In its commitment to helping governments, the World Bank is releasing “General Guidelines for the Development of Government Payment Programs”, that promotes best practices and establishes standards for developing and improving government payments programs.
Improvements that make government payment programs more efficient, safer and more transparent can cut related administrative costs by as much as 75%.
Millions of people in developing countries worldwide receive their salaries, benefits and pensions through government-to-person (G2P) payments. But in many cases, they are not being delivered in a cost-efficient way.
“Only 25% of low-income countries process cash transfers and social benefits electronically and this percentage is only slightly higher for public sector salaries and pensions,” says Gaiv Tata, World Bank Director, Financial Inclusion Global Practice.
“This means that many governments are stretching limited resources, and spending more than they should on paying benefits and salaries.”
The report focuses on cases such as Brazil’s “Bolsa Familia” social safety net program, where the government saved 75% on administrative costs by going electronic.
Bolsa Familia easily brought universal coverage to 12.4 million low-income individuals, representing about 30% of the population below the poverty line.
By providing beneficiaries with access to a payments account, G2P programs can also expand financial inclusion for millions of the unbanked by serving as their gateway to other financial services.
Programs like “Bolsa Familia” provide a lifeline to low-income families so that they can spend on essentials such as food and education.
More efficient government payment programs not only optimize government payouts, but they can also improve revenue generating activities.
“It is estimated that government expenditures and tax collections, which make heavy use of government payment systems, amount to 15%-45% of the GDP,” explained Massimo Cirasino, World Bank Manager of Financial Infrastructure.
“More efficient electronic payment systems not only save the government money, they can also potentially benefit taxpayers and all other users of electronic payments.”
The guidelines also address operational challenges government payment programs face, providing recommendations on; ensuring that payments and collections support the sound, efficient, and transparent management of public financial resources; making government payment programs safe, reliable and cost-effective and ensuring that efforts to modernize government payment programs accelerate the development of national payments systems and promote financial inclusion.
The guidelines were developed in consultation with the International Advisory Group for Government Payments (IAG).
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