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Strengthening Public Financial Management for Social Protection (SPFMSP) Project

Finance Division, Ministry of Finance

Government of the People’s Republic of Bangladesh

Costed Reform Plan for Social Protection

Cash Payments in Bangladesh

Costed Reform Plan for Social Protection Cash Payments in Bangladesh

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Reform Plan in Brief

Backdrop

The National Social Security Strategy (NSSS) of the Government of Bangladesh emphasises on ‘strengthening the delivery of the National Social Security System’. The strategy prioritizes key reform in strengthening payment mechanism to make it Government to Person (G2P) payment system so that it promotes financial inclusion and prevents leakages. In this backdrop, th e Finance Division had requested the SPFMSP project to perform a research study on ‘Payment System’ and suggest the way forward for improving the existing payment system as required by the NSSS.

Findings of the said study revealed that all the prevalent methods of delivery suffer from challenges on the demand-side as well as on the supply-side, and are generally characterized by weak information systems and lack of adequate accountability structures. Inadequate monitoring along with unsatisfactory beneficiary identification mechanisms may be encouraging duplicate and fraudulent payments. Payment system of some social protection programmes are way too costly for beneficiaries in terms of their travel expenses and loss of working hours (opportunity cost) in collecting the benefits. As the current system stands, beneficiaries usually have no right to choose a mode of payment most suitable to them. Based on such findings, the study proposed for establishment of an efficient and effective payment system, which will empower the beneficiaries to be able to make informed choices, be cost-effective and transparent, and have robust MISs and system-driven budget management and accounting.

The findings and recommendations of the study were discussed in a dissemination workshop with all the major stakeholders including the concerned government agencies, development partners, banking regulator, and current and potential payment service providers from government as well as private sector. The workshop strongly endorsed the payment system proposed by the study, and recommended that a reform plan be prepared for implementation of the proposed system. The workshop also suggested that the system may be piloted in two social protection schemes before it is rolled out for all the other schemes. In line with the recommendations of the workshop the SPFMSP project was mandated to develop a reform plan.

Proposed Reform Plan

The proposed reform plan targets the Payment System from the perspective of three different sets of stakeholders that are independent but are integrated within the system. While it strengthens the supply side on part of the exchequer and the concerned line ministries, it also focuses on empowering the beneficiaries at the demand side. From the perspective of the Finance Division, it works onminimizing the transaction costs and providing greater transparency to the system. It also ensures that the money is withdrawn from the Treasury, only when the payment is due and has been credited into the beneficiaries’ accounts. For the line departments, it eases out most of their functions and time that they spend on processing the payments to the beneficiaries as well as on independently negotiating and signing contracts with bankers / service providers.It also averts a situation where government money may be lying idle in intermediary banks for long durations.Most importantly, the reform system keeps the beneficiaries as the focal point of social protection programmes and strives to empowerthem to make an informed choice for obtaining their payments through any of the three principal modes currently available in the country, i.e., through the banks, mobile financial services (MFS) and the post offices.Following are the salient features of the proposed reform plan:

1. The current procedure for selection of beneficiaries will continue. Departments under the LMs will remain to be the custodian of the data on beneficiaries and will be responsible for regularly updating them through their field staff. Beneficiaries’ data shall also be digitized


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at the field level capturing their NIDs. 2. Beneficiaries will choose the mode of receiving the payments from among the approved

channels and will inform accordingly to the field officials of the concerned department. Field staff, with the help of local community organisations and elected officials, will educate the beneficiaries and support them to make appropriate choice for mode (bank, MFS providers, postal) of receiving their payments. They will also be supported to choose a particular provider within their opted mode of payment.

3. MIS units of the departments will maintain the data of beneficiaries on the platform and formats compatible with SPBMU MIS.

4. Before the start of every payment cycle, the field offices will update the list of beneficiaries in their MIS under each scheme along with the beneficiaries’ payment option. Department MIS will verify the correctness of the updated data and the corrected data will be automatically and immediately transferred to SPBMU MIS.

5. The SPBMU MIS will validate the data with help of NID database of beneficiaries as well as with the databases of all the other line ministries on a real-time basis.

6. The SPBMU MIS will highlight any discrepancy found in the data. The concerned line ministry will be responsible for addressing all such discrepancies.

7. Once the data is validated by SPBMU and whenever payment under any particular scheme becomes due, the concerned DDO assigned for a particular social protection scheme will

8. prepare the bill/claims for payment authorisation on the basis of ‘validated’ beneficiary data andsubmit the same to CAO through iBAS++.

9. The concerned CAO after performing all the required statutory checks prescribed by existing regulations will instruct Bangladesh Bank through the iBAS++ platform for effecting payment to the beneficiaries.

10. On receiving payment instructions from the concerned CAO, the Bangladesh Bank(BB) will access the EFT file at iBAS++ platform and will instruct the designated banks to credit the beneficiary accounts through the PSP selected by them.

11. After the transfer to beneficiaries account the PSP shall furnish the payment list to BB through their designated banks. The BB in turn will forward the same to the respective CAOs where it would be reconciled with the DDOs.

12. Accounting and auditing of the disbursed funds will continue to be conducted as per the existing provisions in the rules.

Following three diagrams schematically depict the three stages of the proposed operational procedures

• Validation of beneficiary data

• Payment Process, and

• Post Payment Reconciliation


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Implementation Requirements

In order to implement such a system, it may be necessary to develop and strengthen certain systemic processes and capacities at the FD, the line ministries as well as the banking system, MFS providers and the BPO. For the FD, while it is an essential prerequisite to operationalise the central MIS at the SPBMU that is linked with the iBAS++ on one hand and the MIS of line ministries on the other, there is also a need to access the NIDs of the beneficiaries for validation purposes. On the part of the line ministries, it is absolutely necessary to have dig itized databases of the beneficiaries that are verified and mapped to their NIDs. While the data entry and verifications with NIDs could be performed at the field level, the digitized data should be integrated into the departmental MIS at the central level. At the level of the Central Bank, there may be a necessity to enhance the capacity for a real-time transfer of the funds through the BEFTN to the concerned banks, MFS and BPO that will need to develop the capacities to credit each individual account using the core or locally developed banking solutions. While many of these elements already exist in some form or the other with each stakeholder, it would be essential to bring all of these pieces together and make them compatible so that an integrated payment system may be implemented by the GoB.

Costing the Reform

During the process of developing the reform plan, extensive consultations were held with Finance Division, various line ministries, Central Bank, and payment service providers such as scheduled banks, MFS providers and Bangladesh Post Office. Such consultations also helped the team to estimate the cost associated with implementation of IT solutions for the reforms and identify various cost points for capacity development at all levels within Government. The reform plan estimates that the appropriate fees for transferring the cash benefits could be 1% of the total cash disbursed to the beneficiaries across the three principal payment channels. Such fees should be provided by the Government to the payment service providers and the beneficiaries should receive all the services with respect to social protection cash transfers, including the cash outs, free of any charge.

Way Forward

It is proposed to pilot test the reforms on two schemes, namely, Maternity Allowance of MoWCA and Old Age Allowance of MoSW in a limited geographical area. It is further proposed to cover all beneficiaries of the two schemes from selected upazilas for the pilot.


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List of Acronyms a2i = Access to Information

BDT = Bangladeshi Taka

BEFTN = Bangladesh Electronic Fund Transfer Network

BPO = Branch Post Office

CAO = Chief Accounts Officer

CBS = Core Banking System

CGA = Controller General of Accounts

DAO = District Accounts Officer

DBBL = Dutch Bangla Bank Ltd.

DCA = Divisional Controller of Accounts

DDO = Drawing & Disbursing Officer

DIS = Deposit insurance Scheme

DSP = Department of Social Protection

EFT = Electronic Fund Transfer

EGPP = Employment Generation Programme for the poorest

EMTS = Electronic Money Transfer Scheme

FFWP = Food for Works Programme

FAO = Food and Agriculture Organisation

G2P= Government-to-Public

GBP = British Pound Sterling

GO = General Order

HO = Head Office

HPO = Head Post Office

HSSP = Higher Secondary Stipend Programme

HWDWA = Husband-Deserted, Widowed and Destitute Women Allowance

KYC= Know Your Customer

MIS = Management Information System

NEFT = National Electronic Fund Transfer

NGO = Non-governmental Organisation

NID = National Identification Data

OAA = Old Age Allowance

PD = Project Director

PESP = Primary Education Stipend Programme

PIC = Project Implementation Committee


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POS = Point of Sales

PPP = Public-Private Partnership

SESP = Secondary Education Stipend Programme

SESIP = Secondary Education

SEQAEP = Secondary Education Quality and Access Enhancement Programme

SPFMSP= Strengthening Public Financial Management for Social Protection

SPBMU= Social Protection Budget Management Unit

SSNP = Social Safety Net Programmes

SSP = Social Safety Payment

SSPF = Social Safety Protection Fund

SPO = Sub Post Office

SWAPNO = Strengthening Women’s Ability for Productive New Opportunities

UAO = Upazila Accounts Officer

UDIC = Upazila Development Information Centre

UEO = Upazila Education Officer

UIDAI = Unique Identification Authority of India

UNO = Upazila Nirbahi Officer

USEO = Upazila Secondary Education Officer

USSO = Upazila Social Service Officer

VGD= Vulnerable Group Development

VLE = Village Level Entrepreneur

WFP = World Food Programme


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Table of Contents

Reform Plan in Brief ........................................................................................................................... i

List of Acronyms ................................................................................................................................ v

Table of Contents .............................................................................................................................. 1

Chapter 1 .......................................................................................................................................... 3

A Note on Existing Payment Systems for Social Protection in Bangladesh ........................................... 3

1. Introduction ........................................................................................................................... 3

2. Existing Payment Systems ....................................................................................................... 3

3. Limitations of the Existing Payment Systems ........................................................................... 4

4. Bank Asia Case Study .............................................................................................................. 5

5. Conclusion .............................................................................................................................. 6

Chapter 2 .......................................................................................................................................... 8

Reform Plan for Social Protection Payments ...................................................................................... 8

1. Introduction ........................................................................................................................... 8

2. Desired Framework for an Effective and Efficient System for Social Protection Payments ......... 8

3. Operational Procedure ........................................................................................................... 8

4. Proposed Validation Process- Prior to Payment Phase ............................................................. 9

5. Proposed Process for Payment ...............................................................................................10

6. Proposed Reconciliation Process after Payment .....................................................................12

7. Salient Features of the Proposed Reforms in the Payment System ..........................................13

7.1 Line Ministries Engaged in Social Protection Cash Transfers .........................................14

7.2 Bangladesh Bank ..............................................................................................................15

7.3 Social Protection Budget Management Unit (SPBMU) ..................................................15

7.4 Payment Service Providers (PSPs) ................................................................................16

8. Advantages of the Proposed Payment System ........................................................................16

9. Cost Components and Fees to be Paid to PSPs .......................................................................17

10. Conclusion .............................................................................................................................18

Chapter 3 .........................................................................................................................................19

IT Requirements for Payment System Reform in Bangladesh .............................................................19

1. Introduction ..........................................................................................................................19

2. General Flow of Payment Information ....................................................................................19

3. Technical, Staffing and Training Requirements .......................................................................20

3.1 Line Ministries .................................................................................................................21

3.2 Social Protection Budget Management Unit (SPBMU) .......................................................23

3.3 Office of the Controller General of Accounts (CGA) and iBAS++ ........................................25

3.4 Bangladesh Bank (BB) ......................................................................................................25

3.5 Payment Service Providers (PSPs) .....................................................................................25

4. Security of the IT Systems ......................................................................................................25

5. Implementation of the Proposed Payment Systems ................................................................26


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6. Estimated Costs for IT implementation ..................................................................................26

7. Conclusion .............................................................................................................................29

Chapter 4 .........................................................................................................................................30

Capacity Enhancement, Awareness Generation, and Grievance Redressal Mechanisms ....................30

1. Introduction ..........................................................................................................................30

2. Capacity Enhancement ..........................................................................................................30

3. Training Needs .......................................................................................................................31

4. Generating Awareness among Beneficiaries ...........................................................................32

4.1 At Village Level ................................................................................................................32

4.2 At Upazila and District Levels ...........................................................................................33

4.3 At National Level ..............................................................................................................33

5. Beneficiary Grievance Redressal ............................................................................................33

6. Cost Components ..................................................................................................................33

7. Conclusion .............................................................................................................................34

Chapter 5 .........................................................................................................................................35

Implementation Strategy and Proposed Pilots ..................................................................................35

1. Introduction ..........................................................................................................................35

2. Implementation Strategy .......................................................................................................35

3. Pilot Testing of the Proposed Reforms ....................................................................................36

4. Proposed Timelines for the Pilots ..........................................................................................37

5. Conclusion .............................................................................................................................39

Annexure 1 ......................................................................................................................................40

Operational Guidelines for the Proposed Social Protection Payment System .....................................40

Annexure 2 ......................................................................................................................................54

Draft Service Level Agreement (SLA) Between Line Ministry (Name), Government of Bangladesh &

Payment Service Providers (Scheduled Banks) ........................................................................54

Annexure 3 ......................................................................................................................................58

Draft Service Level Agreement (SLA) Between Line Ministry (name), Government of Bangladesh &

Payment Service Providers (Mobile Financial Services Providers) ...........................................58

Annexure 4 ......................................................................................................................................62

Draft Service Level Agreement (SLA) Between Line Ministry (Name), Government of Bangladesh &

Payment Service Providers (Bangladesh Post Office) ..............................................................62

Annexure 5 ......................................................................................................................................66

Proceedings of Workshop on Dissemination of Payment System Reform Plan ...................................66


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Chapter 1

A Note on Existing Payment Systems for Social Protection in Bangladesh

1. Introduction Acceptability of social protection programmes as an effective tool to reduce poverty is rapidly increasing within policy circles across the globe. At the same time, it is also acknowledged that

direct cash transfers to the beneficiaries1 may be a far more efficient instrument than indirect subsidies and price controls. In fact, some scholars are now strongly advocating direct cash transfers to maintain universal basic incomes and abolish all other social protection programmes. Direct cash benefit transfers, however, cannot be effectively undertaken in absence of appropriate payment systems. It is therefore vitally important for policymakers to make efforts towards creating a payment system that is cost-effective and transparent, and has ability to reach all the citizens of the country however remotely they are located.

This chapter analyses various issues facing the existing payment systems for social protection in Bangladesh. A detailed analytical description of various prevalent methods of social protection payment has already been presented in a research study report on Payment System commissioned by SPFMSP. This chapter, however, summarizes the existing payment system architecture in Bangladesh, and takes a detailed look into an important pilot undertakenby the government towards improving the existing systems by leveraging modern technological tools , and analyses its replicability and sustainability.

2. Existing Payment Systems Various line ministries and their constituents entrusted with making cash payments under their respective social protection programmes have been making attempts to improve the payment system in the interest of beneficiaries and for overall improvement of the management of their programmes. As is generally the case with government agencies, the ministries developed their own methodologies for addressing the problems they perceived in their respective payment systems. Most of such improvements were therefore attempted in total disregard of what was being done in other ministries. Thus, if a problem associated with the payment system was addressed by one ministry, it remained unaddressed in the other ministries. In addition, most of such improvements were driven by ministries’ own needs for better management of programmes rather than focusing on beneficiaries’ problems and issues.

In the current situation, social protection schemes administered by different line ministries are following different payment methodologies. While MoDMR is using treasury mode for payment, thus also involving district accounts officers and upazila accounts officers while making payments, other ministries are using centralised payment mechanisms involving banks, mobile financial services and post offices while engaging with only the chief accounts officers located centrally.

1 ‘Beneficiary’ is not deemed to be an appropriate way to describe people and households covered under any social protection programme. We would prefer referring to such people and households as ‘clients’, ‘participants’, ‘customers’ or ‘partners’ of the programme. However, as the term ‘beneficiary’ is generally accepted in policy circles in Bangladesh, this reference will be used throughout the report for such people and households.


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3. Limitations of the Existing Payment Systems The existing systems of payment generally suffer from various limitations and constraints as is described below:

• The prevalent methods of social protection payments suffer from the challenges on demand-side as well as on the supply-side. Systems of flow of information are very weak with lack of adequate accountability structures. Monitoring of payments faces several constraints and thus there is a strong possibility of duplicate and fraudulent payments within some of the current payment systems.

• There is no provision for recording and redressing beneficiary grievances.

• The treasury mode of payment suffers from limited outreach. Sonali Bank branches are few and far between(especially in rural areas) and thus the beneficiaries need to travel long distances for obtaining their payments. This is associated with significant travel and opportunity costs.

• The treasury mode of payment also involves local elected and civil officials, which is fraught with the obvious risks of leakages, rent-seeking, delays in payment, and elite capture of the programmes.

• Line ministries making payments through banking system are engaging only with the nationalised banks, although officially there is no such restriction in place. Thus, they lose out on utilising the networks of other banks, which could have directly benefited the beneficiaries.

• Most of the accounts opened for the purpose in banks are special accounts, and are only used to disburse cash benefits to beneficiaries. The banks do not permit beneficiaries to meet their savings needs through such accounts. Thus, a significant opportunity for financial inclusion of beneficiaries is lost.

• As the days of payment at bank branches are fixed, it causes serious inconvenience to the beneficiaries, other customers of banks and the bank staff.Beneficiaries need to wait for a long time in queues with no or inadequate facilities of drinking water, sanitation or seating, etc.

• Wherever the banks use their agent networks for such payments, they need to incur additional costs. There is no clarity on who should bear this cost.

• Similarly, there is an additional cost involved while making payments through mobile financial services or through post offices and different line ministries are following different criteria in calculating such costs and reimbursing the costs to service providers.

• In addition, as anecdotal evidence suggests, the banking, mobile financial services (MFS) and postal agents sometimes take advantage of lack of awareness on the part of beneficiaries and extract from them a larger amount than the prescribed commission , if any.

• In order to make payments through the modes other than treasury, the line ministry, departmental and project officials need to open accounts at central and at district/upazila levels with such service providers, which may be in violation of the rules and regulations on the subject. It may also be fraught with the serious risks of embezzlement of public money.

• Currently, the majority of cash benefits in social protection schemes are distributed either on quarterly, bi-annual, or annual basis, which is not in the interest of beneficiaries. One of the reasons for this is the costs and inconvenience associated with the payments. More frequent payments via more conventional payment methods entail larger expenses.

