Digitizing Civil Registration and Cash Transfers in Nepal

Challenges

In the past, Nepal’s local governments conducted all business on paper. This was due to lack of basic connectivity infrastructure and skilled human resources. Vital events – birth, death, marriage, divorce, and migration – were registered on paper and people received handwritten registration documents. Keeping paper-based records posed the risk of data losses and limited the use of the data for planning purposes and verification of vital events. In addition, limited awareness of vital registration and difficulties in accessing services of local government offices led to low registration rates and coverage.

Similarly, recipients of social security allowances (SSA)—the elderly, single women (mainly widows), persons with disability, children, and those belonging to endangered ethnicities—were registered on paper and ward officials carried the cash in their backpacks and distributed the cash manually. Such practice raised a lot of problems, including duplication, alleged leakage of funds due to ghost beneficiaries, and delayed benefit payments. 

Approach

The Strengthening Systems for Social Protection and Civil Registration (SSSPCR) project was implemented during Nepal’s transition to a federal system of government. The project facilitated the transition by helping to build the capacity at the local level for improved service delivery. The project added trained human resources and equipment across all 753 local levels to support digitization, helped increase awareness about civil registration and SSA, improved access to registration, and supported policy reform to deliver SSA via banks, providing technical assistance and partnerships to support that shift. 

In addition to strengthening the foundations of digitized service delivery by digitizing civil registration and the SSA beneficiary database, – the project is also currently supporting the design and development of an integrated social registry (ISR).  The ISR is an integrated database of households with their demographic and socio-economic data which will provide a platform for identification of beneficiaries and coordination across multiple social programs including those for disaster relief. 

Results

The project helped modernize service delivery, protect the poor and vulnerable, promoted financial inclusion, improved governance by reducing errors and duplication of eligible beneficiaries, and will support the government of Nepal’s efforts to respond to emergencies and crises quicker.

The project improved service delivery in three critical areas: 

Online civil registration: 

• Over 6,600 wards (more than 97 percent of the country’s wards) are now registering civil events online. 

• Nepal’s birth registration rates of children under five have increased from 58 percent in 2014 to 77 percent in 2019. Digitized birth registration can help the government to harmonize early years interventions across health, education, and social protection sectors. 

E-Payment: 

• Social Security Allowance (SSA) is paid via banks in all local levels to 3.5 million people 

• Payment via banks has meant substantial efficiency gains in terms of timeliness of delivery, control of leakage in the system, and financial inclusion. Switching to electronic payments has helped control leakages of SSA funds by reducing errors and ‘ghosts’ in two stages: de-duplication of the beneficiary database during digitization and KYC (know your customer) checks at the time of opening beneficiary account. 

• Using the e-payment pilot conducted in 2013/14 as the basis, the combined impact of the above two stages could mean elimination of over 20 percent of ghost beneficiaries in the system. That translates to a huge fiscal saving given the scale of SSA budget. The government’s SSA allocation for FY23 has increased to NPR 134 billion (equivalent to over $1 billion). 

Digitization

• Digitization of the SSA beneficiary list means that government has a list of the demographically vulnerable consolidated in one place that is updated on a quarterly basis. During crisis and emergency situations, this list can be used to expedite relief transfer. 

• The project has also supported digitization of past civil registration documents. 

Bank Group Contribution

The International Development Association (IDA) provided financing of $150 million for the project. $35 million was cancelled in September 2019 when one of the activities initially planned, establishment of a national population register through a door-to-door data collection, was dropped from the project. Project was restructured to focus on extensive registration campaign. 

Partners

The project was supported by technical assistance (TA) from the United Nations Capital Development Fund (UNCDF) on payments and the Foreign, Commonwealth and Development Office (FCDO) of the United Kingdom on the development of the ISR.

Looking Ahead

While the SSSPCR project has laid strong foundations for an improved delivery system for social protection in Nepal, challenges remain in the areas of connectivity, human resource, and access to bank branches in many parts of the country. 

Going forward, Nepal needs to institutionalize and sustain these gains to improve the delivery of social protection schemes. This requires expediting the design and development of the ISR and sustained investment to ensure its roll out across the country and a gradual integration of ISR with other social programs. A follow-on project for FY26 pipeline is under discussion that will help roll out the ISR. Ensuring timely implementation and effective coordination on the system building agenda is crucial. 

As Nepal pivots towards a green, resilient, and inclusive development (GRID) pathway, the ISR will provide an integrated platform for identification of the poor and vulnerable and improve coordination among all tiers of the government. 

Beneficiaries

“We have come across beneficiaries who, knowingly or unknowingly, have registered vital events in more than one local level. Thanks to the online registration system, we can verify their details and avoid duplications now. Likewise, payment of social security allowances through banks has made transactions transparent and prevented financial irregularities that were rampant previously. As the online registration is new and may not be accessible to people with limited digital literacy, we are in the process of appointing a staff at the Ward office to assist beneficiaries in need of the service. We have even set up a digital/audio-visual citizen charter for beneficiaries' convenience.” 

  - Birendra Maharjan, Secretary, Lalitpur Metropolitan City, Ward no. 4