An Evaluation of the Electronic Pension Payment System in Tajikistan
An Evaluation of the Electronic Pension Payment System in Tajikistan, Asian Development Bank, 2013, ISBN 978-92-9254-234-4
49 Pages Posted: 3 Aug 2017
Date Written: July 29, 2013
Modernizing government-to-person (G2P) pension payments from traditional cash-based to modern electronic-based delivery systems can improve outcomes for pensioners, government entities, and financial services providers.
Cash operations, though convenient in some circumstances, involve manual handling procedures in the distribution process that entail large overhead expenses and significant operational risks. These are highly susceptible to fraud and leakages due to difficulties in appropriately reconciling payments. However, experience has shown that implementing electronic-based G2P payments can be challenging, especially when financial infrastructure is not well developed.
In 2009, the Republic of Tajikistan became one of the first countries in the Central Asian region to implement electronic G2P payments to pensioners. This change occurred because the Ministry of Labor and Social Protection of the Population (MLSPP) and the State Bank of Tajikistan (Amonatbank, the pension payments agent) desired to (i) reduce the average time for release of funds from the State Agency for Social Insurance and Pensions (SASIP) to beneficiaries, (ii) improve the quality of service provided to pensioners, (iii) reduce costs of administering pension payments and eliminate opportunities for fraud and misuse of funds through a secure channel of automation, and (iv) promote financial inclusion. As of October 2012, the electronic system had been implemented in 15 of 68 districts covering roughly 192,000 of Tajikistan’s approximately 596,000 pensioners. Districts were selected for the new system according to the local availability of financial infrastructure and stable electricity supply to ensure that pensioners would have sufficient points from which to access their funds.
The study combines quantitative and qualitative methods to evaluate the effects of this change. The introduction of the electronic payment system was found to be generally positive for members of the pensioner population who personally collect their pensions. Significant improvements were found in the perceived convenience and time spent in collecting the pension. However, the change is less positive for female and rural pensioner populations. The study also found that only a small proportion of the rural population uses plastic cards to access their pension accounts by themselves. Many married female pensioners have spouses or relatives withdrawing the pensions on their behalf.
Less clear are the effects on MLSPP, SASIP, and Amonatbank. MLSPP and SASIP are still learning and adapting to this more modern electronic system. While adaptation has brought some initial costs, these are expected to be outweighed by reduced operating costs as paper-based systems are automated. Amonatbank, on the other hand, has had to make substantial capital investments to enable pensioners to access the pension accounts. Automated teller machines (ATMs), point-of-sale (POS) terminals, and plastic cards were purchased. Initially, Amonatbank’s benefits from conversion to the electronic system may have been small, as pensioners still draw significantly on Amonatbank staff time due to unfamiliarity or trouble with the new system. Pensioners have shown little interest in using Amonatbank’s other financial services. Nevertheless, eliminating manual verification, processing, and reconciliation of pension payment documents has helped reduce Amonatbank’s operating costs.
More time and effort are required for the different parties to successfully adapt to the electronic system so that benefits can be fully realized. There remains substantial scope for improving the delivery system’s effectiveness. The main challenges to creating a better service provision include (i) high uncertainty over payment dates, as late payments still occur; (ii) the low number of points from which to access funds, especially in rural areas, due in part to the unintegrated nature of Tajikistan’s various ATM networks; (iii) pensioners’ lack of awareness about withdrawal alternatives and uneasiness in using their cards and pension accounts; (iv) poor servicing of ATMs due, for example, to lack of electricity; and (v) SASIP’s incomplete and unintegrated pensioners database and use of rudimentary processes.
Recommended improvements include the following: (i) enhanced financial and cash flow management by the Treasury and SASIP to avoid pension payment arrears; (ii) mobile or agent banking, which requires less capital investment by financial institutions, to improve service delivery to rural pensioners who face greater time and travel costs in obtaining their pensions; (iii) training to help the pensioner population, especially women, to access and utilize their funds; and (iv) conversion to a fully integrated electronic database of pensioners within SASIP to further streamline the process and reduce operating costs.
Keywords: Pension, payment system, Tajikistan
JEL Classification: G23
Suggested Citation: Suggested Citation