• The existing systems do not take adequate advantage of modern technology, or recent advances in electronic payments andinnovations in methods of payment.

• Most importantly, the payment systems, whether conventional or improved, do not provide any choice to beneficiaries. Whenever a programme has switched over from one


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method of payment to the other, it did not offer any opportunity to beneficiaries to exercise any option. All the beneficiaries of the programme were forced to switch over to the new mode of payment. One mode of payment, even if convenient for a set of beneficiaries across various social protection programmes, may be extremely inconvenient for other beneficiaries.

4. Bank Asia Case Study As mentioned earlier, various ministries, departments and projects have made several noteworthy efforts to improve the payment system. Access to Information (a2i),which is part of the Prime Minister’s Office, has been doing remarkable work in improving the payment system by supporting different line ministries and engaging with payment service providers across the entire payment infrastructure of the country. The team entrusted to design the costed reforms in payment system on behalf of the SPFMSP Project had an opportunity to visit one such initiative at Chandpore and witness a pilot programme on the delivery of old age, disability and destitute widow allowances through an electronic infrastructure developed by Bank Asia with active support from a2i.This pilot is being reportedly conducted for social safety net schemes (old age, widow and disabled pensions), food security programme, SWAPNOW and local government salary payments. The pilot covers 11,558 beneficiaries of social safety net schemes, 33,000 beneficiaries of food security, 216 of SWAPNOW and 286 of local government salary payment. Pilot for social safety net schemes is being conducted in twelve unions under five upazilas of five districts. The union visited by the team had about 900 beneficiaries of social safety net schemes.

Beneficiary data in these pilot areas has been captured by Bank Asia along with their photographs, NID details, fingerprints, mobile phone number and other demographic details. It is validated with the NID database while opening bank accountsfor the beneficiaries. Afterwards, their identity is authenticated online via fingerprints using the bank’s database. There are also provision of authenticating via PIN (can be provided to them on request), one-time password (OTP) (when the above two systems do not work) and face detection (using thebank’s database). Beneficiaries are issued ‘Near-field Communication’ (NFC) smart cards, the data on which can be captured by mobile phonesusingapplications. In case of laptops, however, the account number needs to be manually entered for retracting the information.

The old system of making entries on their pension cards and a register kept at the centre along with their thumb impressions on both the documents still continues.

Bank Asia dedicates six days for disbursing the amount for each payment cycle. The bank transports its staff for making payments during the six days earmarked for the payment. They carry their own equipment but are provided with space and furniture at the union council office for making payments. The payment is distributed ward-wise. Cash for disbursal is arranged by crediting the requisite amount into the employees’ accounts that they withdraw while going to the field for cash disbursal. There is no ‘cash-in-transit’ insurance for this and such transporting such a large amount of cash for six days continuously is fraught with several other security risks. The bank also incurs staff costs, transport costs, cash management costs, and supervision/monitoring costs for running this operation, which is basically the equivalent cost of setting up payment booths with electronic infrastructure. Bank Asia is, however, not being compensated to meet any of these additional costs- thus such a high cost of transfer for the intermediary greatly reduces the likelihoods of sustainably beyond the pilot or in a scaled -up context.

The beneficiaries are compelled to withdraw their money on the days fixed for their localities (wards). Bank usually keeps a window of six days for disbursing the amount for each payment cycle that comprises a quarterly payment. Each ward is generally allotted only one day for the purpose. The Social Welfare Department opens a special account at Bank Asia for this


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purposethat is operated jointly by the Upazila Social Service Officer and the Upazila Nirbahee Officer (UNO). The cheque gets deposited centrally by the DDO in this account to be further distributed to beneficiaries. When the money is credited in the beneficiary’s account, a text message is sent to the beneficiary. When a beneficiary withdraws the benefit, she/he again receives a text message informing them about the withdrawal.If they are unable to travel to the union council office for some reason on that particular day their authorised nominees can receive payments on their behalf. However, such nominees need permission from council chairman as well as the social welfare officer. Each union is provided with a social welfare officer but they are headquartered at upazilas. On the day of our visit, some nominees attended the union council office for obtaining the payment. They did get permission from the council chairman but had to wait for the social welfare officer to arrive. He arrived late but wanted the nominees to attend his office at the upazila for obtaining his permission. Nominees, agitated for obvious reasons, protested angrily against this as the officer, personally present there, could have permitted them on the spot. He finally relented and the matter ended there at least for that day.

In many ways, this is a very innovative pilot and is making great progress in terms of making payment systems more efficient. Various issues faced by the old system, however, still persist. For example, issues with identification at the time of payment are still prevalent under this pilot. This is due to the continued operation of the old system of making entries on pension cards and verification via a register kept at the Department of Social Service centre and beneficiary thumb impressions in tandem with the new banking system. This makes the innovative initiatives of the pilot slightly redundant.

Additionally, although bank accounts have been opened for the beneficiaries, the nature and scope of theseaccounts is severely limited. Despite investing heavily in developing such an efficient system, the beneficiaries do not get to take advantage of saving provisions offered by a regular bank account, which reduces the financial inclusion aspect of the pilot. Beneficiaries are also not empowered to make any choice regarding the mode of obtaining their payments and are restricted to withdrawing the money only on one predetermined day for the entire payment period of three months. Worse still, they are not facilitated to withdraw money from their own accounts in their own time. They are allowed to withdraw their money only on a

particular day in the entire period of three months for one payment cycle of the allowances2. In addition, transporting regular bank staff to union headquarters for making payments for each payment cycle is quite expensive and is not an initiative that is likely to sustain, especially if the bank is not suitably compensated.

5. Conclusion The prevalent methods of delivery suffer from the challenges on demand-side as well as on the supply-side. Systems of flow of information are very weak with lack of adequate accountability structures. Monitoring of payments faces several constraints and thus there is a strong possibility of duplicate and fraudulent payments within some of the current payment systems. Beneficiary identification arrangements too do not seem to be satisfactory. In the same vein, some systems are excessively taxing for the beneficiaries in terms of travel and opportunity costs. Moreover, one mode of payment, even if convenient for a set of beneficiaries across various social protection programmes, may be extremely inconvenient for other beneficiaries. There is no ‘one size fits all’ option but in the existing arrangements the beneficiaries very rarely have a right to choose a mode of payment most suitable to them.

2This has its own implication in terms of costs to be borne by the beneficiaries. As the beneficiaries cannot choose their own time for obtaining payments, their opportunity costs for obtaining payments increase. We came across a case where a young girl accompanying her disabled grandmother had to miss her school on the day of payment.


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It is therefore important to reform the payment systems in such a way that it addresses the limitations of the existing systems. The next chapter presents a detailed reform plan that leverages modern technology and recent advances in electronic payments while addressing the deficiencies of the existing systems.


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Chapter 2

Reform Plan for Social Protection Payments

1. Introduction This chapter presents a detailed plan to reform the existing payment system for social protection in the country. It begins with outlining a framework for an efficient system for social protection payments, which is followed by detailed operational procedures for different stages of implementation of reforms, and roles and responsibilities of various stakeholders.

2. Desired Framework for an Effective and Efficient System for Social Protection Payments

Any effective payment solution in the context of Bangladesh needs to incorporate the following elements and attributes:

• Empowerment of beneficiaries by allowing them to choose modes of payment for receiving the benefits

• Transparency in the administration of the system

• Detection and elimination of ghost beneficiaries, ineligible beneficiaries, and double dipping

• Cost-effectiveness on supply-side as well as on demand-side

• Speedy payments

• Low opportunity costs to beneficiaries

• Easy accessibility for all beneficiaries however remotely they are located

• Flow of data in real time from the supply-side to the payment service providers, and backward, immediately after the payment is effected

• System-driven budget management of all social protection programmes

• System-driven data flow among all stakeholder agencies

• System-driven accounting of disbursements

• Availability of an effective grievance redressal system

The proposed reforms in the social protection payment system have been guided by the general framework of principles as mentioned above. In particular, they intend to empower the social protection beneficiaries by allowing them to choose the most suitable payment option among

all the existing payment mechanisms. They also allow the line ministries (LMs)3 engaged in making social protection payments to utilise all the possible payment channels for such payments, with uniform service conditions and rates across all the social protection programmes.The reformed payment system will be backed by a modern technology-driven unified coordination and supervision mechanism over all the available modes of payment in the country.

3. Operational Procedure In the proposed payment system, LMs will continue to remain responsible for identifying the beneficiaries based on pre-defined eligibility criteria. Their field staff will update the

3 The term line ministry (LM) includes the concerned ministry, and all the departments and directorates working within the ministry, authorised under delegation of financial powers to make payment from a particular budget head of the Government.


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information on beneficiaries before each payment cycle, wherever needed, and send the same to the departmental authority prescribed to approve such updates. The information on beneficiaries will also include their choice of a payment method. The approved updated lists will be shared with the MIS unit of the concerned department/LM, which will also be automatically captured by the MIS unit at the SPBMU. Both the MIS units will work on compatible platforms and maintain the information in the same formats for better communication between the two. SPBMU MIS unit will keep scrutinizing the data to check for duplication and violation of any eligibility condition both within the schemes of a particular line ministry as well as across all the schemes of the government. The data on beneficiaries will mandatorily have each beneficiary’s NID number.

NID for beneficiaries will provide a unique identifier for this unified protocol being implemented by line ministries engaged in social protection cash transfers. All the bank, post office and MFS accounts of beneficiaries will be linked with their NID. NID identification will also serve as KYC for opening of accounts for beneficiaries. The proposed system will enable all the line ministries (LMs) engaged in making social protection payments to offer option of multiple payment channels to each beneficiary within all of their social protection programmes. The beneficiaries will have more than one payment method available to them for obtaining their payments. They will however need to choose one of the options and communicate it to the field personnel of the concerned line ministry or their payment intermediaries. They will be adequately informed to make a conscious choice considering their convenience and other relevant factors. The data pertaining to their choice of mode of payment will be captured at the MIS units of the concerned LMs and the Social Protection budget Management Unit (SPBMU- part of the Ministry of Finance).

Various stages of the proposed operational procedure are detailed below:

4. Proposed Validation Process- Prior to Payment Phase Before implementing the ‘reformed’ payment system by a line ministry, it is important that it develops its MIS and digitizes the data of beneficiaries on formats and platforms compatible to the ones being used by SPBMU MIS. SPBMU will provide all required support to the line ministries in this regard. Such data should also consist of the choice of beneficiaries of the most appropriate payment channel for them, their account numbers held at the concerned payment channels and their mobile numbers for communicating to them about crediting of benefits in their accounts.

The existing practice of identification of beneficiaries would continue to be vested with t he concerned line ministries, departments and the project functionaries. New beneficiaries will be identified by the field personnel of the concerned agencies before each payment cycle as per their existing practice, and their details will be entered in the concerned agencies’ MIS. While identifying beneficiaries it will also be ascertained from them as to what payment channel they would like to use for obtaining their cash benefits.

As shown in the Figure 1 below, the data on beneficiaries contained in the line ministry MIS will be automatically captured at the SPBMU MIS, which will validate the eligibility of beneficiaries with the help of the NID database,and would flag discrepancies in beneficiary details, if any, to the concerned line ministry. This would take care of fraudulent payments and double dipping. In addition, SPBMU MIS would check details of beneficiaries obtaining benefits from more than one scheme, whether administered by one line ministry or by different ministries, to check if the benefits obtained are as per regulations of the individual ministries. In some cases, a beneficiary obtaining benefits from one scheme is prohibited to obtain benefits from some other schemes. However, in the current system there is no mechanism to check and prevent such cases as different schemes do not ‘talk’ with each other. The proposed checks by SPBMU MIS would be able to identify such cases and help the concerned line ministries to correct the


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situation.

Line ministries will be required to address all discrepancies and anomalies in their beneficiary data as pointed out by SPBMU MIS to the satisfaction of SPBMU. The beneficiary data thus ‘validated’ will only be kept in the database of line ministry MIS and will be used for disbursing the cash benefits under the relevant scheme of the line ministry.

Figure 1

5. Proposed Process for Payment There are three principal payment channels currently in the country: scheduled banks, MFS, and Bangladesh post office. All the three channels have been expanding their reach by engaging agents in areas where they have had low penetration. They are willing to leverage such networks of agents for reaching out to social protection beneficiaries and disbursing cash benefits to them. All the three payment channels have provisions of opening beneficiary accounts and making disbursements to such accounts through centralised mechanisms.

As mentioned earlier, the beneficiaries will be adequately informed to make a considered choice in favour of a particular payment service provider. They will also be assisted to choose the most convenient bank or MFS provider if they decide to use such payment channels for obtaining their cash benefits. They will then be facilitated to open their accounts in such banks, MFS providers or post offices. Details on such choice as exercised by the beneficiaries will be entered in the beneficiary databases within line ministry MISs.

As shown in the figure 2, at the start of a payment cycle, the DDO assigned for a particular social protection scheme will prepare the bill/claims for payment authorisation on the basis of ‘validated’ beneficiary data and submit the same to CAO through iBAS++. The concerned CAO after performing all the required statutory checks prescribed by existing regulations will instruct Bangladesh Bank through the iBAS++ platform for effecting payment to the beneficiaries. This process will replace the current method of issuing advance cheques in the name of DDO or the bank.


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Figure 2

The DDO will also prepare the list of beneficiaries to be paid within the payment cycle on the basis of the validated data. This list will again be validated through SPBMU and would be hard-coded. The hard-coded list will then be accessed by iBAS++. The concerned CAOwill also have access to the list for verifying the payment authorisation demanded by the DDO with the number of eligible beneficiaries. On the basis of this list, the iBAS++ will prepare only one EFT (xml) file for the entire payment cycle containing the information on all individual beneficiaries to be paid in that particular cycle. This EFT file will be accessed by Bangladesh Bank on iBAS++ platform. Proposed process for the interface of iBAS++ with SPBMU is shown below in the Figure 3.

Figure 3


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On receiving payment instructions from the concerned CAO, the Bangladesh Bank (BB) will access the EFT file at iBAS++ platform and will sort it out according to each payment service provider (PSP) and instruct them to credit the beneficiary accounts accordingly. PSPs will also inform the beneficiaries through text messages on their registered mobile phones regarding crediting of cash benefits into their accounts. The accounts of the PSPs with BB will be settled on BEFTN at the end of the day on the basis of number of beneficiary accounts credited. As the MFS providers and Bangladesh Post office are not part of BEFTN currently they wil l designate a scheduled bank to communicate with BEFTN. BB fund settlement with MFS providers and Bangladesh Post Office will also take place through the designated bank only in the current situation.

If any transaction fails at the PSP level, it will reflect on BEFTN system as well as on iBAS++ system. The iBAS++ system will translate the information in English which will be accessed by the MIS units of SPBMU and LMs. DDOs will access this information on the MIS unit of the concerned LM and take further action to address the reasons for non-payment.

In the current situation, BB cannot use BEFTN to transfer money to the individual accounts of beneficiaries at the MFS providers or atBPO, but it can directly transfer the amounts to the accounts standing at scheduled banks that are on core banking system (CBS). However, after discussion with BB, it is proposed to initially allow BB to effect one EFT for all beneficiaries of a particular PSP. The PSPs, in turn, will transfer the amount directly to the beneficiary accounts within their own systems. Once the system stabilizes and the confidence levels at the banks and at BB improve, the BB may be asked to use BEFTN for directly crediting the benefits into beneficiaries’ accounts that are on CBS. The MFS providers and BPO will however need to develop relevant systems for their beneficiary accounts to be directly linked with the BEFTN. Until that happens, the system of BB transferring lump sums to designated accounts at their banks will continue.

Such limitations of the current system, however, do not adversely affect the efficiency of the proposed payment system. Banks on CBS, MFS providers and BPO have the capability to transfer money to individual beneficiaries and get back to BB within 24 hours (definitely within 72 hours in extreme cases).

Additionally, Payments may need to be staggered LM-wise on different dates so as not to load the BB system. It is suggested that an effort be made to fix cash transfer dates for all LMs in advance.

6. Proposed Reconciliation Process after Payment As mentioned above, and shown in Figure 4 below, the BEFTN will capture the information on cases where it is not possible to credit the beneficiary accounts due to some reason. This information will also be reflected on the iBAS++ system. The iBAS++ system will translate the information in English which will be accessed by the MIS units of SPBMU and the LMs. DDOs will access this information on the MIS unit of the concerned LM and take further action to address the issues that resulted in not crediting the benefits into some beneficiaries’ accounts and get back to SPBMU and the iBAS++. The BB in turn will again use BEFTN to transfer the remaining benefits to the deprived beneficiaries through their chosen PSPs.


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Figure 4

SPBMU will access the payment information at iBAS++ and update the beneficiary databases accordingly. The MIS units of LMs will access the updated information on SPBMU MIS and update their own databases accordingly. The iBAS++/CGA will further use this information for accounting and auditing purposes as is being done in the existing arrangements.

7. Salient Features of the Proposed Reforms in the Payment System 1. The current procedure for selection of beneficiaries will continue. Departments under the

LMs will remain to be the custodian of the data on beneficiaries and will be responsible for regularly updating them through their field staff. Beneficiaries’ data shall also be digitized at the field level capturing their NIDs.

2. Beneficiaries will choose the mode of receiving the payments from among the approved channels and will inform accordingly to the field officials of the concerned department. Field staff, with the help of local community organisations and elected officials, will educate the beneficiaries and support them to make appropriate choice for mode (bank, MFS providers, postal) of receiving their payments. They will also be supported to choose a particular provider within their opted mode of payment.

3. MIS units of the departments will maintain the data of beneficiaries on the platform and formats compatible with SPBMU MIS.

4. Before the start of every payment cycle, the field offices will update the list of beneficiaries in their MIS under each scheme along with the beneficiaries’ payment option. Department MIS will verify the correctness of the updated data and the corrected data will be automatically and immediately transferred to SPBMU MIS.

5. The SPBMU MIS will validate the data with help of NID database of beneficiaries as well as with the databases of all the other line ministries on a real-time basis.

6. The SPBMU MIS will highlight any discrepancy found in the data. The concerned line ministry will be responsible for addressing all such discrepancies.

