Transaction failures in Direct Benefit Transfer payments have been widely discussed in recent times, notably in the context of wage payments under the National Rural Employment Guarantee Act, which guarantees memebers of rural families 100 days of work a year. However, little attention has been paid to the hurdles faced by NREGA workers in accessing their wages after DBT payments are credited to their accounts.

These are known as “last mile” hurdles. A new report by LibTech India, Length of the Last Mile, paints a grim and startling picture of these last-mile hurdles, based on a careful survey of 1,947 NREGA workers in Andhra Pradesh, Jharkhand and Rajasthan.

This timely wake-up call extends LibTech’s earlier work on delays and other flaws of DBT payments to NREGA workers, spanning a whole decade. In an insightful foreword to the report reproduced below, economist Jean Dreze places these new findings in the context of the elusive quest for timely and reliable payment of NREGA wages.

The full report can be read here.

It was a telling experience, in the last few years, to meet so many workers, pensioners and others in rural Jharkhand who had the greatest possible difficulties in accessing their meagre payments from the banking system. Some were waiting for payments that, unbeknown to them, had been rejected for arcane technical reasons. Others were bewildered by the requirements of “Qwicy”, as e-KYC is known in rural Jharkhand. Others still had been cheated by unscrupulous business correspondents or other intermediaries. And many had to wait for weeks or months for payments that are due to them within days as a matter of legal right.

These hurdles have been particularly devastating for the National Rural Employment Guarantee Act, the main focus of this report. Wage payment issues have plagued NREGA ever since the transition from cash-in-hand to bank and post-office payments in 2009. For one thing, payment is often delayed well beyond the 15-day period within which they are supposed to be paid under the Act. It is not that delays were unknown before 2009, but they were relatively short, and also, workers had ways to demand action since the delays – if any – were generally caused by local authorities.

This changed after the transition to bank payments: delays became much longer (initially at least), and the payment system became more and more centralised, depriving workers of any means of control over it.

This is not to say that the transition to bank payments was wrong. Direct payment to workers’ bank accounts is a useful safeguard against corruption. But the transition from cash-in-hand to bank payments caused serious problems. Ideally, the transition problems should have attenuated over time, giving way to a reasonably reliable and timely payment system. Unfortunately, the modalities of bank payments kept changing, creating periodic waves of new transition problems for many years.

In some states, cash-in-hand was successively replaced with post-office payments followed by bank payments, payment through a specific bank, Direct Benefit Transfer and Aadhaar Payment Bridge System payments – I am skipping some intermediate steps.

Each time the payment system was re-jigged, workers had to run from pillar to post to adjust to the new modalities (for instance, by opening a new account, or linking it with Aadhaar) and face another round of hurdles. Ten years after bank payments were introduced, the Central government is still unequal to the task of ensuring reliable wage payments within 15 days.

The imposition of Aadhaar on NREGA was a turning point in this sobering story. When the NREGA wage payment system moved to Aadhaar-based payments such as DBT and Aadhaar Payment Bridge System, a new generation of payment problems emerged. One of them was the problem of “rejected payment”: as mentioned in the report, nearly Rs 5,000 crore of NREGA wage payments were rejected during the last five years.

Other Aadhaar-related problems include diverted payments (money being sent to a wrong account) and blocked payments (money being inaccessible to the worker, e. g. for lack of compliance with e-KYC).

Predictably enough, payment problems were especially common in the poorer, less well-governed states, where they had a tremendous discouragement effect on rural workers. In Jharkhand, whenever we enquire about their interest in NREGA work, rural workers often say something like “Bhugtan sahi naheen hota hai to kya fayda?” (without proper payment, what is the point?).

To be fair, some serious work has been done in the last few years to resolve the payment issues, and significant progress has been made towards timely and reliable payment. Nevertheless, major problems persist. For instance, payment rejection rates are still hovering around 4%-5%, much as before. Funds also continue to dry up around the end of the financial year, holding up wage payments for weeks or even months at a time. Further, NREGA workers still face many problems in extracting money from their bank accounts.

The survey presented in this report is full of valuable insights into these “last-mile” problems. It is startling, for instance, to learn that 40% of Customer Service Point users in the sample have experienced biometric authentication problems (at least one failure in the last five transactions). Similarly, an astonishing 25% of the respondents reported instances of being informed (by SMS or otherwise) of a wage credit of which they found no trace when they checked their account at the bank.

To access their wages, almost half of NREGA workers have to make multiple visits to the bank or payment agency. This is all the more alarming as “a majority of the workers have to travel to the block to collect their wages”, contrary to the common assumption that doorstep payment has become the norm in rural India. Even at the block level, people are often deprived of simple services such as updating of bank passbooks. Last but not least, the report sharply brings out that NREGA workers are as bereft as ever of effective grievance redressal facilities. Instead, they experience a harrowing “normalisation of hardships”.

In short, we are still very far from financial inclusion in the full sense of the term – accessible, convenient and effective banking services for everyone. The report is a useful antidote to some of the techno-utopian delusions that have flourished on this in recent years.

A good example is the Indian government’s Economic Survey 2015, which promises “wiping every tear from every eye” with the so-called JAM trinity [linking Jan Dhan accounts, Aadhar cards and mobile numbers] and even concludes that “nirvana today seems within reach”. Five years after this rosy prediction, poor people are still struggling to navigate the banking system.

The authors, of course, are not opposed to the use of advanced technology in NREGA or other social programmes. But they advocate technological innovations that further the rights of rural workers rather than corporate interests – liberation technology. This is a powerful idea, with a wide range of possible applications.

The report, thus, is not just about fixing glitches in the NREGA payment system but also about putting the issue in a new perspective. It will be of much interest to anyone concerned with the future of employment guarantee and the rights of rural workers. The concluding recommendations offer rich pointers for research, policy and action. Hats off to the LibTech India team for this very enlightening study.

Jean Dreze is a visiting professor at the department of economics, Ranchi University.