UN Agencies Support the Republic of Zambia through Ministry of Finance to Digitalize Utilities Payments
On 16 March 2021, the UN Capital Development Fund (UNCDF) and the United Nations Office of South-South Cooperation (UNOSSC), funded by the India-UN Partnership Fund, partnered to digitalize utility payments and thus drive digital and financial inclusion for many of Zambia’s underserved customers. Both organizations aim to work with Zambia’s Ministry of Finance (MOF) to increase the availability and usage of utilities for women and youth, in particular.
Utilities, such as water, energy and sanitation, are essential services but in many parts of Zambia, these services are not easily accessible for various reasons, including the mode of payment available. Utilities are primarily paid for in cash, which can pose limitations for women and young people as they often do not have control over household finances. Digitalizing utilities payments can bring immediate benefits to customers, such as:
- increased affordability of the service(s);
- increased penetration utility services, making them more widespread;
- improved quality of life;
- improved livelihoods by empowering customers with digital and financial skills that can be used in the growing and inclusive economy of Zambia.
The project, which will be implemented over the next 13 months, will accelerate the development and financing of inclusive digital payment solutions in the utilities sector. This project is timely and was well-received by the government of Zambia as it will directly address specific aspects of Zambia’s National Financial Inclusion Strategy (NFIS) that are considered of ‘high priority and high impact.’ These include:
- Designing and launching simplified products for underserved consumers through mobile based channels and others;
- Migrating Government-to Persons and Persons-to-Government payments from cash to digital platforms.
The MOF and UNCDF will collaborate to develop workable digital channels and leverage existing digital payments solutions to reach more customers with the services they need. Because utility services are essential, a well-developed digital utilities sector will be a vital tool and will play a pivotal role in advancing digital and financial inclusion, especially for women and youth. Digital payments have proven to lower the cost of providing financial services to low-income people and marginalized communities, while increasing the safety and convenience of using savings and payments.
UNCDF, the technical assistance provider, will work with MOF, the implementing partner to design an environment where financial service providers (FSPs), FinTechs and Regulators will collaborate with the Ministry to test and implement new solutions for utility payments, particularly water.
Mr. Adel Abdellatif, Director, Ad Interim (a.i.), United Nations Office for South-South Cooperation (UNOSSC) says, “The India-UN Development Partnership Fund exemplifies South-South cooperation at work. Collaboration between Zambia’s Ministry of Finance and the Government of India to support building digital financial inclusion in Zambia demonstrates that countries with similar development challenges can cooperate to solve and overcome those challenges. UNOSSC is proud to manage the India-UN Development Partnership Fund which is rapidly implementing demand-driven projects across the South.”
“Digital payments for utilities are no longer a “nice-to-have” but a “must-have” service. Through this project, we envision strengthening existing digitalizing efforts within the utilities sector, with the objective of using utility payments as a catalyst for including Zambians who are unbanked. In addition, digitalizing utilities creates opportunities for seamless customer experiences, reduces dependency and cost of cash payments, enables faster transfer of payments and reduces collection and operational costs for utility providers. This initiative will also have a focus of supporting government to create an enabling environment towards the digital transformation of Zambia.” says Isaac Holly, Country Lead for UNCDF.
The Ministry of Finance in Zambia commented that, “In the wake of the COVID-19 pandemic, digitalization of payments for services in the utility sector and other sectors makes it more convenient, cost effective and safe for service delivery which is critical in arresting the spread of the pandemic. In this context, the Government has continued to implement the National Financial Inclusion Strategy which, among other things, seeks to migrate Government-to-Person (G2P) and Person-to-Government (P2P) payments and improve outreach and adoption of digital financial services. The partnership with UNCDF will, therefore, complement Government efforts in improving livelihoods of all Zambians, especially the vulnerable groups of society (women, youth and children).”
With a specific focus on women and youth, the project aims to enhance youth and female participation in the market, resulting in poverty reduction, improved livelihoods and economic growth. Working with the MOF in this sector also provides further opportunity to enhance UNCDF’s vision to build inclusive digital economies. The increased usage and adoption of digital utilities is expected to spur market players to expand to additional geographies around the country, thus allowing more equitable distribution of services and consequently an increased investment in the digital sector. This brings benefits to all those who are digitally included and allows them to participate in the digital economy.
The India-UN Development Partnership Fund recently pledged support for an initiative to create a climate disaster risk financing framework for Fiji.
The United Nations Office for South-South Cooperation (UNOSSC) promotes, coordinates and supports South-South and triangular cooperation globally and within the United Nations system. It manages the India-UN Development Partnership Fund at the request of the Permanent Mission of India to the United Nations in New York. The Office engages a wide range of partners toward achievement of the Sustainable Development Goals, and to foster self-reliance in developing countries according to their national aspirations and values.
The UN Capital Development Fund makes public and private finance work for the poor in the world’s 46 least developed countries (LDCs). UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development. The UNCDF financing models work through three channels: (1) inclusive digital economies, which connects individuals, households, and small businesses with financial eco-systems that catalyze participation in the local economy, and provide tools to climb out of poverty and manage financial lives; (2) local development finance, which capacitates localities through fiscal decentralization, innovative municipal finance, and structured project finance to drive local economic expansion and sustainable development; and (3) investment finance, which provides catalytic financial structuring, de-risking, and capital deployment to drive SDG impact and domestic resource mobilization.