7. Once the data is validated by SPBMU and whenever payment under any particular scheme becomes due, the concerned DDO will submit claims to the relevant accounts office as it is done under the current system for the transfer of benefits to validated beneficiaries.

8. The concerned accounts office will check the validated list by accessing SPBMU MIS and


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accordingly issue payment instructions/advice to Bangladesh Bank for transfer of the entitled benefits to the validated beneficiaries’ accounts as per their choice of receiving the payments.

9. Accounting and auditing of the disbursed funds will continue to be conducted as per the existing provisions in the rules.

An overview of the proposed payment system is outlined below in the Figure 5 below:

Figure 5

Various components of the system will perform the following functions:

7.1 Line Ministries Engaged in Social Protection Cash Transfers 1. Line ministries will remain to be the sole policymakers in respect of social protection and

other programmes belonging to them. 2. They will also continue to be the custodian of the data on beneficiaries and will be

responsible for regularly updating data through their field staff. 3. Their field staff, with the help of local community organisations and elected officials, will

educate the beneficiaries and support them to make appropriate choice for obtaining their payments. Their efforts will run parallel to the efforts of various payment channels that would educate the beneficiaries on the features of their products and thus would help beneficiaries to make a considered choice in favour of the most appropriate payment channel in view of their unique circumstances.

4. In case a beneficiary is not satisfied with her chosen payment channel , the field officials of the line ministries will help her modify her choice and update their databases accordingly.

5. MIS units at the line ministries will maintain the data on beneficiaries in the platforms and formats compatible with those being used by the MIS unit at SPBMU.

6. MIS units of line ministries will allow SPBMU MIS to access their data on beneficiaries before each payment cycle. SPBMU MIS will check this data with the help of NID database and beneficiary databases of all the other line ministries to detect any discrepancy or


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anomaly. 7. The SPBMU MIS unit will get back to the ministry if they find any discrepancy or anomaly

in the data. The concerned line ministry will be responsible for addressing all such discrepancy to the satisfaction of the SPBMU MIS unit.

8. After the benefit amount is credited to beneficiary accounts, the line ministries will instruct their field staff to disseminate information about crediting of such benefits amongst beneficiaries. This will be important for the beneficiaries who do not have mobile phones or who are unable to read text messages on their phones.

9. Line ministries will use the systemic advantage of the new arrangement to firm up the schedule of their payments, and make an effort to make more frequent payments. The time period of the regular payments should not be more than a month in any situation.

10. Line ministries will coordinate with the Finance Ministry to ensure that sufficient funds are made available timely for all of their social protection schemes.

7.2 Bangladesh Bank 1. On receipt of payment instructions from the CAO for a particular social protection scheme,

Bangladesh Bank will access the relevant data at SPBMU MIS, cull out and send relevant beneficiary information to all the participating payment channels, and transfer the funds to the concerned designated accounts at all the payment service providers.

2. It will further instruct the payment service providers to immediately credit the indicated amounts into the accounts of beneficiaries they are holding.

3. Bangladesh Bank will further ask the payment service providers to share the payment files for reconciliation at the Bangladesh bank.

4. It will also ensure that the amounts that could not be credited into the beneficiary accounts for whatever reasons are transferred back to the government account at Bangladesh Bank.

5. Bangladesh Bank will share the payment files with SPBMU, which in turn will share them with the concerned line ministries.

6. After the line ministries address the reasons for non-crediting, the same process will be repeated by Bangladesh bank for crediting the benefits into the accounts of remaining beneficiaries.

7. Bangladesh bank will take appropriate action against the payment service providers that fail to credit the beneficiary accounts timely or fail to timely share the payment files with Bangladesh Bank.

7.3 Social Protection Budget Management Unit (SPBMU) 1. SPBMU MIS unit will provide all the required support to the MIS units of the line ministries

engaged in social protection cash transfers in developing their MIS and other software tools.

2. MIS unit at SPBMU will develop and implement software solutions for the issues pertaining to duplicate and fraudulent payments, and payments to ineligible beneficiaries.

3. Whenever a discrepancy is noticed in the data supplied by any line ministry, the SPBMU MIS unit will immediately highlight it to the concerned ministry. Funds for that particular scheme will be released only when the discrepancy is addressed to the satisfaction of the MIS unit.

4. Once the list of beneficiaries is validated by SPBMU and approved by the line ministries, no changes will be allowed in the list without concurrence by SPBMU.

5. SPBMU MIS will allow Bangladesh Bank to access the relevant database on beneficiaries to facilitate payment service providers to credit cash benefits into beneficiaries’ accounts.

6. MIS unit of SPBMU will receive payment files from Bangladesh Bank. It will use such files to update the payment status to beneficiaries and also for monitoring of the payments.


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7.4 Payment Service Providers (PSPs) 1. On receiving instructions from Bangladesh Bank, the PSPs will immediately credit the

requisite cash benefits into the accounts of concerned beneficiaries. They will also intimate to beneficiaries regarding credit of benefits in their accounts through their registered mobile phones.

2. They will share the payment files with Bangladesh Bank immediately (within 72 hours of receipt of instructions at the most) after the accounts of beneficiaries are credited.

3. They will transfer the non-credited amount back to the cash account of government at Bangladesh Bank immediately after the attempted credits into beneficiary accounts are not successful. This will obviate any scope for withholding money outside the government treasury and will be a significant improvement over the current practice.

4. They will again repeat the process of crediting the benefits into the accounts of remaining beneficiaries on receipt of revised instructions from Bangladesh Bank, and repeat the process as outlined against points 2 and 3 above.

5. Having received the fund and credited the respective beneficiary accounts, the chosen branch of bank/MFS/BPO will activate their own mechanism to inform the beneficiaries of the area about the latest status of their accounts.

6. Accounts of beneficiaries in any mode of payment will be regular accounts and the beneficiaries will have an access to all features and facilities of regular accounts as is the case with regular customers of these modes of payment. There will be absolutely no discrimination against the social protection beneficiaries and they would be allowed to hold funds in their accounts while earning regular savings interest as is prevalent within their respective PSPs. This measure will go a long way in financially including social protection beneficiaries constituting arguably the most vulnerable population segment in the country.

7. The data on withdrawals and other operations in the beneficiaries’ accounts will also be shared with MIS unit at SPBMU at regular intervals, not exceeding a month, for their analysis of such data on various indicators.

8. Advantages of the Proposed Payment System The proposed reform plan targets the Payment System from the perspective of three different sets of stakeholders that are independent but are integrated within the system. While it strengthens the supply side on part of the exchequer and the concerned line ministries, it focuses on empowering the beneficiaries who are at the demand side. From the perspective of the Finance Division it works onminimizing the transaction costs and providing greater transparency to the system. It would also ensure that the money is withdrawn from the Treasury, only when the payment is due and is to be transferred to the beneficiaries just in time. From the side of the line departments it eases out most of their functions and time that they spend on processing the payments to the beneficiaries as well as on independently negotiating and signing contracts with bankers / service providers. It also averts a situation where government money may be lying idle in bank accounts for long durations. Most importantly, the reform system keeps the beneficiaries as the focal point of social protection programmes and strives to empower them to make an informed choice for obtaining their payments through any of the three principal modes currently available in the country (i.e. through the banks, mobile financial services and the post offices).

The proposed reforms would result in improvement of the cash flow management with lesser dependence on ‘ways and means’, avoiding holding of funds by intermediary banks, mitigating double dipping, and elimination of leakages and ghost beneficiaries. It will help line ministries and departments to better understand their beneficiaries along with their locations and profiles. It will also facilitate much improved monitoring over cash benefit transfers by the line ministries and their constituents. The line ministries will have effective and user-friendly MISs and


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digitised data on all of their beneficiaries. Work of accounts officers, field officers and the Drawing and Disbursing Officers (DDOs) would reduce significantly. Most importantly, however, it would empower beneficiaries by allowing them to choose the most suitable payment channel in their particular circumstances, which would substantially reduce their costs of receiving the payments. They will also be much better included in the mainstream financial system of the country.

9. Cost Components and Fees to be Paid to PSPs Scheduled banks and Bangladesh Post Office do not have adequate number of branches to be able to serve all the beneficiaries of social protection programmes. They have therefore been making efforts to develop their agent networks particularly in underserved and unserved areas. They will need, and generally depend on, their agent networks for delivering social protection cash benefits.On the other hand, business models of the MFS providers require them to establish an extensive and widespread network of agents. Thus, all the PSPs proposed to be participating in the payment system would be relying on their agent networks for cash benefit transfers, which entails additional costs for all the PSPs. Moreover, the PSPs will need to develop technology-based systems for providing seamless services to the beneficiaries, which will again require them to incur significant expenditures. It is proposed that such costs should be borne by the Government, and in no case should be transferred to the beneficiaries.

In order to assess such costs, detailed discussions were organised with various representatives of all the three PSPs. The discussions revealed that different banks have prescribed different rates of commission to be charged from their customers for the services offered through their banking agents. There is generally no charge for opening of accounts and making deposits even f it is through their agent points. All the banks, however, charge their customers for making withdrawals through their agent network. They also charge their customers additionally for ATM cards.

Currently, the compensations being offered to the payment channels range from 0 to 2.5% of the total amount to be disbursed under different social protection schemes. The discussions with the banks, however, revealed that fair compensation should be 1% of the total amount to be disbursed to beneficiaries in case of all banks across all the schemes. This amount of compensation should enable banks to meet all their costs relating to software and hardware development and maintenance, manpower costs and monitoring costs in addition to the commission to be paid to their agents. Banks should be allowed to develop their own delivery systems, even if it is different from the other banks, for attracting customers and reducing their costs of disbursement. They should therefore be allowed to charge for provisioning of NFC cards or ATM cards if their delivery methodology involves providing such cards to beneficiaries. Such charges should, however, not exceed BDT 100 and should be met by the Government. In case of loss of or damage to the card the beneficiary may be asked to procure new card through her own resources.

Bangladesh Post Office(BPO) currently charges 1.5% of the total amount being disbursed under ISPP (Income Support Programme for the Poorest- Ministry of LGRD) as delivery commission, out of which 1% straightaway goes to the public exchequer while 0.5% is retained by the BPO for making payment to its IT consultant and for providing incentives to its staff. In addition, it charges BDT 5 per transaction. It also charges BDT 110 for providing the customised card to beneficiaries as one-time fees. This amount is again shared between the BPO and the IT firm.

In case of the BPO too, it is proposed to pay them 1% of the total amount to be disbursed as the commission for social protection cash transfers to the beneficiaries. BPO should also be allowed to receive BDT 100 as one-time payment for providing customised cards to the beneficiaries, as


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their cash disbursal methodology is based on smart cards in the hands of beneficiaries. Entire amount of commission should be allowed to be kept by the BPO to enable them to meet all their expenses and keep on improving quality and outreach of their services in the interest of beneficiaries.

In case of MFS providers, cash-out charges at the agent points range from 1.8% to 1.9%, while account to account transfer within the same service provider ranges from BDT 4 to 5. However, discussion with MFS providers revealed that they would be satisfied with 1% of the total amount to be disbursed as their commission. Social protection cash disbursal on such a rate of commission will still be profitable for the MFS providers as it will allow them customer acquisition in large numbers, which will generate significant levels of additional business.

Thus, it is proposed to pay 1% of the total amount of cash to be disbursed as social protection benefits across all PSPs. In case of banks and post offices, a provision to pay one-time charges of BDT 100 should also be kept for providing customised smart cards wherever such a facility is needed for cash delivery by a particular bank or the BPO. Such charges should be budgeted within the overall social protection budgets of all the LMs. Beneficiar ies should not be charged any money whether towards opening of accounts or while withdrawing their social protection benefits either in full or in part.

At present, BB does not charge any user charges for BEFTN. If in future, it decides to levy charges for participation in BEFTN the Government should bear all such expenses in case of social protection cash transfers.

10. Conclusion This chapter presented an extensive reform plan in the payment system for social protection in Bangladesh along with the roles and responsibilities of all the stakeholders. It is also suggested that the Government should meet the costs associated with social protection cash transfers. Such cost is uniformly proposed to be 1% of the total amount to be disbursed across all the PSPs. This will be in addition to one-time cost of BDT 100 per customised smart card in case of such a requirement.

The following chapter analyses the IT requirements for implementation of such a reform plan.


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Chapter 3

IT Requirements for Payment System Reform in Bangladesh

1. Introduction This chapter analyses IT requirements for the proposed payment system in terms of technology induction, human resource development, and the adequate levels required foreach. The chapterbegins with the description of the flow of information and the various interfaces in the proposed payment system, followed by outline of the technical requirements, staffing and training requirements and finally the estimated cost and implementation strategy.

2. General Flow of Payment Information The existing system of collecting data on social protection beneficiaries at the field level is proposed to be continued. As mentioned earlier, such data will also contain the information on the payment channel for obtaining social protection payment in case of each beneficiary. The data on beneficiaries will be captured into the respective line ministries MIS applications either at the field level or at the central level depending on the accessibility of the MIS. This data will

then be automatically transmitted through database replication 4to the SPBMU MIS at Finance Division under the Ministry of Finance, as shown in Figure 4 in the last chapter. The SPBMU MIS will act as a repository of all beneficiaries’ data from all line ministries while at the same time providing data validation services such as double dipping checks and NID verification to the Line Ministries.

After the beneficiary data has been validated by SPBMU MIS and has been accepted by the concerned line ministry, the concerned DDOs will extract the relevant portion of the database from SPBMU MIS and use it to prepare bills for the upcoming payment cycle. They will then submit the same to their CAOs throughiBAS++ as is currently the case. The CAOs after receiving the bills will instruct BB to transfer funds to the beneficiaries’accounts retrieved from SPBMU MIS. BB will also be referred to the list of beneficiaries associated with such bills available on SPBMU MIS truncation files.

BB will use the BEFTN platform5 for transferring funds to the centrally designated accounts of respective payment channels. The payment channels on their part will credit the social protection benefit amount to the concerned beneficiaries’ accounts on the basis of information provided by BB to them. Figure 5 below diagrammatically describes the functioning of BEFTN.

4Database replication is the frequent electronic copying data from a database in one computer or server to a database in another so that all users share the same level of information. The result is a distributed database in which users can access data relevant to their tasks without interfering with the work of others.

5The Bangladesh Electronic Funds Transfer Network (BEFTN) operates as a processing and delivery centre providing for the distribution and settlement of electronic credit and debit instruments among all participating banks. This Network operates in a real‐time batch processing mode. Transaction files received from the clients during the day are processed as they are received to ensure that if there are conditions that would result in a file or batch reject the banking company have sufficient time to fix the errors and resubmit the file.


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Figure 5

BEFTN system has the following components:

a) Originator

The Originator is the entity that agrees to initiate EFT entries into the network according to anarrangement with a receiver. In this case, the Originator will be the CGA in the Ministry of Finance.

b) Originating Bank

The originating bank is the bank which receives payment instructions from its client (the originator) and forwards the entry to the BEFTN. The originating bank in this setup is the Bangladesh Bank itself where the Treasury accounts exist and the payment instructions are received by CAO.

c) Receiving Bank (RB)

The beneficiary’s bank that will receive EFT entries from BEFTN and post the entries to the account of the beneficiaries is referred to as the Receiving Bank.

d) Receiver

The beneficiary who will receive money from the account maintained with the RB is the Receiver.

e) Authorization

Authorization is a written agreement that defines the terms, conditionsand legal relationship between originator and receiver.

After funds are transferred to beneficiaries’ accounts, BB will collect all the transaction files from the PSPs and submit the summary of payments to respective CAOs for reconciliation in iBAS++ as well as the detailed beneficiaries’ transaction files which will be used for reconciliation in SPBMU MIS. In the SPBMU MIS the transaction files received from PSPs will be used to record the transfer status of the beneficiaries’ account i.e. whether transfer was successful or not. This information is then relayed to the various Line Ministries who will share it with the field offices and the beneficiaries.

3. Technical, Staffing and Training Requirements Implementation of the proposed payment system will require adopting modern technologies andimproving capacity of variousparticipants in the payment system such asline ministries, SPBMU, iBAS++, CGA, BB, BEFTN and the PSPs. For some stakeholders, this will also imply increasing the staff strength and making capacity building efforts for their human resources.


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3.1 Line Ministries Line ministries managing social protection schemes are the key stakeholders in the proposed payment system. They are responsible for identifying the beneficiaries based on pre-defined eligibility criteria. Their field staff will update the information on beneficiaries before each payment cycle, wherever needed, and send the same to the authority prescribed to approve such updates. The information on beneficiaries will also include their choice of a payment method. The approved updated lists will be shared with the MIS unit of the concerned line ministry, which in turn will share the lists with the MIS unit at the SPBMU, Ministry of Finance. Both the MIS units will work on compatible platform and maintain the information in the same formats for better communication between the two. Any update on the lists in the Line Ministries MIS will immediately be automatically transmitted to MIS SPBMU MIS. SPBMU MIS unit will keep validating the data to check for duplication and any violation of eligibility conditions. The data on beneficiaries will mandatorily have NID number for each benefi ciary.

Below are the main technical requirements to be considered before and during implementation of the proposed payment system:

a) Digitisation6 of Beneficiaries Data

Each line ministry will develop MISs that will help in managing all the data pertaining to the social protection programmes managed by the ministry in digital formats for efficient implementation of the proposed payment system. The MIS developed by each line ministry should incorporate the key modules required for any social protection payment system such as beneficiaries’ registration and enrolment, beneficiary updates, their choice of a particular payment channel, their account numbers and mobile phone numbers, and grievance registration and management modules. Some line ministries,such as Ministry of Social Welfare (MOSW) and Ministry of Women and Children Affairs (MOWCA), have already made progress in developing their MISs and are now in the process of digitising the paper-based data.

Once the MIS is in place, the concerned line ministry will need to plan for digitisation of the paper-based data. A considered decision will have to be taken by the ministry on whether to manage the processof digitisation in-house or outsource the work. Such a decision should take into consideration the existing in-house capabilities for digitisation. It is important to carry out a thorough cost-benefit analysis to establish which option will provide the best holistic value for the project in terms of quality of image output, project turnaround time, associated risks and financial costs.

b) Hardware, Internet and Networking

In order to be able to complete the digitisation of the existingpaper-based data, the line ministries will need to buildadequate hardware capacity by acquiring sufficient computers and multifunctional printers capable of scanning large quantit ies of documents. The line ministries will also require stable and reliable internet connectivity for successfulrollout of the MIS at Upazila and Union levels.

