Social protection programs in the form of social cash transfers (SCTs) to vulnerable households and individuals have been adopted at an unprecedented scale across the Global South. Largely absent from the African continent until the early 2000s, SCTs are now included in development strategies in most countries in sub-Saharan Africa. In 2019, all countries in Southern Africa, as well as close to 90% of West African countries and 80% of East African countries had at least one type of SCT program in place. While most programs initially relied on manual cash disbursements, digital ‘financially inclusive’ payment technologies have been on the rise since the early 2000s. Yet the existing literature on SCTs has paid little attention to the payment modalities, focusing instead on other aspects such as policy making processes, impact evaluations and affordability.

This paper addresses this gap through an overview of current practices and trends in the field of SCT payment systems in sub-Saharan Africa. The paper explores the use of different payment instruments and providers, as well as the considerations, practicalities and implications of different payment systems, based on an extensive review of the scholarly literature, as well as a variety of non-academic sources. It covers a total of 130 non-contributory, cash-based social assistance programs in 44 sub-Saharan African countries, including, among others, social pensions, disability grants, child benefits and poverty-targeted household or family support payments. The focus of this paper lies on national safety net programs with a minimum level of government ownership and does therefore not include short-term humanitarian cash transfers.

The findings reveal an increasing uptake of electronic payment methods for SCTs, usually in the form of a combination of various payment instruments, rather than a single disbursement method. Smart cards are used in 29 programs, usually in combination with biometric verification via fingerprint scans, as well as bank accounts for beneficiaries. Payments directly into bank accounts – either provided by the program or into beneficiaries’ personal accounts – are made by 58 programs, and 22 programs have used mobile money as a payment instrument. This shift towards the adoption of digital payment mechanisms has been promoted by international institutions and donors, as well as the emergence of financial inclusion as a key pillar of the global development agenda and the resulting adoption of financial inclusion strategies by numerous national governments. Additional factors driving SCT payment digitization include concerns over fraud and leakage in cash-based payment systems, as well as the cost and logistical complexity of delivering cash to ever larger numbers of beneficiaries.

The increasing adoption of electronic payment methods has opened up new business opportunities for private financial companies and other service providers. Not only do they supply the necessary technology and expertise to design and implement ‘financially inclusive’ payment systems, but they are keen to tap into the previously neglected ‘bottom of the pyramid’ market by offering financial products and services to SCT beneficiaries.

A total of 50 programs surveyed in this study have entered into various forms of partnership with commercial banks, either for electronic transfers into bank accounts, or cash withdrawals through the bank’s ATM or branch network. Some programs even open bank accounts for SCT beneficiaries and subsidize the cost of these accounts, while others require beneficiaries to have (and pay for) their own accounts in order to receive their payments electronically. In addition, large retailers as well as local traders and mobile money agents are increasingly used as payment agents for the disbursement of SCT payments as they represent a flexible and cost-effective alternative to traditional ‘brick and mortar’ bank branches. State-owned or state-subsidized postal networks and post banks are another popular payment partner and are used in 39 programs across 12 countries. State-owned retail banks, microfinance institutions, non-bank payment providers, NGOs and local savings and credit cooperatives are not widely used as SCT payment providers in sub-Saharan Africa.

Yet limited financial infrastructure and administrative capacity continue to hamper digitization efforts, particularly in low-income countries and rural areas. Moreover, unregulated digitization and privatization of SCT payments has led to adverse impacts on beneficiaries in some cases, highlighting the continued importance of state-owned payment channels such as postal networks, as well as regulatory oversight. And despite the growing adoption of electronic payment instruments, cash-based payments remain a key element of most SCT programs in sub-Saharan Africa.

At least 94 programs offer cash payments in some form, and the cash-based nature of the local economy in most African countries makes it unlikely that electronic transfers will fully replace cash-based payments in the near future. Even in programs where account-based or mobile payments are offered, beneficiaries have often been found to merely use them as a cash-out mechanism, rather than as a stepping stone towards greater financial inclusion. This raises the question as to what extent payment digitization truly benefits the recipients of SCTs who continue to queue for cash, except that they now do so at an ATM, bank or mobile money agent, rather than at a state-owned pay point, village square or community centre.

The available evidence suggests that the adoption of electronic payment methods and digital financial services among beneficiaries would require the establishment of a broader digital payment ecosystem in which the SCT payment instrument is accepted as a means of payment even in small local shops and by informal traders. Moreover, financial and technological education of beneficiaries, adequate transfer values, as well as the development of appropriate and suitable tailor-made financial products, would be required to make digital financial services a viable, useful and attractive service for SCT beneficiaries.

Overall, the SCT payment landscape in sub-Saharan Africa is changing rapidly, and payment reforms, pilot projects and digitization efforts can be expected to continue as more and more countries enter the digital age and expand their SCT programs to tackle poverty and inequality. Mobile money is likely to become a more widespread payment instrument as more and more countries adopt appropriate financial legislation for its use, and the number of mobile money users on the continent continues to grow. And while cash is unlikely to disappear as a payment instrument for SCTs in the near future, the COVID-19 pandemic is likely to act as an accelerator for further digitization and innovation in the SCT payment space.