J-PAL Africa, based in SALDRU at the University of Cape Town, recently launched the Digital Identification and Finance Research Initiative (DigiFI Africa). Supported by the Bill and Melinda Gates Foundation, this research fund is designed to study the impact of innovative government/ private sector payment systems and digital identification (ID) reforms on citizens and governments across Africa. The team is now seeking government partners and African Scholars who are interested in applying for proposal and development grants through the initiative.
Policymakers across Africa are increasingly investing in large-scale digital identification and digital payment systems. Because these systems are so new, only limited rigorous research exists on how best to design and implement such systems in low-income contexts. How do these rapid changes affect the lives of citizens? How can they best be structured to lead to the most benefit? Are any groups adversely affected by these reforms?
DigiFI Africa will cluster research around these questions, supporting research that evaluates impacts on citizens and generating results that provide guidance on critical design questions as reforms go to scale.
DigiFI Seeks Partners
DigiFI Africa seeks government partners interested in collaborations on randomized evaluations related to digital payment systems and IDs. The initiative seeks to fund research that evaluates the impact of large-scale government reforms in this space and to monitor take-up and use of new interventions by leveraging administrative data collected by the new digital systems.
DigiFI provides research and capacity building opportunities for African Scholars (PhD researchers based at African research institutions). African scholars are eligible to apply for proposal development grants (up to $10,000) and pilot grants (up to $75,000) through a competitive call for proposals. Targeted mentorship will be provided to African Scholars who receive funds from the Initiative. Scholars are also eligible to apply for scholarships for the MIT Micro-Master’s Data, Economics, and Development Policy. Interested Scholars are encouraged to register their interest with the Initiative.
DigiFI Africa’s research interests
Improving efficiency in public spending through digital finance and digital identification has the potential to have large impacts across Africa. For example, these technological innovations have the potential to enhance record-keeping and transparency by collating administrative data and automating transactions, decreasing the potential for delays and errors in payment systems. Digitizing payments can reduce both the need for travel to access financial services and the time burden of engaging with administrative processes. In addition, digitizing the process of business registration and firm regulation can bring more firms into the tax system and raise revenues for the government.
The DigiFI Africa framing paper lays out the research agenda for the initiative. DigiFI Africa promotes research to address the following questions:
From a government’s perspective:
- How can digital ID systems assist with targeting and efficiency in public programs? Do digital ID systems assist or hinder in reaching marginalized populations?
- Can digital ID systems and digital payments reduce rent-seeking? What are the general equilibrium effects of digital payments on rent-seeking?
- How can digital ID systems and digital payments assist in building incentive systems to motivate public servants?
- How can payment design (such as targeting a specific household member to receive the transfer or changing the timing of the payment) affect its impact?
From a citizen’s perspective:
- How do government services linked to digital IDs affect citizens? What are the best ways to design these linked services for the greatest impact at the lowest cost? Do digital ID systems and digital payments encourage or dissuade take-up of government programs?
- Do digital ID systems improve the overall efficiency of government programs? If so, do these efficiency gains reduce poverty?
- How do digital IDs affect voter participation, the fairness of elections and electoral outcomes? Does increased enfranchisement affect policy decisions?
- Can digital IDs promote further digitization in financial systems and thus enhance financial inclusion? How does this affect short- and long-term poverty outcomes?
- Can digital payment schemes empower traditionally weaker household members or affect the allocation of household resources?
Fiscal capacity:
- Can expanding the formal economy increase the tax base through incentives and simplified processes introduced by digital payments and digital IDs?
Externalities:
- What is the impact of digital ID and digital payment systems on market-level general equilibrium effects? What are their impacts on wages and employment? Are there impacts on occupational choice or migration?
- What are the spillovers on non-beneficiaries of digital ID and digital payment systems?
Private sector impacts:
- Can digital ID systems encourage businesses to enter the formal sector? Do these reforms reduce entry costs to entrepreneurship and enable productive investment?
- Can digital ID systems help strengthen law-enforcing institutions and in turn affect private investment?
Posted by Emily Cupito, Project Director, J-PAL Africa and Aimee Hare, Policy Associate, J-PAL Africa. Featuring research by Shweta Bhogale and Tavneet Suri.