6Digitization is the process of converting information into a digital format. In this format, information is organized into discrete units of data (called bit s) that can be separately addressed (usually in multiple-bit groups called bytes).


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Figure 6

Recommended specifications for computers, printers and internet connection are outlined below:

Item Proposed Specification

Computer Brand : Dell/HP/Lenovo

Processor : Core i3

RAM : 4GB

Harddisk : 500 GB or 1000GB

LED Monitor : 18.5 inch

Multifunction Printer HP/Canon/EPSON

Print/Copy/Scan

UPS Brand : PowerGuard/PowerPack/ RMS/Socomec/Ablerex/ Jetech

1000VA/1200VA Offline/Line Interactive

Internet (Option1) Modem Dongle (Hardware)

Monthly Package 4GB 28/30 days (BanglaLink/Airtel/Robi/Teletalk/Grameenphone) Bandwidth 512 kbps

Internet (Option2) BTCL Connection via Fibre cable (Media Converter, Cable etc.)

Monthly Package, Bandwidth 512 kbps

Monthly Package, Bandwidth 1 mbps

c) Data Exchange Methods

According to the current design of SPBMU MIS, data from the line ministry MIS will be

automatically transferred to the SPBMU MIS using data replication 7technology without any manual intervention. For this to work, the line ministries’MIS databases will have to be connected to SPBMU MISdatabase which will in turn require stable internet connection between the servers of line ministries and the SPBMU.

One of the recommendations for sustainability is to have all the Line Ministries MISs hosted at Bangladesh Computer Council (BCC) which is a government body responsible for hosting systems for Government of Bangladesh ministries and agencies. BCC has a large and well equipped data centre with stable power, network and other data backup facilities. Hosting the

7 Data replication is one way of supporting data integration requirements. Data replication provides trusted data synchronization (including change data capture capabilities) and availability, enabling you to efficiently manage data growth while increasing revenue using up-to-the-minute information. Real-time operational and analytical data synchronization enriches big data systems and mobile applications, empowering the event-driven business.


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line ministry MISs at BCC will be more secure because all the data exchanges will happen within the BCC network limiting possibility of data sniffing during data exchange between the servers.

Figure 7

d) Staffing and Training

Implementing the proposed payment system will require dedicated resources at various levels within all the stakeholders. On part of the line ministries and departments, there will be need for adequate number of adequately trained staff at union, upazila, district and central levels to manage the regular update of data at the field. The field staff especially at Upazila levels will have to be trained on how to use the line ministries’ MISs to capture data from paper forms submitted by the union staff. In addition, each line ministry should build an MIS team who will be tasked with the management of beneficiaries’ data and compliment it with temporary data capture team entrusted with mass data entry activities. MIS teams of line ministries will also be responsible for addressing all the discrepancies detected by SPBMU MIS unit.

3.2 Social Protection Budget Management Unit (SPBMU)

SPBMU MIS Team will ensure that the entire beneficiaries’ data are validated through the unique NID number to ensure that discrepancies, fraudulent and double dipping cases are identified and shared with Line Ministries for corrective actions. In addition, SPBMU MIS unit will provide all required support to the MIS units of the line ministries in developing their database and software tools to the required standards. To achieve this, the following key issues ought to be addressed before and during the implementation of the proposed payment system:

a) Staffing and Training

The SPBMU MIS team should have a well-equipped technically trained and dedicated team to effectively and efficiently support the operations of SPBMU and the other stakeholders during the implementation of the proposed payment system. As per the design of the proposed payment system, the operation of the SPBMU MIS team will bemultifaceted as they will work closely with and provide support to all the Line Ministries, +iBAS++ team, CGA, BB and the PSPs. Even though all the staff positions in the SPBMU MIS have been filled, the two system analysts are not working on full-time basis with SPBMU. Once the two system analysts are committed fully, the SPBMU MIS Team will have the requisite capacity to perform all the functions of the unit. The current SPBMU MIS Team structure is shown below:


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Social Protection Senior

Systems Analyst (with

data analytics)

Systems Analyst

Programmer

IT Maintenance Engineer

Programmer

1

2

5

3

4

Figure 8: SPBMU MIS structure

SPBMU MIS trainings at the pilot stage will be offered by the contracted software development company implementing the SPBMU MIS. It is, however, limited to the general usage of the SPBMU MIS and on supporting and maintaining the system at the backend. Other IT technical trainings which will help build the IT specialized skills of the team will also be arranged to enable them acquire vital skills for supporting all the Line Ministries, +iBAS++ team, CGA, BB and all the PSPs. This is proposed to be done after the software development company hands over the system to SPBMU.

b) Data Exchange Methods

The SPBMU MIS will exchange data with Line Ministries, iBAS++, BB and PSPs through secure channels using the following technologies:

1. Exchange of transaction files between the SPBMU MIS and other systems

As proposed earlier, the SPBMU and the systems of other stakeholders would use common file data formats for data exchange. SPBMU MIS will also have functionalities to process PSPs’ transaction files. It is also importantto build in secure channels for data exchange while exchanging the transaction files.

2. Exchange of data through web services8

This is another technology that will be used for exchanging data between SPBMU and the other systems. NID verification and double-dipping checks done in the SPBMU MIS will be accessed by the line ministries’ MISs through web services. For this to work, the line ministries MISs will be developed further to use the web services provided by SPBMU MIS which will be used to verify the NIDsand perform double-dipping checks during registration of beneficiaries. Exchange of summarised schemes payment cycle data (source of DDO bill information) between iBAS++ and SPBMU MIS will also be done through web services by creating additional features in the

8The term "web service" describes a standardized way of integrating web-based applications using the XML, SOAP, WSDL and UDDI open standards over an Internet protocol backbone.


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MIS of both the organisations.

3. Database to database data exchange mechanism

This type of data exchange will mainly be used in the transfer of data from line ministries’ MIS to the SPBMU MIS. For this to work, replication configurations will be conducted for every new line ministry MISs connected to the SPBMU MIS and features modif ications will be carried out on the SPBMU MIS and the line ministries MISs to accommodate the latest changes.

3.3 Office of the Controller General of Accounts (CGA) and iBAS++

The office of the CGA will play an extremely important role in the implementation of the proposed payment system. CAOs will be responsible for managing the interactions with BB for all the line ministries’ payments to social protection beneficiaries. CAOs should therefore be trained on the proposed payment system and with emphasis on the role of SPBMU MIS in the entire process. As the proposed system is proposed to be fully computerized, there will be need to equip the CAOs with adequate hardware, internet and other networking facilities necessary for the smooth management of the payment process. CAOs’ offices should also be provided with enough support staff with basic IT skills that will help in managing the transaction files produced at SPBMU MIS and sent to BB for transfer of funds to beneficiaries, and organize the transfer of reconciliation files from PSPs to SPBMU MIS.iBAS++online bill management module should also be developed further and its capacity built to accommodate the number of DDO bills that will be processed through the system.

3.4 Bangladesh Bank (BB)

Bangladesh Bank will be incharge of managing the entire operation of transfer of funds centrally through the BEFTN. As the BB will be managing substantial number of transaction and reconciliation files during payments cycles, adequately skilled manpower will be needed to perform these tasks. BB should therefore ensure that they deploy sufficient number of skilled staff and increase the processing capacity of the BEFTN.

3.5 Payment Service Providers (PSPs)

One of the key functions of the SPBMU MIS will be to generate fund transfer transactions files for all the PSPs.The PSPs will be required to provide SPBMU MIS Team with all the appropriate transaction file formats. The SPBMU MIS will thereafter be modified and the functionality for producing these transaction files for every payment cycle will be built into the MIS. These transaction files will be submitted to BB through the agreed secured channel for every payment cycle. At the same time, the PSPs will also provide SPBMU Team with data formats for reconciliation files. The SPBMU MIS Team will consequently modify the MIS by building the reconciliation module which will be used to import these files into the MIS after every payment cycle.

4. Security of the IT Systems During implementation of the proposed payment IT systems,the following two major aspects of information system security will be considered:

• Security of the information technology used in securing the system from malicious cyber -attacks that tend to break into the system and access critical confidential information or gain control of the internal systems.

• Security of data that will ensure integrity of data whenever critical issues arise such as natural disasters, computer/server malfunction, physical theft etc. It is recommended that an off-site backup of data will be kept preventing disaster against such risks.

Guaranteeing effective information security for the systems will:


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• Prevent unauthorized individuals or systems from accessing the information.

• Maintain and assure the accuracy and consistency of data over its entire life-cycle.

• Ensure that the computing systems has security controls used to protect it and communication channels used to access it are functioning correctly all the time, thus making information available in all situations.

• Ensure that the data, transactions, communications or documents are genuine.

• Ensure the integrity of a transaction by validating that both parties involved are genuine, by incorporating authentication features such as "digital signatures".

• Ensure consistency of data and transactions.

• Safeguard data and communications stored and shared in network systems.

During implementation of the proposed payment systems the stakeholders will ensure that al l the required IT systems defence strategies are in place before deployment. The following are the defence strategies that will have to be implemented:

• Encryption of data especially during replication;

• Authentication enforced in the three MIS applications;

• Well implemented functioning and safe Firewall;

• Best recommended Virus Defences (Antivirus Software);

• Regular backups;

• Security Monitors (Programs that monitor the use of computer systems and networks and protect them from unauthorised use, fraud, and destruction);

• Biometric Controls when accessing the server rooms;

• Effective Disaster Recovery plans.

5. Implementation of the Proposed Payment Systems The following MIS activities will have to be undertaken for successful implementation of the proposed payment system:

1. Digitisation of all the data of the two pilot schemes i.e. Old Age Allowance and Maternity Allowance and verification of beneficiaries through NID database.

2. Linking the MoWCA and MoSW MISs with SPBMU MIS for automatic data replication. 3. Developing SPBMU MIS interface with iBAS++, BEFTN, and PSPs to enable data exchange. 4. Validation of inter- and intra-ministerial beneficiary data through NID database 5. Providing the necessary MIS trainings. 6. Pilot the payment process. 7. Rollout the payment process. 8.

6. Estimated Costsfor IT implementation During the implementation of the proposed payment system, funding will be required in the following IT areas:

1. Hardware, Internet and networking for Line Ministries.

With an assumption that most of the computers in the Line Ministry are either outdated or do not exist, for each Line Ministry the estimate is that each Upazila should be equipped with additional 1 Personal Computer, 1 UPS and 1 Multifunctional printer. Therefore for each Line Ministry this translates to 492 PCs, 492 printers and 492 UPs leading to a total cost of28,290,000 BDT as outlined in the table below:


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Item Details Unit Price (Approx.)

No. of Upazilla

Total

Computer Brand : Dell/HP/Lenovo 42,500.00 492 20,910,000.00

Multifunction Printer

HP/Canon/EPSON (Print/Copy/Scan)

6,500.00 492 3,198,000.00

UPS 1000VA/1200VA Offline/Line Interactive

8,500.00 492 4,182,000.00

Total for Each Line Ministry 28,290,000

The actual amount of money that will be spent in providing the Upazila with the 3 categories of Computers equipment above will depend on the outcome of a feasibility study which should be conducted before the start of the pilot of the payment system. If it is discovered in the feasibility study that equipment at some upazilas are in working condition then only the Upazilas with genuine needs should be considered.

Operationalisation of LM MIS at the field level will require reliable internet first at the Upazila levels and later on at the union levels. The costing details of the two recommended options i.e. using Modem dongles or BTCL fibre connection for each Upazila are analysed below:


No. of Upazilla

Total

Internet (Option1)

Modem Dongle (Hardware)-One Off Cost

1,500.00 492 738,000.00

Monthly Package 4GB 28/30 days (BanglaLink/Airtel/Robi/Teletalk/Grameenphone) Bandwidth 512 kbps (1 Year Subscription)

12,000.00 492 5,904,000.00

TOTAL 6,642,000.00


No. of Upazilla

Total

Internet (Option2)

BTCL Connection via Fibre cable (Media Converter, Cable etc.)-One Off Cost

5,000.00 492 2,460,000.00

Monthly Package, Bandwidth 1 mbps (1 year

12,000.00 492 5,904,000.00


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Subscription)

TOTAL 8,364,000.00

It is however recommended to choose the second option (BTCL fibre link) for internet connectivity at field level due its reliability, faster speed of connection and its ability to be shared to serve multiple users concurrently. This factor may be taken into account while ascertaining the actual requirement at Upazila levels.

2. Digitisation of Paper Based Beneficiary Dataat Line Ministries

Currently, the Line Ministries keep their databases on beneficiaries in hard form on paper. The first requirement of implementation of the proposed reforms is to digitise this data and capture it within the LM MIS. Past experience of digitisation of such data suggest that it may cost between 6.00 BDT to 10.00 BDT per beneficiary depending on the number of fields in the database suchas scanning of photographs, signatures and other relevant eligibility certificates.

A detailed study needs to be carried out for calculating the actual cost of digitisation of beneficiary data at each LM, which should also factor in the current levels of digitisation of such data.

3. Development or Modification of LM MIS to Conform to SPBMU MIS Standards

As mentioned earlier in this report, LMs need to develop their own MISsfor efficiently managing their beneficiary databases and computerising other manual processes such as payment list/payroll generation. Such MISs need to be compatible to the MIS of SPBMU for the two MISs to be able to effectively ‘talk’ with each other. In cases of LMs that have partially digitised their data, their existing MISsmay need to be appropriately modified to make it compatible to SPBMU MIS.

Going by the experience of development of MOWCA MIS, the cost involved in development ofa new MIS for Line Ministries may be approximately BDT 12,000,000.

4. Modification of SPBMU MIS to Enable it to Accommodate New Social ProtectionSchemes

The SPBMU MIS will be further developed to incorporate any new social protection scheme that may be introduced at a future date. The estimate cost of modifying the SPBMU MIS for this purpose may be around BDT 2,000,000.

5. Cost of MIS staff at both SPBMU and Line Ministries

Permanent staff will be required at SPBMU to constantly provide necessary support required for smooth operation of the payment system. The current structure at SPBMU of 1 Senior System Analyst, 1 System Analyst, 2 programmers and 1 maintenance engineer receivebasic salary of approximately BDT 300, 000 per month.

Two dedicated MIS personnel will also be required at each Line Ministry engaged in social protection cash payments. In addition, one MIS person would be required at each upazila for updating and maintaining beneficiary database at each upazila. These personnel will be paid basic salaries of around BDT 130,000 per month.

6. Technical Training for the Users of LM MIS

Based on the experience of the training conducted in July 2017 for selected personnel from MOWCA and DWA, and one upazila officer from all the upazilas, the cost of training for the users of all concerned LM MIS is estimated to be BDT 5,000,000.


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7. Technical Training for Users of SPBMU MIS

Selected staff atFinance Division and at iBAS++ along with all the concerned CAOs, DDOsand the SPBMU Staff will need to be trained on the features and applications of SPBMU MIS. It is estimated that an amount of BDT 5,000,000 should be sufficient to for such training.

7. Conclusion This chapter described the proposed payment system in its technical details while estimating the IT requirements for implementing such a system along with its associated costs. The next chapter estimates the capability development and training needs in various government agencies participating in the social protection payment system. It also outlines the steps that need to be taken for generating awareness among beneficiaries and for establishing a robust beneficiary grievance redressal system.


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Chapter 4

Capacity Enhancement,Awareness Generation, and Grievance RedressalMechanisms

1. Introduction One of the most important aspects of any reform plan is to assess the existing capabilities of available human resources on relevant competencies, and prepare a detailed road map for achieving appropriate levels of capabilities at all strata of workforce. Accordingly, this chapter analyses the capabilities of staff at the concerned line ministries and the offices of chief account officers/iBAS++ and estimates the capacity gaps at different levels. This is followed by training needs assessment and the proposed training plans.The chapter also outlines the steps that need to be taken for generating awareness among beneficiaries and for establishing a robust beneficiary grievance redressal system.

2. Capacity Enhancement The proposed reform plans intend to rely heavily on modern technological tools for making the payment systems more efficient, transparent and beneficiary-friendly. The underlying principle of proposed plans is centricity of beneficiaries in the entire process. They also intend to improve the extent of financial inclusion for all beneficiaries of social protection programmes. Existing capabilities of people within various stakeholder agencies have been assessed within this framework, which lead us to determine capability gaps and training needs at each level.

The most fundamental need for staff at all levels within government agencies will be to make them aware of the provisions in the proposed reforms and their roles within the new arrangements. Field officials of the concerned line ministries will need to be thoroughly trained on community engagements as they are the first contact with government machinery for the beneficiaries.

A quick assessment of the line ministry staff and the staff at the offices of CAOs reveals that there is a serious lack of computer literacy at all levels. It is, in fact, more pronounced at higher levels of the line ministry personnel. The staff members need to be trained to acquire proficiency in the use of computers and relevant internet-based applications.

The line ministry personnel have been found to be having surprisingly low levels of awareness on the concepts and importance of financial inclusion. They would need to be thoroughly trained on various aspects of financial inclusion and also on why it is critica lly important for improving the wellbeing of the households of beneficiaries.

The staff at all levels of the government agencies need to realise that social protection programmes are meant for their beneficiaries, and all the decisions and activities in th is regard should be undertaken while always considering this cardinal principle. They should be made aware of the rights of beneficiaries and should be oriented towards beneficiary -first framework of social protection payments.This will necessitate behavioural change on part of all the personnel within the government agencies and particularly their field staff.

An extensive exercise needs to be undertaken to build the capacities of the personnel within the LMs including those at field so that they are adequately aware of the services and their conditions as are offered by different payment service providers. Such trainings and capacity building efforts should be complemented with a prudent staff transfer policies and other human development strategies so that adequately trained people are placed for handling a particular item of work. They should not be transferred out of such positions until sufficiently trained


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people are available to take their places.

At each stage of the system, and at each of the participating agencies, a scientific and rational review of human resource requirements should be undertaken before the actual implementation. This may result reduction of staff within certain agencies, while increase in staff strength in certain other agencies. Thus, it may result in relocation of staff and recruitment of new staff.Recruitment of new staff may also be undertaken in case of lack of required skill sets for the job.Training and capacity development needs of existing staff and the new recruits should be assessed objectively and a detailed programme should be chalked out for imparting relevant training to each set of staff.

