March 2

Dr. Valerie Nkamgang Bemo / Dilwonberish Aberra / Jamie M. Zimmerman

Unlocking the Power of Digital Financial Services for Humanitarian Response

Global humanitarian crises – and the aid systems that respond to them – are undergoing massive change. More people are in crisis than ever before. In 2016, 65 million people were displaced by conflict and another 22.5 million were affected by weather-related disasters.

Meanwhile, the humanitarian sector is transforming how it responds to crises. It’s increasingly moving away from a traditional, commodities-based approach toward cash-based assistance. What was until recently a fringe tactic in the overall aid assistance toolkit has come of age. Ahead of the World Humanitarian Summit in June 2016, the U.N. Secretary General Ban Ki-Moon supported the transformation by calling for cash to become the go-to mechanism for distributing humanitarian aid.

The key to adapting to the new reality lies in tapping new approaches and new technologies that allow the sector to respond faster and better.

Digitizing cash payments through digital financial services (DFS) can provide heightened security, increased accountability and transparency, faster distribution and a scalable transfer model – all currently cruxes for the physical delivery of cash. Early examples of digital cash payments include supporting Ebola response workers in Sierra Leone and monthly aid stipends to refugees in Dadaab refugee camp in Kenya.

In addition, DFS can open a pathway to greater financial inclusion and resilience for crisis-affected populations. This not only helps poor and affected households access aid during crises, but it also gives people the tools they need to better manage future risk and shocks.

This means that DFS builds bridges between the humanitarian and development sectors, which has been a long-desired development goal. This goal motivated the Barcelona Principles for Digital Payments in Humanitarian Response, which was co-created in 2016 by 25 of the largest humanitarian responders.

Unfortunately, despite the enthusiasm and promise, progress has been slow. Many solutions employed by humanitarian agencies today remain one-off, fragmented solutions. Few of these solutions are shared across agencies and fewer utilize shared, standards-based systems such as commercially available, off-the-shelf DFS products.

So, what is preventing humanitarian agencies from leveraging these DFS systems for cash-based aid disbursement, and what might we do to remove those obstacles? A new report by the Bill & Melinda Gates Foundation sheds new light on this question.

First, the challenge is not the technology: Existing DFS systems meet the core payment needs of humanitarian agencies. However, four non-technical barriers stand in the way.

  1. Regulations that require personal identification documents that often aren’t possessed by crisis-affected people;
  2. Strict donor-imposed reporting requirements for tracing funds that limit the ability to provide a single, secure, general purpose account that beneficiaries control;
  3. Damaged or insufficient wireless network infrastructure; and
  4. Inadequate access to the local agents and merchants needed to process digital payments in crisis-affected geographies.

To be fair, humanitarian responders must choose approaches and tools that work within the constraints present in a crisis and cannot alone address these barriers. The barriers are the result of complex local circumstances across the public, private and nonprofit sectors, and they need a multi-sector approach to unlock the potential of DFS.

There are four specific areas where more work is required:

  1. Standardizing the approach to beneficiary data collection. There is a wide spectrum of beneficiary registration processes, systems and tools across humanitarian agencies, and the lack of standardization weakens the ability of regulators and DFS providers to coordinate with the sector. If the humanitarian community agreed to a common, minimum data set for collection and format of beneficiary registration data, it could enable regulators to better structure regulation that allows for flexibility in crises, reduces the need for solution customization, and supports existing national and global digital identity programs.
  1. Agreeing in advance on how to adjust the rules. Identifying, negotiating and enacting key DFS regulations after a crisis can significantly delay or prohibit a rapid response by agencies. Identification and negotiation needs to happen before a crisis. Emergency DFS regulatory templates could facilitate this preparedness activity by providing a standard, structured approach to negotiating, modifying and enacting time-bound regulations to address the barriers that prohibit the use of DFS in a crisis such as “know your customer” (KYC) and agent and merchant regulation.
  1. Rethinking donor reporting and control over the cash. To leverage DFS to drive financial inclusion and resilience objectives, donors must rethink reporting requirements so that agencies can more easily use standards-based systems that provide an enduring financial account for the beneficiary. Although a change to the status quo is required, mobile wallet systems may offer new monitoring opportunities. More collaboration between donors and agencies is needed to explore how DFS can even offer new possibilities for innovative metrics, processes and approaches to M&E.
  1. Experimenting for impact and culture change. The viability and utility of DFS will vary by crisis type (slow vs. rapid onset) and crisis phase (response vs. recovery vs. reconstruction). We need to better understand when, where and how to best leverage DFS in crises to effectively demonstrate the value of commercially available DFS systems in the short and long term. This will be critical for motivating additional private sector investment, as well as policy and systems change within agencies and donors.

Defining the role of DFS in humanitarian response is still very much a work in progress. The recommendations above will not solve all challenges in all contexts but are steps toward a vision where DFS positions the humanitarian sector and all those who engage with it to respond more effectively. This is why on March 21st, over 175 humanitarian and technology leaders will convene at Google Headquarters to discuss the most pressing needs and the role of technology in moving towards solutions, among them digital payments. The global humanitarian need is increasing and there is no time to lose.


Dr. Valerie Ngamkang Bemo is a senior program officer (Emergency Response) and Dilwonberish Aberra is an associate program officer (Financial Services for the Poor) at the Bill & Melinda Gates Foundation. Jamie M. Zimmerman is a senior associate for BFA.

This post reflects the findings just published by the Bill & Melinda Gates Foundation from their Emergency Mobile Wallet project, conducted in partnership with Ericsson in 2016. These findings reflect the analysis and outcomes of that project and do not necessarily indicate the strategic direction of the Emergency Response or Financial Services for the Poor team.


Finance, Technology
data, digital finance, fintech