Common use of Implications and Recommendations Clause in Contracts

Implications and Recommendations. There is evidence globally that DFS can improve financial inclusion, and financial inclusion can improve financial protection against the costs of health care. The more mature the DFS market, the greater the opportunity for health applications. Since the evolution of DFS in the MENA region is early stage, countries need to first help increase financial inclusion. The research and synthesis for this report was conducted in 2019 and early 2020, prior to the coronavirus disease 2019 (COVID-19) pandemic. DFS are a potentially powerful tool to help mitigate negative effects of the crisis. At the same time, the momentum for DFS expansion could be slowed as economies retrench during the protracted lockdown. The COVID-19 pandemic is thus both a barrier to and an opportunity for DFS to meet the financial needs of underserved populations. To support the dual objectives of financial inclusion and financial protection, we have organized our recommendations into two categories: recommendations to advance DFS in the region and recommendations focused on the health sector. A third set of recommendations is tailored to the COVID-19 response. These recommendations are intended to support private sector engagement with DFS stakeholders in support of national efforts toward self-reliance. • Support DFS regulatory reform through cross-border exchanges and technical assistance: The Central Banks of Egypt, Jordan, and Morocco have updated their banking regulations to encourage innovative applications to lower barriers to access. USAID should promote peer learning for regulators grappling with similar reforms in countries such as Tunisia, Algeria, and Lebanon through study tours, regional working groups, or online communities of practice. Consultants with expertise can share best practices and model language on particular topics such as cross-border remittances, biometric IDs, and consumer dispute resolution. • Invest in consumer education for improved financial literacy: To improve knowledge about DFS benefits and build demand for financial services, USAID should support financial literacy campaigns and skill-building courses. The need to increase awareness and technology skills for underserved populations exists across the region. USAID can leverage its initiatives in other sectors to engage local leaders, project teams, and community partners in financial education efforts through rural public service points such as schools or agriculture extension offices. • Engage with DFS initiatives to enhance targeting of the most vulnerable: USAID should partner with DFS providers such as Morocco’s M-Wallet or Egypt’s Fawry to incentivize introduction of products that meet the needs of the poorest. Research on market opportunities to serve underserved populations can persuade companies to broaden their customer base and design services that better meet the needs of the poor. Costs to extend agent networks to new areas where customers need more cash-out points can be shared through public-private partnerships. USAID should steer qualified providers to apply for seed funding from existing innovation funds such as its Development Innovation Ventures. • Close the gender gap: USAID should identify, broker, and nurture DFS partners who commit to co-designing services specifically designed to meet the needs of women. Egypt has prioritized financial inclusion for women in its national financial inclusion strategy and can serve as a test bed for gender experts to develop DFS marketing strategies tailored for women. Country-specific research can identify gaps and solutions such as bundling DFS with other high-demand products to increase account ownership. • Build awareness among health sector stakeholders about financial inclusion: DFS provide benefits and opportunities for patients, clinics, and program managers, but these opportunities are not well recognized within the health sector. As a substantial portion of a country’s gross domestic product (GDP), the health sector has significant payment flows and could help normalize the use of digital payments. Through its relationships with health ministries, private provider associations, health research facilities, pharmacies, and other institutions, USAID can help build demand for digital services in the health sector. At a minimum, USAID should promote and enforce the use of e-payments in its regional health contracts, grants, and cooperative agreements as required by USAID procurement guidance (USAID 2014). • Promote inclusion of health system actors in DFS initiatives: USAID should establish an inter-agency process with interested country partners to coordinate and structure inputs for health-specific initiatives for DFS. Central banks throughout the region want to advance the uptake of DFS. Health system stakeholders want to improve the efficiency and responsiveness of health services. Bringing together DFS stakeholders with representatives from the ministry of health, national health insurance providers, trade associations of clinical providers, large hospitals, and pharmacy chains can identify promising opportunities for collaboration. • Organize cross-regional learning opportunities for expanding health insurance through DFS: Sub-Saharan African and Asian countries such as Kenya, Ghana and India are pioneering new DFS to serve excluded populations with simple low-cost mobile- enabled insurance products through public and private insurance providers. USAID should bring together stakeholders from the MENA region to meet with insurance regulators, implementers, and innovators to learn how they are using DFS to reach informal economy households. • Evaluate DFS use cases in health: The potential for DFS to promote UHC would be strengthened with more evidence on how and under what conditions DFS affects health system performance. As public and private health facilities adopt DFS in the MENA region, USAID should fund research to measure the impact of DFS on health system quality, responsiveness, and efficiency. Formal or academic research is also needed on the role of DFS such as mobile-enabled health insurance, savings, and remittances in reducing out-of-pocket spending. • Co-fund campaigns to promote the use of DFS in the public and private sectors as a tool to prevent transmission of the novel coronavirus and to promote economic activity: Remote transactions and contactless payments reinforce social-distancing requirements, limiting the need to visit banks, utilities, and service providers. Campaigns should also highlight the use of DFS as a means of keeping local businesses open during lockdown or quarantines. DFS transactions reduce interpersonal contact and risk for exposure to COVID-19, which helps control the spread of the virus and can mitigate negative health, economic, and social effects. • Assist central banks in designing incentives for merchants and consumers to use DFS during the pandemic: Options include temporary waivers of transaction fees on payments or transfers, which might otherwise create a financial barrier for new users. Other regulatory waivers could raise the limits on transaction amounts to promote more use. USAID could host technical advisors from AFI and from outside the MENA region to share lessons learned from other countries and regions on expanding DFS as part of the COVID-19 response. Globally, more than 1.7 billion people, or 31 percent of the world’s adult population, do not have access to formal financial services such as bank accounts (Demirgüç-Kunt et al. 2018). Fueled by the explosive growth of mobile phones, digital financial services (DFS) leverage technology to offer new forms of financial accounts that provide secure options for storing, transferring, and accumulating money. Through reforms in banking regulation, countries are lowering barriers to financial account ownership and licensing new forms of savings, credit, and insurance services for underserved populations. More than half the population living in the Middle East and North Africa (MENA) region are “unbanked,” with no secure means of storing, saving, borrowing, or making payments (Demirgüç-Kunt et al. 2018). Mobile phone services are widespread; there are more people with mobile phone accounts than with bank accounts (GSMA 2019c). DFS thus have the potential to expand access to financial services in the region. The concept of financial inclusion recognizes that increasing access to formal financial services can improve economic security and spur economic growth. DFS can contribute to solutions for many challenges in the region including high youth employment, undiversified economies, large income disparities, and limited access to finance for small and medium enterprises. As the United States Agency for International Development (USAID) partners with countries in their journey to self-reliance, it is guided by a policy for private sector engagement that recognizes the central role of market-based approaches to achieve sustainable development outcomes. As commercial services, DFS are market-driven applications that grow the financial services sector as well as support economic and social development indicators. There is thus a strong rationale for promoting the DFS market in USAID’s regional activities. USAID’s Sustaining Health Outcomes through the Private Sector (SHOPS) Plus project aims to harness the full potential of the private sector to improve the equity and quality of the total health system. By making financial services more affordable and equitable, DFS provide promising opportunities for expanding access to health information, products, and services, and making progress toward universal health coverage (UHC). UHC aspires to improve access, utilization, equity, and financial protection for individuals in need of health services and to strengthen efficiency and quality of health system performance. DFS can contribute to progress toward UHC by helping people save or borrow for health costs and helping improve financial management of health service delivery. Both UHC and financial inclusion strategies target the same demographic: low-income and underserved populations. Improving access to banking can contribute to better health, and improving access to health can contribute to financial well-being.