Various committees have been formed at different levels for identification of beneficiaries and for monitoring and supervision of cash benefit disbursement processes. It is, however, found that there is a serious lack of coordination among the committees, and the members of the committees are not clear about their roles and responsibilities. It is therefore important to organise trainings to make them fully aware of their roles and responsibilities and build their capabilities so that they are able to efficiently monitor the schemes. In addition, strategies and processes should be put in place for achieving effective coordination among them.

3. Training Needs Preliminary training needs assessments reveal that the trainings for the government staff need to be organised in two stages. First stage training, aimed to improve core competencies of its participants, is required to be undergone by all staff members across all participating government agencies including those working in the office of CGA, iBAS++, and various offices of CAOs, while the second stage trainings will be specialized trainings and will be different for the staff members at different levels and for different agencies. The general topics needed to be covered in the first (foundational) stage of training are as follows:

• Basic computer skills

• Internet-based applications relevant for the proposed payment system reforms

• Basic elements of the new payment system for social protection programmes

• Fundamentals of electronic banking and mobile financial services

• Security requirements for participating in electronic banking and mobile financial services

• Basic features of electronic fund transfers and BEFTN

• Need and importance of social protection towards reducing poverty and vulnerability

• Social safety nets, social assistance and social insurance

• Concepts and importance of financial inclusion

• Need for financial inclusion for social protection beneficiaries

• Leveraging new payment system for improving extent of financial inclusion of social protection beneficiaries

• Beneficiary-centric framework for social protection

• Identifying and meeting beneficiary needs

• Basic elements of an effective grievance redressal mechanism

• Role and importance of SPBMU

• Basic features of SPBMU MIS and its relevance for social protection payment system

• Features of NID identification and authentication process using NID database

Second stage trainings will be specific to the needs of the particular agencies. The topics for such training may inter alia include the following:

• Features and elements of, and beneficiary eligibility criteriafor,the respective social protection programmes


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• Beneficiary identification for field staff

• Updation of beneficiary data

• Basic understanding of their line ministry’ MIS

• Use of iBAS++ software modules for line ministries

• Methods of effectively engaging with local communities for field staff

• Strategies and methods of generating awareness among beneficiaries for the field staff

• Account opening requirements in respect of different payment service providers for field staff

• Updation of payment information on beneficiary databases

• Addressing the issues concerning payment rejections at the level of payment service providers

• Basic principles of audit for line ministry officials, and preparation of audit feeds through payment information

In addition, specialised trainings need to be organised for the staff engaged for line ministry MIS, grievance redressal, and monitoring and evaluation of the delivery of respective social protection programmes of the line ministries. Staff of CGA, including those working at the offices of various CAOs, need to be trained on specific auditing and accounting requirements. Auditors, in particular, need to be thoroughly trained on computer applications and iBAS++ systems.

4. Generating Awareness among Beneficiaries Another very important aspect of capacity development efforts would involve building capabilities of beneficiaries by making them aware of the provisions of the proposed payment system, empowering them to choose the most appropriate payment channel for receiving their social protection benefits, and enabling them to take advantage of the expanded scope for their financial inclusion in the proposed system. They should also be made explicitly aware that the Government is bearing all costs of transaction and they do not need to part with even a single Taka from their benefits for their payment service providers.

As payment service providers within the three payment channels will have their own commercial interests in enrolling as many beneficiaries as possible, they will play a major role in making beneficiaries aware of the features of their own services and product s, in addition to apprising them of their power to choose any payment mechanism. However, the line ministries need to be deeply involved in this process in the interest of beneficiaries and in order to ensure that the beneficiaries are able to choose the most suitable payment mechanism.

Individual line ministries should involve their field staff, local elected representatives and community-based voluntary organisations in their efforts to reach out to the beneficiaries of their respective social protection programmes. In view of the rich civil society culture in the country it is important that civil society organisations are adequately involved in the process of education of and awareness generation among the beneficiaries. All participating civil society organisations need to be adequately trained before involving them to engage with beneficiaries.

It is proposed that following activities may be taken up at different levels for reaching out to the beneficiaries, making them aware of their rights, and enabling them to take advantage of the provisions in the new payment system for their empowerment and wellbeing:

4.1 At VillageLevel • Homestead meetings at villagelevel by involving relevant voluntary organisations

• Ward Level meetingsand orientation by the LM field officials and ward members

• Wall writings and postering at village levels

• Conducting rallies at village levels


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• Participating in local fairs and festivals, putting up special stalls

• Street playsby student volunteers and voluntary organisations

• Using religious gatherings for dissemination of information

• Involving all government functionaries working at village and union levels in awareness-generation campaigns

4.2 At Upazila and District Levels • Putting up bill boards at strategic locations

• Using community radios for spreading the message

4.3 At National Level • Mass media campaigns in print as well as electronic media

• Leveraging Social Service Day Observance ( 2 January) and organising rallies, meetings, conferences, seminars on the day for generating debates and deepening of understanding

5. Beneficiary Grievance Redressal One major aspect the current payment systems are deficient in is the total lack of beneficiary grievance redressal mechanisms. The proposed reforms aim to establish a robust citizen-centric grievance redressal system that will incorporate the best practices of customer care in both public and private sectors. The system will consist of a dedicated portal to be part of all MISs of the line ministries as well as the MIS of SPBMU. It will be bi-lingual, in Bangla and in English, accessible through multiple channels (voice, e-mail, letter, fax, mobile) and will be geared to resolve the queries and complaints of the citizens in the shortest possible time. The portal will also have provisions to include additional languages as per the requirements. It will provide a single window to the resident to air their grievances and suggestions in a simple and accessible manner. The line ministries and the SPBMU, as the case may be, will then coordinate with the concerned field offices and the payment service providers for adequately and timely redressal of all the grievances lodged on the portals.

In addition, all the field offices and the schools (in case of stipend programmes) will mandatorily have grievance redressal cells with clearly demarcated roles and accountabilities of local officials. Such cells will be integrated with the grievance redressal portals at their respective line ministries, and will be effectively monitored at the central level using modern IT tools. There will be no charge for lodging complaints and getting those complaints redressed. The system will also provide for an appellate mechanism for the beneficiaries who are not satisfied with the disposal of their grievances at local levels.

Line ministries will also enlist the help of civil society organisations to receive feedback on all aspects of social protection payments in the country.A citizen’s charter will be prepared that will detail the rights of beneficiaries, responsibilities of officials and timelines for disposing of the complaints. The charter will also specify the action to be taken in case of violation of provisions contained in the charter. Effective monitoring mechanisms would be designed to make the entire system transparent and impartial.

6. Cost Components Adequate funds will need to be allocated for the following activities:

• Conducting exercises for rationalising the staff at headquarters as well as at field

• Hiring the required personnel particularly those required for IT implementation at LM headquarters and at field

• Conducting trainings and workshops for capacity enhancement of newly recrui ted as well


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as the existing staff

• Capacity building exercises for the members on committees for various social protection programmes

• Launching awareness-generation campaigns for the beneficiaries

• Development of an effective grievance redressal system

• Conducting trainings and awareness-generation activities among the LM staff and the beneficiaries on effective use of grievance redressal system

7. Conclusion This chapter estimated the capacity development needs at different levels within the participating government agencies in the proposed payment system. The chapter also outlined the efforts that need to be made for generating awareness among beneficiaries on different aspects of the payment system, their rights and the provisions for their empowerment. It concludes with the suggestions on the steps to be taken towards establishing a robust beneficiary grievance redressal system, and the need of fund allocation for different activities.

The next chapter describes implementation strategy and the plan to pilot test the proposed reforms.


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Chapter 5

Implementation Strategy and Proposed Pilots

1. Introduction This chapter describes the strategy to implement the proposed reforms. It proposes aplan to conduct pilots for testing the feasibility of the proposed system and for fine-tuning certain aspect of it. The chapter concludes with proposed timelines for the pilot testing.

2. Implementation Strategy Implementation of the proposed reforms in payment system would involve following steps and activities to be undertaken by different stakeholders:

• Hardware and software requirements for the proposed reforms should be assessed on the basis of the analysis presented in this report. Procurement process for the required assets should start immediately after ascertaining and approving such needs.

• At each stage of the system, and at each of the participating agencies, a scientific and rational review of human resource requirements should be undertaken before the actual implementation. This may result in reduction of staff within certain agencies, while increase in staff strength in certain other agencies. It may also result in relocation of staff and recruitment of new staff.

• Recruitment of new staff may be needed in case of lack of required skill sets for the job. This will be particularly important in case of IT skills. Relocation of existing staff and recruitment of new staff should be undertaken at each of participating LMs.

• Concerned staff at LMs, FD, iBAS++ and CGA should be adequately trained according to the recommendations of this report.

• Digitization of beneficiary data should be completed in all respects.

• MIS for all the LMs should be designed and developed for all social protection schemes having cash transfer components.

• MIS of line ministries should be made totally compatible with SPBMU MIS. SPBMU should also provide support to line ministries in this regard including the support on developing compatible modules for data validation and payroll generation.

• Mobile numbers of beneficiaries should be collected and included in the beneficiary databases.

• NIDs of all the beneficiaries should be captured and included in the beneficiary databases.

• Beneficiaries’ options for payment service providers (PSPs) should be captured and included in the beneficiary databases along with their account numbers within their opted PSPs.

• Campaigns for generating awareness on the new features of the reformed payment system should be launched among beneficiaries in such a manner that all beneficiaries are aware of their rights and other provisions concerning them contained in the proposed reforms.All beneficiaries should be contacted through electronic, physical or personal methods to educate them on the benefits of the new system for them. They should be made aware of the modes of payment available to them in their geographical locations and should also be supported in making the most appropriate choices for themselves.

• iBAS++ should expand the scope of their current system so that all DDOs can prepare the bill/claims for payment authorisation and submit them to CAOs on iBAS++ platform.

• Such expansion should also enable all CAOs to use iBAS++ platform to verify such bills and authorise payments on the basis of validated data.

• iBAS++ should develop FTP to access the beneficiary data at SPBMU MIS for generating


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EFTs to be submitted to Bangladesh Bank.

• BEFTN system at Bangladesh Bank should be adequately augmented for it to be able to efficiently perform its required function with regard to the proposed reforms.

• Finance Department should enter into Service level agreements (SLAs) with various PSPs to ensure universal service conditions and cost of transfer across all LMs for a particular PSP.

• All functions of SPBMU MIS including validation of data should be operational.

• Linking of SPBMU MIS with LM MIS should be fully functional.

• Linking of SPBMU with iBAS++ should be in place.

• SPBMU should conduct workshops for different stakeholders on various aspects of proposed reforms.

After completion of the above activities SPBMU MIS will access the beneficiary data available at the LM MIS, concerning a particular social protection scheme, for its validation with the help of NID database and beneficiary databases pertaining to all other social protection schemes. This will be done at the start of each payment cycle and for each social protection scheme. On allotment of the budget for making payment against a particular scheme the detailed operational procedure as described in the chapter 2 of this report will come into play.

A provision of social audit through community organisations should be kept in all the socialprotection schemes after one year of their transition to new payment system. Feedback on the payment system through social audits should be used to further strengthen the p ayment system.

3. Pilot Testing of the Proposed Reforms It is proposed to conduct pilot testing of the proposed reform plan in order to test its feasibility and to fine-tune itsprovisions, wherever necessary. After discussion with the stakeholders it is proposed to conduct such pilot tests on the schemes of Maternity Allowance (MA) and Old Age Allowance (OAA). It is further proposed that all beneficiaries of five upazilas across three districtsshould be covered under the pilots for each scheme.

A team of officers from Ministry of Finance, participating LMs and the CGA should be constituted to monitor the pilots. Lessons learnt from the pilot should be used to further strengthen the system before other line ministries join it. In due course of time the reformed payment system will be capable of handling all G2P payments smoothly.


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4. Proposed Timelines for the Pilots

Months

Activities Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18

1.Development of MIS for the two LMs participating in the pilots

2.Awareness generation among beneficiaries and their opening of accounts with their chosen PSPs

3.Updation of beneficiary data at field levels

4.Procurement of required hardware for the pilots

5.Data digitization for the two schemes for piloting

6.Completion of all SPBMU modules

7.Linkage of SPBMU MIS with LM MIS

8.Linkage of SPBMU MIS with iBAS++ system


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9.Required updation of iBAS++ system for incorporation of DDOs/CAOs and generation of EFTs

10.Training and capacity building of the staff engaged in the pilots

11.Making payments to beneficiaries through new system

12.Evaluation and assessment of the pilots


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5. Conclusion This chapter concluded the report by providing a detailed outline of the strategy to implement the proposed reforms in social protection payment system. It also provided a plan for pilot testing of the proposed reforms and suggested a timeline for the pilot tests.


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Annexure 1

Operational Guidelinesforthe Proposed Social Protection Payment System

List of Acronyms BB Bangladesh Bank

BANBEIS Bangladesh Bureau of Education Information & Statistics

BEFTN Bangladesh Electronic Fund Transfer Network

BPO Bangladesh Post Office

CAO Chief Accounts Officer

CBS Core Banking System

CGA Controller General of Accounts

DDO Drawing & Disbursing Officer

DG Director General of the Directorate /Department

EMTS Electronic Money Transfer Scheme

GoB Government of Bangladesh

G2P Government-to-Public

iBAS++ Integrated Budgeting and Accounting System++

KYC Know Your Customer

LM Line ministry /Directorate/Department under the Ministry

LM MIS LM Management Information System

MFS Mobile Financial Services

NID National Identification Data

POS Point of Sales

PD Project Director

PSP Payment Service Provider

SPBMU Social Protection Budget Management Unit

SPBMU MIS SPBMU Management Information System.


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Table of Contents 1. Background. 41

2. Framework for Efficient and Effective payment system 41

3. Purpose of the Guidelines 41

4. Phases of Payment System 41

4.1 Validation Process prior to Payment (Phase: 1) 42

4.1.1 Guidelines for Line Ministries Engaged in Social Protection Cash Transfers 44

4.1.2 Guidelines for Social Protection Budget Management Unit 44

4.2 Phase 2: Process for Payment 45

4.2.1 Guidelines for Line Ministries, LM DDOs, iBAS++ and CAOs 47

4.2.2 Guidelines for Bangladesh Bank 48

4.2.4 Guidelines for Payment Service Providers 49

4.3 Phase 3: Reconciliation after Payment 49

4.3.1 Guidelines for Line Ministries/CGA/SPBMU 50

5. Beneficiary Grievance Redressal 51

6. Advantages of the System 51

6.1 Benefits to Line Ministries and Departments 52

6.2 Benefits to Finance Division 52

6.3 Advantages to Beneficiaries. 52


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Operational Guidelines for Social Protection Payment Services

1. Background The National Social Security Strategy (NSSS) of the Government of Bangladesh emphasises on ‘Strengthening the Delivery of the National Social Security System’. The strategy prioritizes key reform in strengthening payment mechanism to make it Government to Person (G2P) payment system so that it promotes financial inclusion and prevents leakages. In this backdrop, the Finance Division had requested the SPFMSP project to perform a research study on ‘Payment System’ and suggest the way forward for improving the existing payment system as required by the NSSS.

The findings of said study revealed that all the prevalent methods of delivery suffer from challenges on the demand-side as well as on the supply-side, and are generally characterized by weak information systems and lack of adequate accountability structures. Inadequate monitoring along with unsatisfactory beneficiary identification mechanisms may be encouraging duplicate and fraudulent payments. Payment system of some social protection programmes are way too costly for beneficiaries in terms of their travel expenses and opportunity lost in collecting the benefits. As the current system stands, beneficiaries usually have no right to choose a mode of payment most suitable to them. On the basis of such findings, the study proposed for establishment of an efficient and effective payment system, which will empower the beneficiaries to be able to make informed choices, be cost -effective and transparent, and have robust MISs and system-driven budget management and

The recommendations from the above study put forward an agenda for a comprehensive costed reform plan to improve social protection payment system as indicated in the NSSS. It also provided a long-term vision for a comprehensive, centralised payment system. Such a payment system would enablesocial protection schemes to transfercashbenefits from the Treasury to the beneficiaries’ accounts directly. The National Identity (NID) would provide unique identifiers for this integrated system. Along with the concerned line ministries, the Social Protection Budget Management Unit (SPBMU) of the Finance Division will regularly monitor the quality of payment services and take appropriate action in case of any observed deficiency in the service delivery. It would also make sure that the beneficiaries are adequately empowered to choose the most suitable options for obtaining their payments. The reformed payment system will be backed by a modern technology-driven unified coordination and supervision mechanism over all the available modes of payment in the country.During implementation of the reformed payment system, the stakeholders will have to ensure that all the required IT systems and required manpower are in place. Roles and responsibilities of each stakeholder in the operation of the reformed payment system have been provided in these Guidelines.

2. Framework for Efficient and Effective Payment System: In the Reform Plan for Social Protection Payment System, a framework for an effective payment solution has been incorporated with the following elements and attributes:

Empowerment of beneficiaries by allowing them to choose modes of payment for receiving the benefits


• Detection and elimination of ghost beneficiaries, ineligible beneficiaries, and double dipping

• Cost-effectiveness on supply-side as well as on demand-side

• Speedy payments

• Low opportunity costs to beneficiaries

• Easy accessibility for all beneficiaries however remotely they are located


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• Flow of data in real time from the supply-side to the payment service providers, and backward, immediately after the payment is effected

• System-driven budget management of all social protection programmes


• System-driven accounting of disbursements

• Availability of an effective grievance redressal system

The reforms in the social protection payment system have been guided by the general framework of principles as mentioned above. In particular, they intend to empower the social protection beneficiaries by allowing them to choose the most suitable payment option among all the existing payment mechanisms. They also allow the line ministries (LMs) engaged in making social protection payments to utilise all the possible payment channels for such payments, with uniform service conditions and rates across all the social protection programmes.

