office, mobile phone company, transfer company, cooperatives, traders, direct cash distribution by CARE or its implementing partner.
- Choosing the payment instrument: direct cash, ATM card, check, wire, mobile phone or voucher. The choice of the instrument will be dictated by the choice of the payment mechanism but some payment agents can offer several instruments (e.g. a bank can offer direct cash, check, ATM card or wire).
| Payment agent | Payment instrument | Potential advantages | Potential disadvantages | Appropriate context |
| CARE Implementing partner | Direct cash | – Quick to initiate
– Rapid access to cash for beneficiaries – Variable and flexible distribution points – No transaction fees |
– High safety risk for staff and beneficiaries
– Higher risk of fraud and corruption (or suspicion) – Labour intensive and time consuming in terms of planning for CARE or the partner – Long waiting line for beneficiaries |
Failing banking system and absence of other reliable payment agents.
Small scale pilots One off payment While CARE does not encourage this option, there are still cases where the CO had to resort to it. |
| Bank | Direct cash | – Safer than direct payment by CARE or partner
– Transfer risk of loss to a third party – Flexible time to redeem the cash for the beneficiaries – Quick if existing relationship with the bank – Not labour intensive for CARE or its partner – Solid audit and reconciliation process |
– Lack of branches in remote rural areas | Functioning banking system
Repeated payment
|
| Cheque | – Safer than direct payment by CARE or partner
– Transfer risk of loss to a third party – Flexible time to redeem the cash for the beneficiaries – Solid audit and reconciliation process |
– Lack of branches in remote rural areas
– Long writing time for the cheques – Fastidious signature process for the cheques – Unfamiliarity of the beneficiaries with this mechanism |
Functioning banking system
Repeated payment Small scale project |
|
| Bank account | – Safer than direct payment by CARE or partner
– Transfer risk of loss to a third party – Flexible time to redeem the cash for the beneficiaries – Quick if existing relationship with the bank – Increased financial inclusion of beneficiaries – Not labour intensive for CARE or its partner – Solid audit and reconciliation process – Possibility of saving in the bank account |
– Lack of branches in remote rural areas
– Bank account opening and operating fees – Lack of ID documents by beneficiaries to open a bank account |
Functioning banking system
Repeated payment When complemented with training on financial inclusion |
|
| ATM Card | – Safer than direct payment by CARE or partner
– Transfer risk of loss to a third party – Flexible time to redeem the cash for the beneficiaries – Quick if existing relationship with the bank – Increased financial inclusion of beneficiaries and usually high acceptance from beneficiaries – Not labour intensive for CARE or its partner – Solid audit and reconciliation process – Possibility of saving on the card |
– Lack of ATM in remote rural areas
– Long and expensive set up cost (ATM Card cost) – Loss/theft of the ATM Card |
Urban area with pre existing ATM system
When complemented with training on financial inclusion and use of the ATM card |
|
| Mobile phone | Mobile phone | – Safe and usually discrete way of transferring cash
– Transfer risk of loss to a third party – Not labour intensive for CARE or its partner – Flexible time to redeem the cash for the beneficiaries – Possibility of saving in e-wallet |
– Lack of access to mobile phone by beneficiaries – especially women (or extra costs of mobile phone distribution)
– Unfamiliarity of the beneficiaries with the mobile money – Lack of stable mobile network – Long and expensive set up costs (SIM card cost, etc.) – Loss/theft of phone or change in mobile number – Possible error (sending to the wrong number) – No donor visibility |
Repeated payment
Failing banking system or when bank services are more expensive Area with reliable mobile coverage Pre existing mobile money system When complemented with training on how to use mobile money |
| Transfer company | Direct cash | – Transfer risk of loss to a third party
– Flexible time to redeem the cash for the beneficiaries – Not labour intensive for CARE or its partner -Can already be familiar to beneficiaries (e.g. remittance) |
– Lack of branches in remote rural areas
– Expensive commissions – Rapid set up but then low capacity to deliver the cash to a high number of beneficiaries |
Repeated payment
Failing banking system or when bank services are more expensive Where transfer company are regularly used by beneficiaries |
| Post office | Direct cash | – Transfer risk of loss to a third party
– Flexible time to redeem the cash for the beneficiaries – Not labour intensive for CARE or its partner – Often aligned with government policy -Often seen as a public sector service provider rather than private sector provider |
– Lack of post office in remote rural areas
– Lack of cash flow – Delays due to internal bureaucracy |
Repeated payments
Areas with good post office coverage |
| Trader | Direct cash | – Transfer risk of loss to a third party
– Flexible time to redeem the cash for the beneficiaries – Low set up and transaction costs – Higher multiplier effect on the local market |
– Poor record keeping:
+ increased risk of fraud + need for additional finance team member within CARE or implementing partner for prompt reconciliation – Initial lack of interest from the traders |
No banking system, post office, transfer company or mobile coverage. |
| Voucher | – Transfer risk of loss to a third party
– Flexible time to redeem the cash for the beneficiaries – Low set up and transaction costs – Higher multiplier effect on the local market – CARE or its partners can easily influence recipient choice and promote certain practices |
– Limit beneficiaries choice on where to spend the money
– Poor record keeping: + increased risk of fraud + need for additional finance team member within CARE or implementing partner for prompt reconciliation – Initial lack of interest |
Cash grant not appropriate. |
