DigiFI Africa: A pillar of the G7 Partnership for Women’s Digital Financial Inclusion in Africa

J-PAL Africa, based 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 USD$7 million research fund is designed to study the impact of innovative government and private sector payment systems and digital identification (ID) reforms on citizens and governments across Africa.

Policymakers across Africa are increasingly investing in large-scale digital identification and digital payment systems. Because these systems are so new, little 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.

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 generalized 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 timing 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?

DigiFI Africa will run a competitive research fund with requests for proposals (RFPs) twice annually through 2022. The initiative will support researchers in conducting two phases of work:

1. Formative research that includes pilots and high-frequency monitoring systems to assess the status and health of digital payments and digital ID programs at various stages of reforms.

2. Rigorous randomized impact evaluations to test the impact of roll-outs of promising digital payment and digital ID reforms. 

Funding is open to J-PAL affiliates, invited researchers, researchers with a PhD based at an academic institution in Sub-Saharan Africa (details here), and PhD students who have a J-PAL affiliate on their dissertation committee. The Round 1 RFP closes on September 20, 2019. For more information, contact Aimee Hare.

Local researchers often have a uniquely deep understanding of the context in which they work, which is key to developing well-grounded evaluations. The J-PAL Africa team, including DigiFI Africa led by Tavneet Suri, are committed to providing a mechanism for local African scholars to drive the research agenda on the continent.

Apart from providing funding opportunities for African scholars’ research, we are offering an African Scholar Webinar Series 2020 to support the development of research skills.

What will you learn?

Scholars will be introduced to the key concepts of randomized evaluations. We have developed a four-part series: 

Session one: Friday, 15 May 2020 at 4 pm SAST with Jessica Goldberg (University of Maryland): Jessica will give an introduction to randomized evaluations. She then will discuss how to develop a good research question and project, using the example of her fingerprinting study in Malawi. 

Session two: Wednesday, 27 May at 4 pm SAST with Dan Levy (Harvard): Dan will provide an overview of the reasons why we randomize through pre-recorded sessions from J-PAL’s Evaluating Social Programs course. This interactive session gives scholars an introduction to thinking conceptually about how to measure the impact of an intervention. 

Session three: Monday, 8 June at 4 pm SAST with Patrizio Piraino (University of Notre Dame): Patrizio delves into the mechanics of randomized evaluations, explaining the intuition around determining sample size and statistical power. This is a good opportunity to deepen one's technical understanding of randomized evaluations.  

Session four: Monday, 29 June at 4 pm SAST with Emily Cupito (Project Director, J-PAL Africa): Emily is a seasoned J-PALer who has coordinated J-PAL Africa research funding rounds in her role as the former Director of DigiFI Africa. Emily will take the class through the process of writing a good funding proposal, sharing some tips and tricks.

The webinar series is targeted to junior faculty and early-stage researchers who have an interest in randomized evaluations and who may consider applying to DigiFI Africa’s Request for Proposals in the future. However, it is open and free for anyone to attend. RSVP here. 

Other opportunities available for African scholars

African scholars with a deep understanding of randomized evaluations can apply for research funding through DigiFI. Read more about the scope of the initiative here. Applications for the next round will close in September 2020.

African scholars can learn more about running randomized evaluations through the J-PAL MicroMasters in Data, Economics, and Development Policy online program. The summer term starts on June 2, 2020. Scholarships are available through DigiFI—apply here.

As of 2019, 469 million people across sub-Saharan Africa used mobile money. In 2019 alone, 50 million sub-Saharan Africans created a new mobile-money account, a 12 percent increase from 2018.  Across Africa, governments are exploring new ways of digitizing financial services and identification to reform policies. While there is a big push to go digital, our knowledge of its potential impacts are limited, particularly in the African context. These reforms may have transformative impacts for citizens through improved governance and public service delivery. But they also have the power to exclude marginalized groups or violate privacy rights. 

The Digital Identification and Finance Initiative (DigiFI) in Africa aims to generate rigorous evidence on the impacts of these technologies for both governments and citizens in sub-Saharan Africa. For example: How should digital identification (ID) systems be designed to maximize benefits while minimizing costs in a specific context? When is it appropriate to link a social protection program to a digital ID system? To what extent can digital ID systems and digital payments reduce leakages and improve targeting of social protection programs? Can digital ID systems and digital payments assist in building incentive systems to motivate public servants? For more information on DigiFI Africa’s research agenda, please see our framing paper. 

We are excited to launch a further exploration of these questions in DigiFI Africa’s new blog series. Over two months, this series will unpack key policy questions on digital ID and payments systems while also exploring a subset of the academic literature provided in our framing paper. This series includes posts on: 

• The benefits, challenges, and unknown impacts of digital IDs,
• Digitization of government-to-person payments, 
• Mobile money and person-to-person payments, and
• Possible barriers to effective public service delivery (e.g. targeting, leakages, incentives, and take-up) and opportunities for digitization to improve these processes, including high frequency process monitoring.

You can read about DigiFI’s ongoing studies. These include, but are not limited to, research on the impacts of linking the national biometric ID system in Kenya to social protection schemes, the relationship between digital IDs and poverty alleviation in Malawi, how digital tax systems can aid revenue collection in Uganda, and the role of digital cash transfers in responding to the COVID-19 pandemic in Ghana and Kenya. 

If you’re a policymaker or researcher thinking about the design of a digital financial or ID system or evaluating new reforms in the DigiFI research agenda, we encourage you to get in touch! We can be found on [email protected] and would love to hear from you.