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Switchover from Cash to Online Payment Helps Rural Welfare Scheme: India

The payments got streamlined after the 60-year-old Devi opened a bank account using her biometric identity card

Biru Devi is relaxed about getting paid for her labor as she toils on the picturesque hill slopes in Tanda village with a group of other women. She is working on a construction project under India’s flagship $10 billion rural jobs program that guarantees poor rural households 100 days of work every year Cash.

“Earlier my money was never paid in time, maybe the bills did not get passed. But now my wages go into my bank account and are not delayed,” said Devi.

The payments got streamlined after the 60-year-old Devi opened a bank account using her biometric identity card. The unique 12-digit identification number made it possible to operate the account even though she did not know how to read and write. All the 3000 village residents did so as part of a project led by a public sector bank and village authorities to transform Tanda into a digital village.

The switchover from cash to online payments is helping address one of the biggest problems that had plagued the rural welfare scheme – middlemen who used to siphon off money from the anti-poverty program that provides work to 70 million people.

Cash, Online, Payments
Women in Tanda village on the Himalayan slopes in Himachal Pradesh are among the millions of poor women who get 100 days of work a year as part of India’s rural employment welfare scheme for poor rural households. (A. Pasricha/VOA). VOA

Using the world’s biggest biometric identity project under which citizens have been given an identity number, India is starting to transform the way it gets welfare to the poor. Although glitches remain and some controversy dogs the biometric program called “Aadhaar” which means foundation, it is helping root out graft from welfare schemes on which India spends billions of dollars.

It took time to persuade women like Biru Devi that their money in the bank would be safe – the majority of workers of the rural jobs program are women and many like Devi are illiterate.

“They are happy that they have to just show their Aadhaar card, and they have to just put their finger or thumb, and they get their money or deposit their money or get the money transferred, so it is changing,” said Ekta Mahajan, branch manager at State Bank of India in Palampur, which led the digitization drive in the village. But now they know the benefits. “There will be no corruption, there will be no commission, they will benefit directly and faster.”

Besides wages for the rural welfare program, subsidized food rations that India gives nearly 800 million people have also been linked to the biometric cards. The more than $20 billion food welfare program that guarantees cheap rice and wheat to the poor is the world’s largest public food distribution system, but it was beset with graft for decades. A large part of the food was siphoned off by corrupt officials and sold to traders at market rates and thousands of fake names were often put on the rolls of beneficiaries.

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That is changing. At the local ration shop in Tanda, eligible residents now show their electronic cards or use their thumb and finger impressions to get the rations. It ensures the food goes to the intended beneficiaries.

The shop’s owner says it has reduced his work of making entries in registers. But an erratic wifi network can still pose a hurdle in bringing technology to rural areas.“Sometimes people have to wait for half an hour because we cannot connect to the system,” Rajiv Kumar admitted ruefully.

Although some activists have long opposed linking the biometric identity cards to welfare schemes, India’s Supreme Court cleared the way for it last year, saying it empowers the poor. “Aadhaar gives dignity to the marginalized,” the court ruling stated.

These activists say that the biometric cards have failed to cut fraud and denied welfare benefits to many poor people who have found it difficult to link their Aadhaar cards to the programs. The problem is the most acute in underdeveloped states where governance is poor.

Cash, Online, Payments
FILE – An impoverished woman places her finger on a biometric card reader before buying her quota of subsidized rice from a fair price shop under the Public Distribution System in Rayagada, India. VOA

“In many cases it leads to other ways of corruption,” said Reetika Khera, an economist at the Indian Institute of Technology in New Delhi. She said the major problem lies in what she calls “quantity fraud” or short changing people on the rations they are entitled to. “They may still give you half the rations you are entitled to, or tell people that the authentication failed even if it has not and use their quota.”

India’s top court has said that such challenges meant the plan had to be improved, not axed.

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Besides cutting graft from welfare schemes, digitization has brought other benefits in Tanda village as it gets plugged into the banking economy for the first time. Women who attend a workshop learn how they can avail themselves of education loans or cheap farm loans meant for rural areas.

“They have savings, they are taking loans to teach their children,” according to the village head, Jasbir Singh. “Access to loans has boosted our agriculture and traditional dairy farming and improved incomes. So even those who cannot get jobs earn a decent livelihood.”

Cash, Online, Payments
Customers use their phones to make digital payments at the local shop. (A. Pasricha/VOA). VOA

Leapfrogging into the digital era has transformed this Himalayan village in more ways than one.

With their smart phones, villagers now shop for vegetables and groceries at the local store the modern way. “Our children also tell us, mom the old times are over. Become a model for the new world. We also feel happy that we too are part of a new age,” said a laughing 60-year-old Rekha Devi.

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And women, whose only way to save money was to put it under mattresses or tuck it at the back of cupboards, have a new sense of security. “If there for an emergency, I can take out money,” said Biru Devi proudly. (VOA)

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