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In the ongoing fight against poverty in southern Africa, there is increasing evidence that social transfers are an excellent way of protecting the poor and vulnerable, and improving their lives.

The term 'social transfers' refers to a range of social assistance measures provided to individuals and households who are chronically poor. Types of social transfers range from school feeding schemes to non-contributory pensions, from agricultural inputs to child support grants. But one of the most significant challenges facing any social transfers programme is how to deliver the transfer to the intended beneficiaries without fraud, corruption or other abuse, and at an affordable cost.

Cash is presently being more widely promoted as a social transfer (in the form of regular pensions and grants). One of the advantages of cash it that it's much less bulky than food, but transporting large amounts carries security risks. Several current delivery systems go some way towards solving this problem, but each also has some difficulties and disadvantages:

• The use of local banks is effective in more urbanised settings but they may be inappropriate in more remote rural areas.
• Mobile banking has been used effectively by NGOs in Mozambique and Malawi, but it is expensive when there are small numbers of clients and timing can sometimes be too inflexible.
• Local money-transfer companies can be used, but only if they already exist.
• Direct payments by an implementing agency are also possible. For example, NGOs distribute cash transfers in a pilot project in Mchinji, Malawi, and the Post Office delivers the old age pension in Lesotho. But there are security risks of cash-in-transit heists and because it is difficult to verify that those receiving the transfer are entitled to it, there is the danger of corruption and fraud.

Exciting new information and communications technologies (ICTs) are now emerging, which help resolve the twin problems of beneficiary identification and secure transfers to remote areas. Some examples are fingerprint recognition, smartcards, cell phones and 3G networks. Improved communications and innovative approaches are making 'branchless banking' a reality -- allowing basic financial services to be delivered securely to even the remotest of rural areas. Using these technologies, local retailers and even individual traders can act as banking agents.

Smartcard technology allows individual biometric identifiers (such as fingerprint data) to be stored, together with a range of financial accounts (or 'wallets') for individual cash entitlements. These wallets can be topped up remotely at regular intervals -- for example to pay welfare benefits or old age pensions, or even to give access to physical entitlements such as agricultural inputs or food aid.

In South Africa, Namibia and Botswana, social pensions are already being paid through smartcards. Each recipient has a smartcard (a credit card with embedded chip) with his or her fingerprints recorded. Every month the pension is transferred electronically to the card account, and the beneficiary can access the funds either through conventional banking infrastructure, mobile ATMs, or simple point-of-sale terminals in retail shops. Even street traders and village merchants are now clubbing together to share the use of such low-cost terminals, further extending the reach of the financial sector.

Such systems are highly secure (because of the biometric identification), very flexible (because recipients can spend or withdraw money when and where they desire), and much safer than conventional cash delivery. They also provide benefits and incentives to the retailers involved, which encourages them to offer a wider range of financial services, which in turn stimulates the local economy and creates a virtuous spiral of development. Smartcards themselves also offer a much wider range of potential applications within a country, from national identity cards and voter registration, to medical history and tax records. Such smartcards could have multiple purposes, for example, a national identity smartcard might also be used to make cash transfers to the poorest. This would cut delivery costs to negligible levels.

This piece was based on the policy brief entitled "Delivering social transfers", which forms part of a series of 10 policy briefs providing an overview of the issues and arguments in the current debate on the role of social transfers as a means of reducing chronic hunger and poverty in southern Africa.

A smartcard is the same size as a credit card or cell-phone top-up card. But, unlike these, it has an integrated circuit (or chip) that carries all necessary functions and information on the card -- so it does not require access to a remote database at the time of a transaction. When inserted into a reader, the chip makes contact with electrical connectors that can read the stored information and write information back. When used for social transfers, each beneficiary is issued with a smartcard that contains information on their entitlement to a grant. It may also contain additional identification data such as biometric fingerprinting. The cash transfer is assigned to the chip remotely. When the beneficiary inserts the smart card into a reader, for example at a bank, post office, or retail outlet, the chip shows that they can collect their cash (or use it to make purchases). Details of the delivery of each transfer can be tracked in real time from the donor to the beneficiary.