3. Purpose of the Guidelines Theseguidelines are based on the recommended plan for payment system solutions for the social protection schemes. They are meant to provide operational guidance to various stakeholders in the social protection payment system such as the line ministries (LMs), departments and directorates engaged in social protection cash transfers,the concerned Chief Accounts Officers (CAOs), Social Protection Budget Management Unit (SPBMU), payment service providers (PSPs), and Bangladesh Bank (BB). The users while following these guidelines will,however, continue to enrich/amend it from time to time with the help of relevant orders, rules and regulations issued by the respective LMs, BB, CAOs, SPBMU and PSPs, and place them as annexures to the Guidelines. Any change/amendment of the Guidelines should be undertaken in consultation with SPBMU of the Finance Division of the Ministry of Finance.

Model Service Level Agreements (SLAs) across different modes of payments (banking, mobile money, postal etc.) may be followed for effecting social protection cash payments to beneficiaries.Proposed templates for such SLAs are annexed along with these guid elines.

4. Phases of Payment System There are following three distinct operational phases in the process of payment of cash benefits to the beneficiaries under a social protection scheme:

Phase 1: Validation Process-prior to Payment

Phase 2: Process for Payment and

Phase 3: Reconciliation Process after Payment.

Following agencies are the major participants in the processof social protection cash transfers to the beneficiaries:

1. Beneficiaries of social protection cash transfer schemes/projects/programmes 2. Line ministries/ Departments and their Field Offices (generally referred to as LMs in this

document) in charge of social protection schemes/projects that have cash benefit delivery components

3. Social Protection Budget Management Unit (SPBMU), Finance division, Ministry of Finance 4. LM CAOs under the CGA 5. Government Treasury represented by Bangladesh Bank (BB)/ Sonali Bank 6. Payment Service Providers(PSPs) includingscheduled banks, MFS providers and Bangladesh

Post Office

4.1 Phase 1: Validation Process-prior to Payment


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Before implementing the ‘reformed’ payment system by a line ministry, it is important that it develops its MIS and digitizes the data of beneficiaries on formats and platforms compatible to the ones being used by SPBMU MIS. SPBMU will provide all required support to the line ministries in this regard. Such data should also consist of the choice of beneficiaries of the most appropriate payment channel for them, their account numbers held at the concerned payment channels and their mobile numbers for communicating to them about crediting of benefits in their accounts.

The existing practice of identification of beneficiaries would continue to be vested with the concerned line ministries, departments and the project functionaries. New beneficiaries will be identified by the field personnel of the concerned agencies before each payment cycle as per their existing practice, and their details will be entered in the concerned agencies’ MIS. While identifying beneficiaries it will also be ascertained from them as to what payment channel they would like to use for obtaining their cash benefits.

As shown in the Figure 1 below, the data on beneficiaries contained in the line ministry MIS will be automatically captured at the SPBMU MIS, which will validate the eligibility of beneficiaries with the help of the NID database, and would flag discrepancies in beneficiary details, if any, to the concerned line ministry. This would take care of fraudulent payments and double dipping. In addition, SPBMU MIS would check details of beneficiaries obtaining benefits from more than one scheme, whether administered by one line ministry or by different ministries, to check if the benefits obtained are as per regulations of the individual ministries. In some cases, a beneficiary obtaining benefits from one scheme is prohibited to obtain benefits from some other schemes. However, in the current system there is no mechanism to check and prevent such cases as different schemes do not ‘talk’ with each other. The proposed checks by SPBMU MIS would be able to identify such cases and help the concerned line ministries to correct the situation.

Line ministries will be required to address all discrepancies and anomalies in their beneficiary data as pointed out by SPBMU MIS to the satisfaction of SPBMU. The beneficiary data thus ‘validated’ will only be kept in the database of line ministry MIS and will be used for disbursing the cash benefits under the relevant scheme of the line ministry.

Figure 1

Guidelines for various participants for the phase of validation are detailed below:


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4.1.1 Guidelines for Line Ministries (LMs) Engaged in Social Protection Cash Transfers

• LMs will need to develop their MISs and digitize the data of beneficiaries on formats and platforms compatible the ones being used by SPBMU MIS before they can participate in the ‘reformed’ payment system. They may access NID database to reduce their workload relating to beneficiary data digitization.

• New beneficiaries will be identified by the field personnel of the concerned LMs and the data on existing beneficiaries will be updated before each payment cycle as per the existing relevant rules and regulations.

• The details of each beneficiary will be entered in the MIS of the concerned LMs.

• Such details shall also include the NID number of each beneficiary for enabling SPBMU to ascertain the eligibility of each beneficiary with the help of NID database.

• The LM field staff, with the help of local community organisations and elected officials, will educate the beneficiaries and support them to make appropriate choice of PSP and its branch/agent point for obtaining their payments. Their efforts will run parallel to the efforts of various PSPs that would educate the beneficiaries on the features of their products and thus would help beneficiaries to make a considered choice in favour of the most appropriate payment channel in view of their unique circumstances.

• LM field staff will also support the beneficiaries in opening their accounts with their respective PSPs.

• Field staff will further ensure that numbers of such accounts are included in the beneficiary data along with the mobile phone numbers of the beneficiaries.

• In case a beneficiary is not satisfied with her chosen payment channel, the field officials of the line ministries will help her modify her choice and update their databases accordingly.

• LMs shall ensure that accounts of all the beneficiaries are duly opened before the next cycle of payment is initiated.

• LMs will use the systemic advantage of the new arrangement to firm up the schedule of their payments, and make an effort to make more frequent payments. The time period of the regular payments should not be more than a month in any situation.

• LMs will coordinate with the SPBU, Finance Ministry to ensure that sufficient funds are made available timely for all of their social protection schemes.

4.1.2 Guidelines for Social Protection Budget Management Unit (SPBMU)

• The newly created SPBMU at the Budget wing of the Ministry of Finance will support and coordinate with the LMs in the following manner for ensuring the optimal performance of the payment system:

• SPBMU will provide all support to the LMs towards development of their MISs.

• As shown in the validation process diagram above, the data on beneficiaries contained in the line LM MIS will be accessed by the SPBMU MIS which will check it for genuineness of beneficiaries with the help of the NID database, and would flag discrepancies in beneficiary details, if any, to the concerned line ministry. This would take care of fraudulent payments and ghost beneficiaries.

• MIS unit at SPBMU will ensure that all the beneficiaries are identified through their unique NID numbers. The child beneficiaries, as in case of student stipend programmes, will also be identified through the NID number of their declared guardians until the time they are included within the scope of NID. Even in existing systems students are identified on the basis of information on their declared guardians.

• In case of more than one child beneficiary for a particular guardian, the system will be able to identify the beneficiary with the names of the children and NID number of the guardian. It will also be able to verify if all the requirements are met in case of multiple children from the same parents.


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• Finance Division may enter into an agreement with NID centrally with a provision to allow all the LMs and SPBMU access NID database.

• SPBMU MIS would check details of beneficiaries obtaining benefits from more than one scheme, whether administered by one line ministry or by different ministries, to check if the benefits obtained are as per regulations of the individual ministries. In some cases, a beneficiary obtaining benefits from one scheme is prohibited to obtain benefits from some other schemes. There is no mechanism to check and prevent such cases in the current system as different schemes do not ‘talk’ with each other. The proposed checks by SPBMU MIS would be able to identify such cases and help the concerned line ministries to rectify the anomalies.

• LM will be required to address all discrepancies and anomalies in their beneficiary data as pointed out by SPBMU MIS to the satisfaction of SPBMU.

• The beneficiary data thus ‘validated’ will only be kept in the database of LM MIS and will be used for disbursing the cash benefits under the relevant scheme of the line ministry.

• Before the start of each payment cycle, field officials will update the list of beneficiaries tobe paid and get it approved by the concerned authority. Beneficiary databases kept at MISs of LMs and SPBMU will get updated accordingly, at the same time.

4.2 Phase 2: Process for Payment There are three principal payment channels currently in the country: scheduled banks, MFS, and Bangladesh post office. All the three channels have been expanding their reach by engaging agents in areas where they have had low penetration. They are willing to leverage such networks of agents for reaching out to social protection beneficiaries and disbursing cash benefits to them. All the three payment channels have provisions of opening beneficiary accounts and making disbursements to such accounts through centralised mechanisms.

As mentioned earlier, the beneficiaries will be adequately informed to make a considered choice in favour of a particular payment service provider. They will also be assisted to choose the most convenient bank or MFS provider if they decide to use such payment channels for obtaining their cash benefits. They will then be facilitated to open their accounts in such banks, MFS providers or post offices. Details on such choice as exercised by the beneficiaries will be entered in the beneficiary databases within line ministry MIS’s.

As shown in the Figure 2 below, at the start of a payment cycle, the DDO assigned for a particular social protection scheme will prepare the bill/claims for payment authorisation on the basis of ‘validated’ beneficiary data and submit the same to CAO through iBAS++. The concerned CAO after performing all the required statutory checks prescribed by existing regulations will instruct Bangladesh Bank through the iBAS++ platform for effecting payment to the beneficiaries. This process will replace the current method of issuing advance cheques in the name of DDO or the bank.


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Figure 2

The DDO will also prepare the list of beneficiaries to be paid within the payment cycle on the basis of the validated data. This list will again be validated through SPBMU and would be hard -coded. The hard-coded list will then be accessed by iBAS++. The concerned CAO will a lso have access to the list for verifying the payment authorisation demanded by the DDO with the number of eligible beneficiaries. On the basis of this list, the iBAS++ will prepare only one EFT (xml) file for the entire payment cycle containing the information on all individual beneficiaries to be paid in that particular cycle. This EFT file will be accessed by Bangladesh Bank on iBAS++ platform. Proposed process for the interface of iBAS++ with SPBMU is shown below in the Figure 3 below:

Figure 3

On receiving payment instructions from the concerned CAO, the Bangladesh Bank (BB) will access the EFT file at iBAS++ platform and will sort it out according to each payment service provider (PSP) and instruct them to credit the beneficiary accounts accord ingly. PSPs will also


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inform the beneficiaries through text messages on their registered mobile phones regarding crediting of cash benefits into their accounts. The accounts of the PSPs with BB will be settled on BEFTN at the end of the day on the basis of number of beneficiary accounts credited. As the MFS providers and Bangladesh Post office are not part of BEFTN currently they will designate a scheduled bank to communicate with BEFTN. BB fund settlement with MFS providers and Bangladesh Post Office will also take place through the designated bank only in the current situation.

If any transaction fails at the PSP level, it will reflect on BEFTN system as well as on iBAS++ system. The iBAS++ system will translate the information in English which will be accessed by the MIS units of SPBMU and LMs. DDOs will access this information on the MIS unit of the concerned LM and take further action to address the reasons for non-payment.

In the current situation, BB cannot use BEFTN to transfer money to the individual accounts of beneficiaries at the MFS providers or at BPO, but it can directly transfer the amounts to the accounts standing at scheduled banks that are on core banking system (CBS). However, after discussion with BB, it is proposed to initially allow BB to effect one EFT for all beneficiaries of a particular PSP. The PSPs, in turn, will transfer the amount directly to the beneficiary accounts within their own systems. Once the system stabilizes and the confidence levels at the banks and at BB improve, the BB may be asked to use BEFTN for directly crediting the benefits into beneficiaries’ accounts that are on CBS. The MFS providers and BPO will however need to develop relevant systems for their beneficiary accounts to be directly linked with the BEFTN. Until that happens, the system of BB transferring lump sums to designated accounts at their banks will continue.

Such limitations of the current system, however, do not adversely affect the efficiency of the proposed payment system. Banks on CBS, MFS providers and BPO have the capability to transfer money to individual beneficiaries and get back to BB within 24 hours (definitely within 72 hours in extreme cases).

Additionally, Payments may need to be staggered LM-wise on different dates so as not to load the BB system. It is suggested that an effort be made to fix cash transfer dates for all LMs in advance.

4.2.1 Guidelines for Line Ministries, LM DDOs, iBAS++ and CAOs

• On the basis of approved lists ofbeneficiaries to be paid within a particular payment cycl e, payrolls for that payment cycle will be generated at LM MIS. Payroll files will be accessed, validatedand hard-codedat the SPBMU, which will be linked to the iBAS++ system.

• On being given a command by the DDOs, the iBAS++ system will generate bills on the basis of relevant hard-coded payroll data, which will be accessed by the concerned CAOs.

• The CAOs will also have an access to the payroll data through the link provided at the iBAS++ system.

• After checking budget position, availability of funds and performing all other required statutory checks prescribed by existing regulations,CAOs will approve the bills on iBAS++ platform and give a command for preparation of EFT.This process will replace the current method of issuing advance cheques in the name of DDOs or the banks.

• Such bills will also include the fees to be paid to the PSPs for payment services to be rendered by them. All fees and expenses associated with the cash transfers to social protection beneficiaries will be borne by the Government, and not by beneficiaries in any situation.

• iBAS++ will design their system in such a way that one EFT will be generated for the entire payroll, accompanied by the details of all the beneficiaries to be paid in that particular payment cycle in the form of an xml file. Within the xml file each beneficiary will have a unique EFT number. iBAS++ will also provide for a common identifier for the beneficiaries


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for a single programme, which will be different for different programmes in order for BB to be able to sort out programme-wise information.

• At one click the CAOs will submit the EFT along with all the xml files to BB for further payment to the beneficiaries through their chosen PSPs. BB BEFTN will segregate xml files according to various PSPs and share the relevant files to all the concerned PSPs and instruct them to credit the beneficiary accounts accordingly.

• PSPs will credit the accounts of the beneficiaries and inform the beneficiaries through text messages on their registered mobile phones regarding crediting of cash benefits into their accounts.

• The accounts of the PSPs with BB will be settled on BEFTN at the end of the day on the basis of number of beneficiary accounts credited.

4.2.2 Guidelines for Bangladesh Bank Bangladesh Bank (BB) is the central bank and the banker to the Government of Bangladesh. All payments with the exception few of the projects financed by Development partners are processed though BB. Therefore, while payment authorisation is received from accounts offices for social protection schemes, the BB shall follow the procedures as stated below.

• BB will ensure that the requisite software and hardware systems are in place for the BEFTN to be able to perform efficiently.

• BB will augment the systems associated with BEFTN wherever necessary.

• BB cannot use BEFTN to transfer money directly to the individual accounts at the MFS providers or at BPO currently, but it can directly transfer the amounts to the accounts standing at scheduled banks that are on core banking system (CBS). It will, however, instruct the PSPs to use their own systems to credit the amounts into beneficiary accounts initially.

• The three PSP channels, in turn, will transfer the amount directly to the beneficiary accounts within their own systems. Once the system stabilizes and the confidence levels at the banks and at BB improve, the BB may use BEFTN for directly crediting the benefits into beneficiaries’ accounts that are on CBS.

• BB will take all necessary steps to include MFS providers and BPO also within the ambit of BEFTN, and instruct these two PSP channels to develop relevant systems for their beneficiary accounts to be directly linked with the BEFTN. Until that happens, the system of BB giving one payment instruction for all beneficiary accounts to a particular MFS provider or to BPO will continue.

• On receipt of payment instructions from the CAO and after accessing EFT files at iBAS++, BB will send relevant EFT instructions through BEFTN to all the participating banks and the banks designated by MFS providers and BPO, and instruct the PSPs to immediately credit the indicated amounts into the accounts of beneficiaries.

• BB will further instruct the PSPs to share the payment files for reconciliation within 72 hours of receiving the payment instructions from BB.

• BB to share the payment files with iBAS++, which will be accessed by the concerned CAOs as well as by MISs of SPBMU and the concerned LMs for reconciliation.

• BB will take appropriate action against the PSPs that fail to credit the beneficiary accounts timely or fail to timely share the payment files with BB.

• BB will make settlement of funds on receipt of payment information from the participating banks, and from MFS providers and BPO through their designated banks. Such settlements will be made at the end of each payment day.

In case of payment failures, BB will repeat the payment process for crediting the benefits into the accounts of left-out beneficiaries after the LMs have addressed the reasons for non-crediting.


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4.2.3 Guidelines for Payment Service Providers (PSPs)

• PSPs will launch awareness generation drives among beneficiaries to educate them about facilities and features of their accounts and other products.

• PSPs will open the accounts of beneficiaries who opt to obtain their social protection cash benefits through their channels. Such accounts of beneficiaries will mandatorily be regular accounts with all features and facilities as are provided to regular customers of the concerned PSPs.

• As MFS providers and BPO are not part of BEFTN currently, they willeach designate a scheduled bank,whichis part of BEFTN, for communicating with BEFTN.

• MFS providers and BPO will receive payment instructions through such designated banks and will share their payment information with BB through such banks only.

• The concerned banks, MFS providers and BPO will immediately credit the requisite amounts into the accounts of the relevant individual beneficiaries on receipt of instructions from Bangladesh Bank.

• PSPSs will intimate to beneficiaries regarding credit of benefits in their accou nts through their registered mobile phones.

• They will share the payment information with BB immediately (within a maximum of 72 hours of receipt of instructions) after the accounts of beneficiaries are credited.

• They will repeat the process of crediting benefits into the accounts of beneficiaries, who could not be paid in the first round due to some reasons, on receipt of revised instructions from Bangladesh Bank. They will inform these beneficiaries through their registered mobile phones and share the payment files again with Bangladesh Bank.

• They will keep repeating this process until all eligible beneficiaries have been paid.

• MFS providers and BPO will take required action, on advice of Bangladesh Bank, to develop relevant systems for them to become part of BEFTN and their beneficiary accounts to get directly linked with the BEFTN.

• PSPs will share data on withdrawals and other operations in the beneficiaries’ accounts with MIS unit at SPBMU on the request by SPBMU, for an analysis of such data on various indicators.

4.3 Phase 3: Reconciliationafter Payment As shown in Figure 4 below, the BEFTN will capture the information on cases where it is not possible to credit the beneficiary accounts due to some reason. This information will also be reflected on the iBAS++ system. The iBAS++ system will translate the information in English which will be accessed by the MIS units of SPBMU and the LMs. DDOs will access this information on the MIS unit of the concerned LM and take further action to address the issues that resulted in not crediting the benefits into some beneficiaries’ accounts and get back to SPBMU and the iBAS++. The BB in turn will again use BEFTN to transfer the remaining benefits to the deprived beneficiaries through their chosen PSPs.


