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 or Implementing Partner Direct cash
  • Quick to initiate
  • Rapid beneficiary access to cash
  • Variable and flexible distribution points
  • No transaction fees
  • High risk to safety of staff and beneficiaries
  • Higher risk of fraud and corruption (or suspicion of either)
  • Labor intensive and time consuming in terms of planning for CARE or 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 has resorted 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 labor intensive for CARE or its partner
  • Solid audit and reconciliation process
  • Access to branches in remote or rural areas may be minimal
  • Functioning banking system
  • Repeated payment

 

Check
  • Safer than direct payment by CARE or partner
  • Transfers risk of loss to a third party
  • Flexible time to redeem the cash for the beneficiaries
  • Strong audit and reconciliation process
  • Access to branches in remote or rural areas may be minimal
  • Long check writing time
  • Thorough check signature process
  • Beneficiaries may be unfamiliar with this mechanism
  • Functioning banking system
  • Repeated payment
  • Small-scale project
Bank account
  • Safer than direct payment by CARE or partner
  • Transfers 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 labor intensive for CARE or its partner
  • Strong audit and reconciliation process
  • Possibility of saving in the bank account
  • Access to branches in remote or rural areas may be minimal
  • Fees associated with opening and operating bank account
  • Beneficiaries may not have the documentation/identification necessary to open a bank account
  • Functioning banking system
  • Repeated payments
  • When complemented with training on financial inclusion
ATM Card
  • Safer than direct payment by CARE or partner
  • Transfers risk of loss to a third party
  • Flexible time to redeem the cash for the beneficiaries
  • Quick if there is an existing relationship with the bank
  • Increased financial inclusion of beneficiaries and usually high acceptance from beneficiaries
  • Not labor intensive for CARE or its partner
  • Solid audit and reconciliation process
  • Possibility of saving on the card
  • Lack of ATMs in remote rural areas
  • Potentially 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 ATM card
Mobile phone Mobile phone
  • Safe and usually discrete way of transferring cash
  • Transfer risk of loss to a third party
  • Not labor intensive for CARE or its partner
  • Flexible time to redeem the cash for the beneficiaries
  • Possibility of saving in e-wallet
  • Lack of beneficiary access to mobile phone – especially women (or extra costs of mobile phone distribution)
  • Unfamiliarity of the beneficiaries with the mobile money
  • Lack of stable mobile network
  • Potentially long and costly set up (SIM card cost, etc.)
  • Loss/theft of phone or change in mobile number
  • Possible error (sending to the wrong number)
  • No donor visibility
  • Repeated payments
  • 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 labor 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 cash to large groups 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 labor 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
  • Transfers 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
  • Transfers 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
  • Limits beneficiary 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