COST BENEFIT ANALYSIS FOR DIGITAL PAYMENTS IN LESOTHO
CBA for digital payments in Lesotho summary report.
Innovative technological advances are leading the rethinking of market based business models applied by financial intermediaries that previously did not consider low income rural poor populations as a potential market for investable funds. Electronic money is rapidly coming to the fore as a game changer made possible through the use of cheap mobile phones, expanded cellular network coverage and fast internet services. Technical advances catalysing innovations include new ways of delivering financial services through agents / agencies, realigning Know Your Customer (KYC) requirements employing Tiered or Proportional KYC that encourage low income clients to open electronic money accounts, facilitating savings mobilisation, access to credit and insurance services.
As Africa’s highest contributor of social protection, Lesotho’ treasury faces considerable pressure to meet Government’s social protection obligations of mitigating the impact of poverty on Basotho. Declining revenues from the Southern African Customs Union (SACU) threaten to derail the social protection agenda and plunge more Basotho deeper in poverty. Consequently financial inclusion is gaining traction within the Government of Lesotho (GoL) as a strategic intervention to ameliorate poverty and induce unbanked low income, rural Basotho into the modern financial system where they can access and benefit from access to credit, savings mobilisation, access to employment and business development services promoting the growth of micro, small and medium enterprises.
The objective of this study was to identify, measure and value economic, financial and social benefits and costs of defined policy interventions to transform Lesotho’s economy from cash based payment platforms to an electronic payment platform. This was followed by an assessment of the existing legal, policy and regulatory frameworks and finally the analysis of technical and technological requirements of payments and collection points to develop electronic payments platforms.
The study utilised two case studies namely, the Child Grants Programme (CGP), representing social transfer payments – G2P; and Lesotho Revenue Authority (LRA) Electronic Taxation Project representing revenue collection – B2G; to demonstrate feasibility of transitioning to electronic payments. The case studies illuminated opportunities and challenges of electronic payments and revenue collection platforms from three sides; that of economic and financial viability; the legal, policy and regulatory feasibility and technical and technologically viability for payments and collection points to promote cashless payment systems.