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Figure 4

SPBMU will access the payment information at iBAS++ and update the beneficiary databases accordingly. The MIS units of LMs will access the updated information on SPBMU MIS and update their own databases accordingly. The iBAS++/CGA will further use this inform ation for accounting and auditing purposes as is being done in the existing arrangements.

4.3.1 Guidelines for Line Ministries/CGA/SPBMU

• Payment information received from the PSPs will be shared by Bangladesh Bank with iBAS++, which will be accessed by the MIS units of SPBMU and LMs at the iBAS++ system.

• DDOs will access the payment information at the concerned LM MIS and take further action to address the issues that resulted in not crediting the benefits into some beneficiaries’ accounts. They will then again initiate the process for making payment to such deprived beneficiaries as described in the Phase 2.

• DDOs will keep repeating this process until all the eligible beneficiaries for a particular payment cycles receive their payments.

• SPBMU will access the payment information at iBAS++ and update the beneficiary databases accordingly. The MIS units of LMs will access the updated information on SPBMU MIS and update their own databases accordingly.

• Relevant portions of payment information will also be shared with Upazila accounts officers after each payment cycle.

• Information of departmental accounts and cash accounts will be reconciled between BB and LM CAO after each cycle of payment effected through BEFTN

• Reconciliation will be undertaken by the LMs with their Accounts Offices on a regular basis as required under the Financial Rules.

• LMs will also undertake year-end reconciliation of money spent/paid out of each scheme/Head of Account for the purpose of preparation of Annual Appropriation Accounts by the CAO/CGA, as required under relevant rules.

• The CGA will further use payment information for accounting and auditing purposes as is being done in the existing arrangements.

5. Beneficiary Grievance Redressal


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The current payment systems lack beneficiary grievance-redressal mechanisms. The proposed reforms aim to establish a robust citizen-centric grievance redressal system that will incorporate the following best practices of customer care in both public and private sectors:

• The system will consist of a dedicated portal to be part of all MISs of the line ministries as well as the MIS of SPBMU.

• It will be bi-lingual, in Bangla and in English, accessible through multiple channels (voice, e-mail, letter, fax, mobile) and will be geared to resolve the queries and co mplaints of the citizens in the shortest possible time. The portal will also have provisions to include additional languages as per the requirements.

• It will provide a single window to the residents to air their grievances and suggestions in a simple and accessible manner. The line ministries and the SPBMU, as the case may be, will then coordinate with the concerned field offices and the payment service providers for adequately and timely redressal of all the grievances lodged on the portals.

• In addition, all the field offices and the schools (in case of stipend programmes) will mandatorily have grievance redressal cells with clearly demarcated roles and accountabilities of local officials. Such cells will be integrated with the grievance redressal portals at their respective line ministries, and will be effectively monitored at the central level using modern IT tools.

• There will be no charge for lodging complaints and getting those complaints redressed. The system will also provide for an appellate mechanism for the beneficiaries who are not satisfied with the disposal of their grievances at local levels.

• Line ministries will also enlist the help of civil society organisations to receive feedback on grievance redressal mechanisms and all aspects of social protection payments in the country.

• A citizen’s charter will be prepared that will detail the rights of beneficiaries, responsibilities of officials and timelines for disposing of the complaints. The charter will also specify the action to be taken in case of violation of provisions contained in the charter.

• Effective monitoring mechanisms would be designed to make the entire system transparent and impartial.

6. Advantages of the Proposed System • No Reinventing the Wheel - Departments to remain Custodian of Beneficiary Data

• Harnessing existing structures optimal utilisation of Human-ware, Hardware and Software

• Unified coordination and supervision at the Central Level.

• Use of IT and system driven approaches with Extensive use of National ID for verification

• Plugging loopholes in existing procedures using systemic approaches

• Supply side Strengthening and improved management in terms of economy, efficiency, effectiveness

• Empowerment of Beneficiaries with convenience of choices of payment channels for receiving benefits

• Compatible MIS with all LMs being plugged into the SPBMU MIS.

• Direct payment to Beneficiary Accounts (G2P) without any intermediary

• No withdrawal of funds from the Treasury unless required for disbursement

• Utilization of all the possible payment channels for such payments, with uniform service conditions and rates across all the social protection programmes for a particular payment channel

• Real time payments and real time monitoring

• Online flow of pre and post payment data

• Centralisation of payment coordination with decentralisation of payment.

• Transparency in payment as well as in cost of transfers


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6.1 Benefits to Line Ministries and Departments • Digitisation of data, improved monitoring of payments and real time MIS

• Greater understanding of beneficiaries, their locations, profile and payments

• Intra-ministerial and inter-ministerial validation of beneficiary data through NID using SPBMU MIS

• Prevent double-dipping, duplication and inclusion errors

• Reduction in work load of field officers as no processing of payments at their level required

• Field officials can focus their energy more on targeting, monitoring and redressing grievances

6.2 Benefits to Finance Division • Improved cash flow management with lesser dependence on ways and means

• No holding of funds allowed to any agency / banks

• Intra ministerial and inter-ministerial data verification, and verification of data with the help of NID database leading to avoidance of double dipping, elimination of leakages and ghost beneficiaries

6.3 Advantages to Beneficiaries • Choice of payment options such as bank, mobile financial services or post office for

receiving benefits at their convenience.

• Direct and timely payments to beneficiaries.

• Easily accessible for all beneficiaries regardless of how remotely they are located.

• Significantly reduced opportunity and travel costs for collection of benefits.

• Significant reduction in inconvenience and drudgery associated with obtaining benefits in the current systems.

• Regular accounts of beneficiaries to be opened and maintained with all the payment service providers leading to their greater inclusion in the mainstream financial system of the country.

• Robust provisions for grievance redressal.


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Annexure 2

Draft Service Level Agreement (SLA)BetweenLine Ministry (Name), Government ofBangladesh& Payment Service Providers (Scheduled Banks)

1. This Service Level Agreement (SLA), dated ............day of the month of..............in the year...........

Between:

The Line Ministry (Name) represented by....the Director-General of the Directorate/Project Director as the First party

And

The Bank (Name), a Payment Service Provider represented by.....(Its authorised person with title of the post etc.) as the Second Party has been entered into as under:

2. Purpose of the Agreement:

1. The First Party desiring to receive payment services and other banking services from the Second Party for the nationwide beneficiaries of the Social Protection Schemes and Programmes being implemented by it;

2. To provide payment services and all other banking facilities by the Second Party to the beneficiaries desiring their services as per lists received from the First Party and its authorised officials;

3. The First Party providing Nationwide Allowances/Students Stipends/Tuition fees/Book Allowances/tuition Subsidy/examination fees/tuition subsidy to Institutions etc. (to be clearly spelt by the First Party); and

4. Any other type of allowances (as spelt out by the First Party) authorised by the First Party.

3. Duration of Service Agreement: For a period of one year from the date stated at para

1 and subject to extension by mutual written consent of the parties involved.

4. Service Fees:No Service fees will be charged for opening of a Beneficiary Account. For transfer of cash benefits to beneficiaries’ accounts, lump sum fees of 1% of the entire transferred amount will be charged by the Second Party to the First Party. In case the cash transfer methodology adopted by the Second Party involves provisioning of a smart card to beneficiaries a one-time fee of BDT 100 per smart card will be charged by the Second party to the First Party.

5. Definitions:

LM: Line ministry /Directorate/Department under the Ministry.

Director-General:Director General of the Directorate /Department.

Project Director:Project Director of the relevant Social Protection Project under the LM.


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Payment Service Provider (PSP): Bank/Mobile Financial Services/Bangladesh Postal Office providing payment services to the Beneficiaries of any or all social Protection Schemes and Programmes

MFS:Mobile Financial Services- financial services being provided through mobile phone technology.

Beneficiaries: Persons drawing Allowances/Stipends/other subsidies under Social Protection Schemes and Programmes.

SPBMU: Social Protection Budget Management Unit in Finance Division, entrusted with Social Protection budget management, validation of beneficiaries’ lists submitted by the LMs and other tasks as specified by the Finance Division from time to time.

SPBMU MIS: SPBMU Management Information System.

LM MIS:LM Management Information System. MIS units at the line ministries will maintain the data on beneficiaries in the platforms and formats compatible with those being used by the MIS unit at SPBMU.

CAO: Chief Accounts Officer of the relevant Line Ministry.

Bangladesh Bank: The central bank of Bangladesh.

BEFTN: Bangladesh Electronic Fund Transfer Network, a central clearing house administered by central bank, i.e., Bangladesh Bank.

6. Operational Procedures:

I. Responsibilities of the First Party

1. First Party will be responsible for identifying the beneficiaries based on predefined eligibility criteria before each payment cycle, wherever needed, and for updating the database of beneficiaries for a particular Social Protection scheme maintained at the MIS unit of the First Party.

2. The First Party will arrange to get this data validated by the SPBMU of the Ministry of Finance.

3. The approved updated and validated data of beneficiaries will include their choice of the Payment Service Providers and also the choice of particular branches/agents within such Service Providers.

4. First Party will sort out the beneficiaries on the basis of their requests to be associated with particular bank branches and bank agents. They will further provide lists of such beneficiaries, who have opted to obtain their payments through the Second Party, to the Second Party. Such lists will contain names, addresses, mobile phone numbers and NID numbers of the concerned beneficiaries along with their other required details. First Party will then ask the Second Party to open regular Bank Accounts for all such beneficiaries as per the Banking Act.

5. Field Offices of the First Party will provide required assistance to the Second Party for opening of accounts of the beneficiaries.

6. First Party will ensure that the bills for the respective cycle of Social Protection payment are duly placed before the relevant CAO for issuing payment order, through Bangladesh Bank, to the Second Party for transferring the amount to the accounts of the concerned beneficiaries.

7. After the benefit amount is credited to the concerned beneficiary accounts, the First Party will instruct its field staff to disseminate information about crediting of such benefits amongst beneficiaries. This will be important for the beneficiaries who do not have mobile phones or who are unable to read text messages on their phones.


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8. The First Party will investigate the cases of beneficiaries whose accounts could not be credited, find out the reasons for such non-crediting, address such reasons adequately, and again follow the procedure as mentioned against points 6) and 7) above. First Party will keep repeating this action until all the accounts of the concerned beneficiaries have been credited with the due amounts of money.

9. First Party will use the payment information received from the Second Party for reconciliation purposes.

II. Responsibilities of the Second Party

1. The Second Party will open the beneficiaries’ individual accounts at the beneficiaries’ chosen branches/agent points following the receipt of validated and approved list of beneficiaries, who have opted to obtain their payments through the Second Party, from the authorised officials of the First Party.

2. Such accounts of the beneficiaries will be regular accounts with all the features and facilities that are available to other customers of the Second Party holding their accounts with the Second Party. The accounts will be opened with zero balances.

3. The accounts of beneficiaries will be mandatorily linked with their NIDs. Beneficiary NIDs will also serve the purpose of KYC for opening of such accounts.

4. On receiving instructions from Bangladesh Bank, the Second Party will immediately credit the requisite cash benefits into accounts of the concerned beneficiaries.

5. Second Party will also intimate to beneficiaries regarding credit of benefits in their accounts through their registered mobile phones.

6. Second Party will share the information on the beneficiaries, whose accounts could not be credited for any reason, with Bangladesh Bank immediately (not later than 72 hours of receipt of instructions in any case) after the accounts of beneficiaries are credited.

7. On the basis of such payment information, Bangladesh Bank will make settlement of the amount to be paid to the Second Party along with the prescribed fees for the purpose. As the banks are part of the BEFTN, Bangladesh Bank will use BEFTN mechanism to make such settlements.

8. The Second Party will again take action to credit the benefits into the accounts of remain ing beneficiaries on receipt of revised instructions from Bangladesh Bank, and repeat the process as outlined against points 4), 5) and 6) above.

9. Accounts of beneficiaries will be regular accounts and the beneficiaries will have an access to all features and facilities of regular accounts as is the case with regular customers. There will be absolutely no discrimination against the social protection beneficiaries and they would be allowed to hold funds in their accounts while earning regular savings interest as is prevalent within the banking system.

10. The Second Party will also share the data on withdrawals and other operations in the beneficiaries’ accounts with MIS unit at SPBMU at regular intervals, not exceeding a month, for their analysis of such data on various indicators.

11. All supporting documentation relating to disbursement of Social Protection payment shall be retained at the Second Party’s disposal and shall be subject to review and audit by the statutory audit bodies and relevant officials of both parties.

7. Controlling Offices for the First Party & the Second Party:

To be mutually agreed between the two parties.

8. Joint Review of Operations:

There shall be a joint review of operations by both parties at the end of each cycle of payment. The corrective measures if any arising out of the Review shall be binding to the respective party for implementation.


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9. Termination of Agreement:

This Agreement and all obligations here under shall terminate in the event of any situation necessitating such termination and agreed upon by both parties. Any such notice of termination shall be issued by either party at least 90 days before the proposed date of termination.

10. Governing Law & Jurisdiction:

This agreement shall be governed by and construed in accordance w ith laws of the Peoples’ Republic of Bangladesh. All legal proceedings shall be subject to the jurisdiction of the courts in Dhaka only.

In witness whereof the parties hereto, acting through their representatives there into duly authorised have caused this agreement to be signed in their respective names and delivered in Dhaka as the day and year first above written

Witness Signed By

1. 1.

2. 2.


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Annexure 3

Draft Service Level Agreement (SLA)BetweenLine Ministry (name), Government of Bangladesh & Payment Service Providers(Mobile Financial Services Providers)


Between:

Line Ministry (Name) represented by....the Director-General of the Directorate/Project Director as the First party

And

The Mobile Financial Services Provider (Name), a Payment Service Provider represented by......(Its authorised person with title of the post etc.) as the Second Party has been entered into as under:


1. The First Party desiring to receive payment services and other financial services from the Second Party for the nationwide beneficiaries of the Social Protection Schemes and Programmes being implemented by it;

2. To provide payment services and all other financial services by the Second Party to the beneficiaries desiring their services as per lists received from the First Party and its authorised officials;





4. Service Fees: No Service fees will be charged for opening of a Beneficiary Account with the Second Party. For transfer of cash benefits to beneficiaries’ accounts, lump sum fees of 1% of the entire transferred amount will be charged by the Second Party to the First Party.

5. Definitions:


Director-General: Director General of the Directorate /Department.

Project Director: Project Director of the relevant Social Protection Project under the LM.

Payment Service Provider (PSP): Bank/Mobile Financial Services/Bangladesh Postal Office


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providing payment services to the Beneficiaries of any or all social Protection Schemes and Programmes

MFS: Mobile Financial Services- financial services being provided through mobile phone technology.




LM MIS: LM Management Information System. MIS units at the line ministries will maintain the data on beneficiaries in the platforms and formats compatible with those being used by the MIS unit at SPBMU.









4. First Party will sort out the beneficiaries on the basis of their requests to be associated with particular branches and agents of the Second Party. They will further provide lists of such beneficiaries, who have opted to obtain their payments through the Second Party, to the Second Party. Such lists will contain names, addresses, mobile phone numbers and NID numbers of the concerned beneficiaries along with their other required details. First Party will then ask the Second Party to open zero-balance interest-bearing accounts for all such beneficiaries as is being done for their other customers.


6. First Party will ensure that the bills for the respective cycle of Social Protection paymen t are duly placed before the relevant CAO for issuing payment order, through Bangladesh Bank, to the Second Party for transferring the amount to the accounts of the concerned beneficiaries.

7. After the benefit amount is credited to the concerned beneficiary accounts, the First Party will instruct its field staff to disseminate information about crediting of such benefits amongst beneficiaries. This will be important for the beneficiaries who may be unable to


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read text messages on their mobile phones. 8. The First Party will investigate the cases of beneficiaries whose accounts could not be

credited, find out the reasons for such non-crediting, address such reasons adequately, and again follow the procedure as mentioned against points 6) and 7) above. First Party will keep repeating this action until all the accounts of the concerned beneficiaries have been credited with the due amounts of money.



1. The Second Party will open the beneficiaries’ individual accounts at the beneficiaries’ chosen branches/agent points following the receipt of validated and approved list of beneficiaries, who have opted to obtain their payments through the Second Party, from the authorised officials of the First Party.



4. As the second party is not part of BEFTN currently, it will designate a scheduled bank that is already part of BEFTN for its communication with BEFTN of Bangladesh Bank.

5. On receiving instructions from Bangladesh Bank, the Second Party will immediately credit the requisite cash benefits into accounts of the concerned beneficiaries.



8. On the basis of such payment information, Bangladesh Bank will make settlement of the amount to be paid to the Second Party along with the prescribed fees for the purpose. The settlement will be made through a designated bank account provided by the Second Party to Bangladesh Bank.

9. The Second Party will again take action to credit the benefits into the accounts of remaining beneficiaries on receipt of revised instructions from Bangladesh Bank, and repeat the process as outlined against points 5), 6) and 7) above.

10. Accounts of beneficiaries will be regular accounts and the beneficiaries will have an access to all features and facilities of regular accounts as is the case with regular customers. There will be absolutely no discrimination against the social protection beneficiaries and they would be allowed to hold funds in their accounts while earning regular savings interest as is prevalent within the system of the Second party.







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This agreement shall be governed by and construed in accordance with laws of the Peoples’ Republic of Bangladesh. All legal proceedings shall be subject to the jurisdiction of the courts in Dhaka only.


Witness Signed By

1. 1.

2. 2.


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Annexure 4

Draft Service Level Agreement (SLA)BetweenLine Ministry (Name), Government of Bangladesh &Payment ServiceProviders (Bangladesh Post Office)


Between:

The Line Ministry (Name) represented by....the Director-General of the Directorate/Project Director as the First party

And

The Bangladesh Post Office, a Payment Service Provider represented by...... (Its authorised person with title of the post etc.) as the Second Party has been entered into as under:


1. The First Party desiring to receive payment services and other financial services from the Second Party for the nationwide beneficiaries of the Social Protection Schemes and Programmes being implemented by it;

2. To provide payment services and all other financial services by the Second Party to the beneficiaries desiring their services as per lists received from the First Party and its authorised officials;





4. Service Fees: No Service fees will be charged for opening of a Beneficiary Account with the Second Party. For transfer of cash benefits to beneficiaries’ accounts, lump sum fees of 1% of the entire transferred amount will be charged by the Second Party to the First Party. A one-time fee of BDT 100 will be charged by the Second Party to the First Party for each Postal Cash Card supplied to beneficiaries.

