What do you do when your client is nomadic, lives in an area with no electricity, roads, or GSM coverage, but plenty of bandits?

Two CGAP partners are devising solutions to just such a situation in Kenya. Vodafone and a consortium of PayNet, Kenya Commercial Bank and Sevak Solutions are awardees from the Social Protection Payments Challenge Fund, co-financed by CGAP and FSD Kenya.  The two awardees are developing prototypes to deliver social protection payments to families with orphans and food insecure households in the arid north bordering Somalia, Ethiopia, and Sudan. Both have chosen approaches that rely on technology to drop the cost of delivering the grants, while giving beneficiaries and others access to other financial services.

But northern Kenya is a tough environment to do banking. In an area the same size as the UK, there are 3 bank branches. In one district, Kwale, a family of five typically gets by on 300 Kenyan Shillings per day, or under USD 5. Garissa district houses a major refugee camp for Somalis. About the busiest place is Loki, with 100 flights daily for UN and other agencies staging relief aid into Southern Sudan. Why so many flights? Because police have declared the road impossible to protect from bandits, starting 600 km to the south.

There are many challenges – lack of power, connectivity, bone-crunching and car-swallowing road, which impose real operating costs when pushing services out to the frontier. Let’s take security as the example. After a spate of armored car hijackings, every movement of money by a bank or ATM supplier requires an armed escort of  4 police and two vehicles for “high risk” areas, which includes most of the northern half of the country. The rule has doubled the cost of cash movement for outfits like PayNet, which operates 110 ATMs. Cash movement is PayNet’s largest single operating expense. And that’s for an ATM network mostly concentrated in the secure south. What would the cost be like to deliver social protection payments in northern Kenya?