(Ed. Note: The “Innovation Fact of the Week” appears as a regular feature in each edition of ITIF’s weekly email newsletter. Sign up today.)
Developing countries have employed poverty-alleviating ICT platforms to great success. India’s smartcard welfare system, deployed in the state of Andhra Pradesh, is one such example. Not only has it increased the efficiency of the welfare program by reducing delays in payment, but it also has ensured that funds meant for recipients make it to them instead of being syphoned away by corrupt civil servants.
The smartcard system uses fingerprint data to verify welfare recipients’ identity, allowing to them to receive welfare disbursements through automated machines. This eliminates the need for civil servants to serve as administrative middle men, as they did in the previous paper-based system. In doing so, the smartcard system cuts down on human inefficiencies, reduces the time it takes for recipients to collect their benefits, and reduces corruption, as welfare checks are no longer syphoned away by human intermediaries who could either under-report or over-report benefits.
A collaborative research paper by economists from UC San Diego and Dartmouth College estimated the economic impact of this ICT-based welfare disbursement program. By analyzing transaction data of over 19 million smart cards issued to Indian citizens in Andhra Pradesh, they found that the delay in welfare payments going out decreased by between 20 and 39 percent. The biometric system also reduced leakages—monies meant for welfare recipients, but not reaching them—by 40 percent. In dollar terms, this amounted to $41 million, an amount approximately nine times greater than the cost of implementing the new system.