5. Definitions:


Director-General: Director General of the Directorate /Department.

Project Director: Project Director of the relevant Social Protection Project under the LM.

Payment Service Provider (PSP): Bank/Mobile Financial Services/Bangladesh Postal Office


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providing payment services to the Beneficiaries of any or all social Protection Schemes and Programmes

MFS: Mobile Financial Services- financial services being provided through mobile phone technology.




LM MIS: LM Management Information System. MIS units at the line ministries will maintain the data on beneficiaries in the platforms and formats compatible with those being used by the MIS unit at SPBMU.









4. First Party will sort out the beneficiaries on the basis of their requests to be associated with the Second Party for obtaining their payments. They will further provide lists of such beneficiaries, who have opted to obtain their payments through the Second Party, to the Second Party. Such lists will contain names, addresses, mobile phone numbers and NID numbers of the concerned beneficiaries along with their other required details. First Party will then ask the Second Party to open zero-balance interest-bearing accounts linked with Postal Cash Cards. Such accounts will have all facilities and features as are available for other customers of the Second Party.


6. First Party will ensure that the bills for the respective cycle of Social Protection payment are duly placed before the relevant CAO for issuing payment order, through Bangladesh Bank, to the Second Party for transferring the amount to the accounts of the concerned beneficiaries.

7. After the benefit amount is credited to the concerned beneficiary accounts, the First Party will instruct its field staff to disseminate information about crediting of such benefits


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amongst beneficiaries. This will be important for the beneficiaries who do not possess mobile phones or are unable to read text messages on their mobile phones.

8. The First Party will investigate the cases of beneficiaries whose accounts could not be credited, find out the reasons for such non-crediting, address such reasons adequately, and again follow the procedure as mentioned against points 6) and 7) above. First Party will keep repeating this action until all the accounts of the concerned beneficiaries have been credited with the due amounts of money.



1. The Second Party will open the beneficiaries’ individual accounts at the beneficiaries’ chosen branches/agent points following the receipt of validated and approved list of beneficiaries, who have opted to obtain their payments through the Second Party, from the authorised officials of the First Party. All such beneficiaries will be provided with Postal Cash Cards that will be linked with their postal savings accounts.



4. As the second party is not part of BEFTN currently, it will designate a scheduled bank that is already part of BEFTN for its communication with BEFTN of Bangladesh Bank.

5. On receiving instructions from Bangladesh Bank, the Second Party will immediately credit the requisite cash benefits into accounts of the concerned beneficiar ies.



8. On the basis of such payment information, Bangladesh Bank will make settlement of the amount to be paid to the Second Party along with the prescribed fees for the purpose. The settlement will be made through a designated bank account provided by the Second Party to Bangladesh Bank.

9. The Second Party will again take action to credit the benefits into the accounts of remaining beneficiaries on receipt of revised instructions from Bangladesh Bank, and repeat the process as outlined against points 5), 6) and 7) above.

10. Accounts of beneficiaries will be regular accounts and the beneficiaries will have an access to all features and facilities of regular accounts as is the case with regular customers. There will be absolutely no discrimination against the social protection beneficiaries and they would be allowed to hold funds in their accounts while earning regular savings interest as is prevalent within the system of the Second party.






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This agreement shall be governed by and construed in accordance with laws of the Peoples’ Republic of Bangladesh. All legal proceedings shall be subject to the jurisdiction of the courts in Dhaka only.


Witness Signed By

1. 1.

2. 2.


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Annexure 5

Proceedings of Workshop on Dissemination of Payment SystemReform Plan


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Strengthening Public Financial Management for Social Protection (SPFMSP) Project

Finance Division, Ministry of Finance, UCEF Cheyne Tower, 25 Segunbagicha, Dhaka -1000

Date: 9th August 2017 (tentative), Venue: CGA Conference Room, CGA Office, Segunbagicha, Dhaka

Participant List of Dissemination Workshop on Payment System Reforms

SL.# Name and Designation of Attendee Organization

1 Mohammad Muslim Chowdhury, Additional Secretary and National Project Director

SPFMSP Project, Finance Division, Ministry of Finance

2 Md. Azizul Alam, Additional Secretary Finance Division, Ministry of Finance

3 Mahiuddin Khan Additional Secretary, (Development) MOE

4 Manzoor Alam Bhuiyan, Joint Secretary and Executive Director, SPFMSP

SPBMU, Finance Division, Ministry of Finance, Segunbagicha, Dhaka

5 Md. Ataur Rahman, Deputy Secretary & Deputy Director, SPFMSP

SPBMU, Finance Division, Ministry of Finance, Segunbagicha, Dhaka

6 Shamia Sharmin, Deputy Director, SPFMSP SPBMU, Finance Division, Ministry of Finance, Segunbagicha, Dhaka

7 Naila Karim, Programmer, SPFMSP SPBMU, Finance Division, Segunbagicha, Dhaka

8 Md. Sajidur Rahman, Programmer, SPFMSP SPBMU, Finance Division, Segunbagicha, Dhaka

9 Md. Ahsan Habib, Maintenance Engineer SPBMU, Finance Division, Segunbagicha, Dhaka

10 Shyama Prashad Bepari, Project Director, Higher Secondary Stipend Project (HSSP)

Directorate of Secondary & Higher Education, MoE

11 Farid Ahmed, Assistant Director, Secondary Education Stipend Project, MoE

12 Md. Zakir Hasan Nur Bangladesh Post, Dak Bhaban, Dhaka-1000

13 Mohammad Mahfujur Rahman, Assistant Director (Admin)

PESP, MoPME, Green Road, Dhaka

14 Abu Muhammad Yousuf, Joint Secretary, Director (Programme)

DSS, MoSW, Agargaon, Dhaka

15 Md. Farid Mollah, Assistant Director DSS, MoSW, Agargoan, Dhaka

16 Md. Kamaluddin A&AO CGA Office, Segubagicha, Dhaka

17 Sheikh Md. Omar Faruk, CAO-MoPME, CGA Office, Segubagicha, Dhaka

18 Taslima Sultana, CAO-MoSW MoSW, Segubagicha, Dhaka

19 Bulbul Singha, CAO-MoWCA CGA Office, Segubagicha, Dhaka

20 Peara Begum, CAO-MoDMR Abdul Gani Road, Dhaka


21 Md. Jamal Uddin Bhuyan, Assistant Director, Lactating Mother Programme

DWA, MoWCA, Eskaton Road, Dhaka


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22 Rezaul Alam, Assistant Director, Maternity Allowance Programme Manager

DWA, MoWCA, Eskaton Road, Dhaka

23 Bishojit Program Manager, DFID DFID

24 Alexandra Maclean DFID DFID

25 Ashiq Aziz World Bank

26 Suraiya Zannath World Bank

27 Jorge Shepherd EU

28 Yelena Ispiryan EU

29 El Harouchi Meriem EU

30 Subhash Chandra Das, Chief Financial Officer Sonali Bank Limited, Motijheel, Dhaka

31 Md. Arifuzzalam Zaman Sarkar SPO Rupali Bank Ltd. Dilkusha, Dhaka

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33 Md. Main Uddin, General Manager Rupali Bank Ltd. Dilkusha, Dhaka

34 Ms. Nur al Atator SBP Sure Cash, Banani, Dhaka

35 Md. Tohurul Hasan, Program Coordinator, Digital Financial Service Lab+, a2i Program, PMO, Dhaka

36 Md. Abul Kashem Khan, SEVP & Chief Technology Officer

DBBL, Motijheel, Dhaka

37 Md. Zakir Hossain Bhuiyain, Head of EBEK Operations and Social Payments

Bank Asia, Topkhana Road, Dhaka

38 Md. Zafrul Hasan, Head of Commercial, Commercial Division

bKash, Mohakhali, Dhaka

39 Dr. Anurag Priyadarshee, International Consultant of Payment Reforms Study

Consultant

40 Syed Sajedul Karim , National Consultant of Payment Reforms Study

Consultant

41 Siddiqur Rahman Choudhury, Team Leader SPFMSP Project

42 Moin Chowdhury, Project Manager/MSP SPFMSP Project

43 Alexandra Hammer SPFMSP Project

44 Dr. Kavim Bhatnagar, Social Protection Economist

SPFMSP Project

45 AKM Shamsuddin SPFMSP Project

46 Abdul Matin Chowdhury SPFMSP Project

47 Rowshan ara Begum SPFMSP Project

48 Shahajahan Miaan SPFMSP Project

49 Kazi Arif Huda SPFMSP Project

50 Sheikh Farid Finance Division



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51 Md. Rakibul Hasan Finance Division

52 Mahmud Hasan Rocket DBBL

53 Jahid Hassan Rocket DBBL

54 Mahmuda Khatoon Meenu CAO MOE

55 Atiar Rahman System Analyst CGA

56 Naheed Sultana SPFMSP Project

57 Gulam Moula SPFMSP Project

58 Md. Abdul Hannan, Social Protection Specialist-Cash & Asset Transfer

SPFMSP Project

59 Arif Hasan, MIS Specialist SPFMSP Project


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Reforming Social Protection Payment System in Bangladesh

Dissemination Workshop

09 August 2017

Presentation Plan

• Objectives of the proposed reforms

• Proposed reform plan: Processes for validation, payment, and reconciliation

• Role of line ministries, CAOs/iBAS++, Bangladesh Bank, Social Protection Budget Management Unit (SPBMU), Payment Service Providers (PSPs)

• Benefits of the proposed reform plan

• Actions needed for implementation of the proposed reforms

• Piloting the reform

Objectives of the Proposed Reforms• Establishment of an efficient, effective and beneficiary-friendly payment

system for social protection

• Empower the beneficiaries to be able to make informed choices

• Cost-effective for government as well as beneficiaries

• Reduce inconvenience to beneficiaries

• Easily accessible for all beneficiaries however remotely they are located

• Robust MISs and flow of data in real time from the supply side to the payment service providers, and backward, immediately after the payment is effected


• System driven budget management of all social protection programmes

• System-driven accounting including reconciliation of disbursements


• Speedy payments

• Convenient and effective grievance redressal

Proposed Reform Plan

• LMs remain responsible for identifying the beneficiaries based on pre-defined eligibility criteria.

• LMs to develop their MIS and digitize beneficiary data.• LM MIS to use formats and platforms compatible to the ones being

used by MIS of Social Protection Budget Management Unit (SPBMU).

• LMs to offer option of multiple payment channels to each beneficiary within all of their social protection programmes.

• Beneficiaries to choose one of the options and communicate it to the field personnel of the concerned LM.

• Field staff to update the information on beneficiaries, including their choice of payment methods and their NID numbers, before each payment cycle, wherever needed.

• Updated beneficiary data to be verified at LM MIS, which is automatically captured at SPBMU MIS.

• SPBMU MIS unit to scrutinize the data to check for duplication and any violation of eligibility conditions.


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Role of Line Ministries (LMs) Engaged in Social Protection Cash Transfers

• Continue to remain responsible for selection of beneficiaries

• Custodian of the beneficiary data, responsible for regularly updating data through their field staff

• Field staff to create awareness amongst the beneficiaries to make appropriate choice of payment service providers (PSPs)

• Addressing beneficiary grievances against PSPs

• LM MIS units will maintain the beneficiary data in the platforms and formats compatible with that of SPBMU MIS

• LMs will be responsible for addressing discrepancies flagged by the SPBMU MIS unit

Role of LMs...Contd.

• Payrolls will be generated for each payment cycle, on the basis of which the DDOs will prepare the bills/claims for payment authorisation.

• DDOs will submit the bills to CAOs using iBAS++ platform for authorising payment.

• Beneficiaries will be duly informed immediately after the benefits are credited to beneficiary accounts.

• Using the advantage of proposed system the LMs may improve the frequency of payments to effect monthly payments.

Role of CAOs/iBAS++

• For each payment cycle DDOs will use iBAS++ platform for payment authorisation by CAOs.

• CAOs will access beneficiary data (read-only) available at SPBMU MIS through a link provided at iBAS++ site for confirming validated data.

• CAOs will use iBAS++ platform to authorise the payments after performing statutory checks.

• iBAS++ will use payroll data at SPBMU to prepare EFT files.• CAOs will use iBAS++ platform to advise Bangladesh Bank for

effecting EFT to each beneficiary account through PSP designated banks.

• CAOs will have access to files returned by PSPs (via BB) after payment, which will be processed for reconciliation between CAO and DDO, and at SPBMU MIS for updating payment data.

Role of Bangladesh Bank (BB)• On receipt of payment instructions from the CAO and after accessing EFT

files at iBAS++, BB will send relevant EFT instructions through BEFTN to all the participating banks and the banks designated by other PSPs.

• Instruct the PSPs to immediately credit the indicated amounts into the accounts of beneficiaries.

• PSPs to share the payment files for reconciliation within 72 hours of receiving the payment instructions from BB.

• BB to share the payment files with iBAS++, which will be accessed by the concerned CAOs as well as by MISs of SPBMU and the concerned LMs for reconciliation.

• Initiate appropriate action against the PSPs that fail to credit the beneficiary accounts timely or fail to timely share the payment files with BB.

• Make settlement of funds on receipt of payment files from participating banks, and other PSPs through their designated banks.

• After the LMs address the reasons for non-crediting, BB will repeat the payment process for crediting the benefits into the accounts of left-out beneficiaries.

Role of Social Protection Budget Management Unit (SPBMU)

• SPBMU MIS will validate the beneficiary data.

• Before each payment cycle SPBMU will also validate payroll beneficiary data.

• Whenever a discrepancy is noticed in the data supplied by any LM, the SPBMU MIS unit will immediately highlight it to the concerned ministry.

• Once a list of beneficiaries is validated by SPBMU and approved by the line ministries, no changes will be allowed in the list without concurrence of SPBMU for that payment cycle.

• SPBMU MIS will access payment files received from Bangladesh Bank at iBAS++. It will use such files to update the payment status to beneficiaries and also for monitoring of the payments.

• SPBMU MIS unit will provide all the required support to the MIS units of the LMs in developing their MIS and other software tools.


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Role of Payment Service Providers (PSPs)• PSPs will launch awareness generation campaigns for beneficiaries and

open accounts of beneficiaries who opt to receive payment through them.

• Such accounts will be mandatorily linked with beneficiary NIDs, which will also serve as KYC for opening of new accounts.

• On receiving EFT instructions from BB, the PSPs will immediately credit the requisite cash benefits into accounts of the concerned beneficiaries.

• Intimate to beneficiaries regarding credit of benefits in their accounts through their registered mobile phones.

• Share the payment files with BB immediately (within 72 hours of receipt of instructions at the most) after the accounts of beneficiaries are credited.

• Again repeat the process of crediting benefits into the accounts of left-out beneficiaries on receipt of revised EFT instructions from Bangladesh Bank; inform beneficiaries; share payment files.

• Accounts of beneficiaries to be regular accounts with all features and facilities as are provided to regular customers.

Benefits of the Proposed Reform Plan

• Reform plan targets the Payment System from the perspective of three different sets of stakeholders that are independent but are integrated within the system

• Works on minimising the transaction costs and providing greater transparency to the system

• Mitigation of double dipping

• Elimination of leakages, and ghost beneficiaries

• Fund settlement takes place only after the beneficiary accounts have been credited

• Averts a situation where government money may be lying idle with banks for long durations

• Improvement of the cash flow management with lesser dependence on ‘ways and means’

Benefits…Contd.

• Eases out most of the LMs’ functions and time that they spend on processing the payments to the beneficiaries as well as on independently signing contracts with bankers / service providers.

• Beneficiaries as the focal point of social protection programmes .• Will help LMs and departments to better understand their beneficiaries

along with their locations and profiles. • Much improved monitoring over cash benefit transfers by the line

ministries and their constituents. • LMs to have effective and user-friendly MISs and digitised data on all of

their beneficiaries. • Work of accounts officers, field officers and the DDOs to be reduced

significantly. • Most importantly, it would empower beneficiaries by allowing them to

choose the most suitable payment service provider in their particular circumstances, which would substantially reduce their costs of receiving the payments.

• Beneficiaries would be much better included in the mainstream financial system of the country.

Actions Needed for Implementation of the Proposed Reform

• Digitization of beneficiary data to be complete in all respects

• Design and development of LM MIS for each scheme having cash transfer component

• Make LM MIS compatible with SPBMU MIS

• Mobile numbers of beneficiaries to be collected and included in the beneficiary database

• NIDs of all the beneficiaries to be captured and included in the beneficiary database

• Beneficiaries’ options for PSPs to be captured and included within the beneficiary database along with their account numbers within their opted PSPs

• Campaigns for awareness generation among beneficiaries

Actions Needed...Contd.

• iBAS++ to expand the scope of their current system so that all DDOs can prepare the bill/claims for payment authorisationand submit them to CAOs on iBAS++ platform.

• This should also enable all CAOs to use iBAS++ platform to verify such bills and authorise payments on the basis of validated data.

• iBAS++ to develop FTP to access the beneficiary data for generating EFTs on the basis of payrolls

• System augmentation for BEFTN at Bangladesh Bank • FD to enter into SLAs with various PSPs to ensure universal

service conditions and cost of transfer across all LMs for a particular PSP

• Campaigns for awareness generation among beneficiaries

Actions Needed...Contd.

• All functions of SPBMU MIS including validation of data to be operational

• Linking of SPBMU MIS with LM MIS to be fully functional

• Linking of SPBMU with iBAS++ • Provide support on making LM MIS compatible with

SPBMU MIS including support on developing compatible modules for data validation and payroll generation

• SPBMU to conduct workshops for different stakeholders on generating awareness and handhold support


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Piloting the Reform

• Piloting of the proposed plan is required to test the feasibility of proposed reforms and to fine-tune the reform plan

• Pilots are proposed to be conducted for the schemes of Maternity Allowance (MA) and Old Age Allowance (OAA)

• All beneficiaries of five upazilas across three districts (TBD) to be covered under the pilots for each scheme

• Piloting will be implemented by FD/SPFMSP

Thank you

Documents

Costed Reform Plan for Social Protection Cash Payments in ...spfmsp.org/.../04/...for-Social-Protection-Cash-Payments-in-Banglade… · becomes due, the concerned DDO assigned for