Changing the way social pensions are paid in India
In Bihar, social pensions have been traditionally delivered through manual cash disbursements at payment camps organised by Panchayats. The Government of Bihar, through the Department of Social Welfare, is moving towards the payment of pensions by direct bank transfer. This will be based on the digitisation of current enrolment lists along with the manual addition of bank account details. The Department of Social Welfare are being supported in this reform through the Bihar Integrated Social Protection Strengthening (BISPS) project of the World Bank.
We were contracted under BISPS to:
- compare leakage rates between blocks with digitised and non-digitised databases;
- conduct a rapid assessment of the payment process experienced by pension beneficiaries, capturing their experience with the past round of payment camps; and
- identify constraints impeding service delivery for beneficiaries through survey data and field observations collected, and provide these inputs as background materials for the design of pension payment pilots.
Direct benefit transfers (DBT), or digitising government payments, offer a huge opportunity to increase efficiencies in government payment systems, while building a digital architecture that can do both: payments and financial inclusion. However, two primary bottlenecks impede the progress of this reform in the case of social pensions. First, there are potential negative repercussions of digitisation on beneficiaries in the absence well-defined processes for digitising massive legacy paper records. Second, beneficiaries of social pensions constitute a vulnerable group, and therefore would need additional interventions to realise the transformative potential of DBT. Therefore, this assignment sought to provide an implementation roadmap to overcome these challenges.
We undertook a scheme-level audit by independently constructing eligibility lists in 32 villages across Bihar, and comparing them with official records. Reasons for inclusion and exclusion errors were delineated further, distinguishing those introduced at enrolment from those incurred at payment. Further, the potential and limits of digitisation of databases was established through qualitative fieldwork.
The analytical outputs were used to recommend five pilots for pension payments via direct benefit transfers. These were designed to address binding constraints to DBT as revealed by the audit and the field-level observations:
- difficulties linking beneficiaries to bank accounts;
- using Aadhaar Payment Bridge;
- reducing inclusion and exclusion errors; and
- physical inconvenience of withdrawing cash for beneficiaries.