How Liberia Can Save Over $5 Million with Mobile Money Salary Payments

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Liberia is a cash-based economy, and ATMs are few and far in between, restricted mainly to Monrovia hotels frequented by expats. In fact, as of 2014, some 60% of financial service facilities were in Montserrado Country, where the capital Monrovia is located, while some counties did not even have bank representation at all.
Liberia’s civil servants depend on this unreliable and interspersed financial services and banking sector—some having to travel for days to collect and cash a paper check or withdraw money after receiving their salary payment through direct deposit.
The High Costs of Getting Paid
In 2014, 37% of civil servants still received their salary payments via paper check yet the entire country had only 75 bank branches operated by nine commercial banks. For these civil servants, Liberia’s Ministry of Finance and Development Planning prints checks for distribution by 66 paymasters.
40 paymasters are assigned to Liberia’s most populated region of Montserrado County and the remaining paymasters travel to Liberia’s 14 other counties to deliver checks via issuing stations at pay locations generally found in the county capitals. Paymasters remain in the field for 10 days to give civil servants ample time to collect their checks.
Since bank branches are not evenly distributed across Liberia’s counties, many employees have to travel to collect their check from the paymaster at the nearest issuing station, which may be a long distance for civil servants living in rural areas. Once they collect their checks, they then have to find the nearest bank or vendor to cash their salary payments. Civil servants have to pay a fee if a vendor cashes their check.
According to teachers surveyed as part of a mobile money pilot project carried out by the USAID Governance & Economic Management Support (GEMS) project, they spend roughly 10.4 percent of their salary (or $15.60 using the average monthly salary of $150 per month) in cashing their checks. Aside from losses in productivity and the costs of time and travel, teachers also listed overcrowded offices, long queues and downed bank networks as frequent challenges.
The Proven Mobile Money Opportunity
Liberian public school teachers were among those who participated in five pilot projects conducted to assess the feasibility of mobile money use by the Liberian Government. By receiving their salaries through mobile money, salary payments are deposited into civil servants’ SMS mobile phone wallets, which they can then exchange for cash at an approved agent; transfer to other individuals; or pay for goods and services at participating businesses.
The mobile money network in Liberia is facilitated by a partnership between telecommunications firm Lonestar MTN and Ecobank with 152 “cash-in/cash-out” mobile money agents operating nationwide—about double the number of bank branches.
Participating teachers were surveyed about their experience before and after they were paid by mobile money for one payment cycle. Findings showed that teachers using mobile money had their salary cash-out costs drop to 5.3% or $7.95. These savings reflect the lesser distance traveled to “cash-out” their salary payments via mobile money agent instead of a bank branch.
With an estimated 17,607 teachers working in Liberia in 2013, mobile money could collectively save them $1.36 million annually. By converting to mobile money to facilitate salary payments, the Liberian government could potentially save $4.08 million in fees, paymaster salaries, travel and other logistics costs.
And this is just teachers. Imagine the cost reduction and efficiency gains if the remainder of public servants who receive their salaries through paper check were transitioned to mobile money as well.
By Dmitriy Synkov of IBI, which implemented the USAID-GEMS project in Liberia.