Building on Digital ID for Inclusive Services: Lessons from India [CGD]

Development: Digital ID

Building on Digital ID for Inclusive Services: Lessons from India
September 13, 2019
Center for Global Development
Alan Gelb and Anit Mukherjee

Digital ID as a development tool
India has emerged as a leader in building on its biometric digital ID (Aadhaar) to reform service and program delivery. It moved quickly to consolidate the rollout of Aadhaar, and then to embed the unique Aadhaar number into program databases. A range of applications, including digital signature and payments, was then constructed on top of the Aadhaar foundation (the India Stack). Together with partners, the Center for Global Development is analyzing the effects of Aadhaar-based reforms. India offers lessons for many other countries as their focus evolves from rolling out an ID system towards using it to improve the efficiency and inclusivity of service delivery. Some programs using Aadhaar are federally administered but others are implemented at state level. It is already clear that some states and sectors are reforming better than others, generally because of better design of the digital reforms or stronger capacity to implement them. The three programs we discuss below highlight achievements as well as challenges that need to be overcome for greater efficiency and inclusion.

An integrated trinity: the JAM
India recognized early the need to integrate Aadhaar into two other pillars for reform: mobile communications and financial access. The resulting trinity is known as JAM: Jan Dhan (financial inclusion), Aadhaar (biometric ID), and mobile connections. With 1.2 billion unique numbers, Aadhaar now covers about 95 percent of India’s population, including almost all adults. In 2014, the government announced the Jan Dhan program to achieve the goal of universal financial inclusion; by 2017, 82 percent of India’s adult population had access to a bank account, up from 56 percent when the program started. Mobile phone subscriptions increased from 17 per 100 inhabitants in 2007 to 85 in 2016, approaching universal access with a growing share of smartphones and internet-enabled devices.

The JAM trinity brings together three digital transformations and exploits synergies among them. Aadhaar enables customers and banks to easily fulfill know-your-customer (KYC) norms necessary to obtain a bank account or a mobile SIM card, while costs have been further reduced by allowing the possibility of digital or e-KYC. Aadhaar is therefore linked organically to new bank accounts and mobile connections, making them accessible to large sections of the population. In turn, much of the increase in financial access has been spurred by the Aadhaar-based reforms to social programs that routed benefits through bank accounts….

…Some cautions from Rajasthan
Our Rajasthan study revealed several problems that countries may face as they transition towards digitalized services.
:: Digitization. Existing databases may not be consistent, and errors in seeding the unique ID number in beneficiary lists can compound the problem, creating aggravations for beneficiaries or even denial of benefits. These difficulties were compounded in Rajasthan by the restructuring of program databases into the Bhamashah registry and by efforts to shrink beneficiary rolls at the same time as they were being digitized.

:: Authentication. As noted above, the reliability of biometric authentication is also a challenge. Fingerprints alone are not enough—they may not always work or work smoothly. Backup methods are needed and, indeed, the Aadhaar approach provides for other options. But sometimes these are not used by frontline service providers, who may ignore protocols and send beneficiaries away to come back another time, or possibly even deny them their benefits. The risk is arguably greatest for the most vulnerable beneficiaries, who have the least capacity to assert their rights before the frontline providers.

:: Digital literacy. Eighty percent of women heads of households cannot read or write text messages or even make a call using mobile phones. While the use of ID to create a social registry can promote inclusion and greater financial access, not everyone will have the necessary tools to participate fully in a digital environment. As these systems mature, bridging the digital capacity gap will be an important issue for the development and technology communities to address…