By Ruben Barreto & Natalie Chun (Asian Development Bank)
Modernizing government-to-person (G2P) pension payments from traditional cash-based to modern electronic-based delivery systems can improve outcomes for pensioners, government entities, and financial services providers.
Cash operations, though convenient in some circumstances, involve manual handling procedures in the distribution process that entail large overhead expenses and significant operational risks. These are highly susceptible to fraud and leakages due to difficulties in appropriately reconciling payments. However, experience has shown that implementing electronic-based G2P payments can be challenging, especially when financial infrastructure is not well developed.
In 2009, the Republic of Tajikistan became one of the first countries in the Central Asian region to implement electronic G2P payments to pensioners. This change occurred because the Ministry of Labor and Social Protection of the Population (MLSPP) and the State Bank of Tajikistan (Amonatbank, the pension payments agent) desired to (i) reduce the average time for release of funds from the State Agency for Social Insurance and Pensions (SASIP) to beneficiaries, (ii) improve the quality of service provided to pensioners, (iii) reduce costs of administering pension payments and eliminate opportunities for fraud and misuse of funds through a secure channel of automation, and (iv) promote financial inclusion. As of October 2012, the electronic system had been implemented in 15 of 68 districts covering roughly 192,000 of Tajikistan’s approximately 596,000 pensioners. Districts were selected for the new system according to the local availability of financial infrastructure and stable electricity supply to ensure that pensioners would have sufficient points from which to access their funds.

Source: SSRN