Optimising Commissions and Payout Mechanism For G2P Payments Under Electronic and Direct Benefit Transfer

MicroSave's Policy Brief No. 11 states that for the efficient delivery of cash-based welfare schemes, Government of India has directed its efforts to scale on a nationwide level G2P payments. For the scale up, viability of the service providers managing the last mile disbursement to beneficiaries is important. In this regard, the Brief addresses the questions of what should be an appropriate fee for disbursal of G2P payments, and what can be the norm or mechanism for division of the payout between banks, Business Correspondent Network Managers (BCNMs), and Customer Service Points (CSPs). The data and analysis is derived from MicroSave's experience and lessons learned based on research and studies in India. Key recommendations to the government include:

• Minimum compensation to CSPs has to be mandated through policy, as presently, it is far lower than what is prescribed by the respective state governments;
• CSPs should be paid electronically in order to ensure transparency and efficiency of the payout;
• BCNMs are achieving a reasonable gross margin from G2P payment disbursal at the cost of CSPs. For BC institutions to continue to be viable, their compensation should be 0.6% to 0.7% of the cash disbursed, excluding the compensation to CSPs;
• Payout to banks should be in the range of 3% to 3.3% for them to move from a loss-making state to one where they earn a reasonable income.