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NIDAN
Office of Zila Panchayat Balaghat, Madhya Pradesh India

A. Problem Analysis

 1. What was the problem before the implementation of the initiative?
Direct benefit transfer through e-platform is very simple and commonsensical idea but, unfortunately, it is extremely difficult to implement. Notably and interestingly, technology is least of challenge. Basic challenges faced can be summarized as follows: 1. Poor Density of financial institutions - Balaghat district is a naxal affected area. Each villager had to travel, on average, 9.3 Km to collect his wages. Nearly 18% of people were travelling more than 15 Kms. Banking system was very clumsy and dialatory. It was taking nearly 10 days for funds to reach from district account to account of a gram pachnyat and further taking approx. 43 days to reach funds from accounts of gram panchayat to account of beneficiaries. 2. Such delays were not because of any personal or institutional specific inefficiency; it was complex layering of fund transfer that was at fault. 3. Technology models of banks were not uniform and their Banking Correspondence (BC) models was highly unstable, non scalable and without interoperability. 4. System of fund disbursal by district works department to their contractor was very discretionary and was breeding lot of corruption. 5. There was no grievance redressal system for citizens if funds have gone missing or he is not able to draw it. Neither there was system to know when funds have come to his account. Thus, a citizen was on total mercy of banks or post office. 6. Poor interest of Banks in financial inclusion projects as they tend not to be profitable. Also they have unsustainable local payment system.

B. Strategic Approach

 2. What was the solution?
Financial inclusion and direct benefit are very elegant and commonsensical ideas, however, they are quite difficult to execute effectively in rural setting. Our target audience rural citizens, particularly poor, are not able to easily draw their entitlements from banks. This is because of one there is inordinate delays in sending those entitlements and ,second, even when send, opportunity cost of withdrawal of such receipts are quite heavy and sometime even exceeds the entitlements themselves. Being District Magistrate of that area at that time this project was started by me to solve these issues in sustainable manner. However, we stressed the solution of withdrawal problem more and solved it first as crediting the amount without ensuring easy and neighborhood withdrawal facility creates more problems for citizen than solving. With these ideas in minds, project of NIDAN (Network for immediate disbursal around neighborhood) was borne. It is an integrated payment system that has made fund flow between district and beneficiary simplified, faster and transparent. It is an end-to-end solution that completely reengineered the fund flow process. Most importantly we realized very early that easiness of withdrawal and social-political acceptance are two critical factors that can make or mar the project. Thus, we frontloaded establishment and stabilization of a credible BC model and took whole project thorough process of social acceptance. Thus our project became very process intensive and so did not remain merely a technological demonstration project. It was started in 15th August 2011 with NREGS payments at village of Kanki of district of Balaghat (MP). Now extended to 372 gram panchayats of district. It came to be owned by all stakeholders and precisely it is this sense of ownership that is why the NIDAN is still being used by nearly 18 departments. Net result was that net distance a beneficiary needs to travel to collect payment got reduced from 9.3 Km to 1.2 Km. Average cycle time for fund flow reduced from 53 days to just 3 days. As it was successfully executed in as remote, backward and naxal affected district of Balaghat, it is replicable in any setting. Development of unique BC model, which is stable and scalable, is major achievement of our project. Every department including Gram panchayat first generates its e-pay order. it is done off-line or on-line depending upon connectivity availability. All such pay orders are aggregated at district level and all relevant checks are conducted. After this a composite bank e-pay order is generated. Once executed, money is transferred to beneficiary account. Our system does not stop here, we put in a system of robust and functioning business correspondence of banks in all such villages, which allowed to people to draw credited amount. From beginning project was designed to be expandable, so that it can be integrated with other e-governance projects. As of now, we are integrating this with e-uparjan system of wheat/paddy procurement in. Objectives- a. To ensure citizen friendly withdrawal system in rural areas with minimum opportunity cost of the withdrawal b. To reduce distance and time that a citizen spends in collecting his entitlement. c. To design a system which legal and audit compliant so to reducing duplication in work of government employees leading to better acceptability of project. d. To provide a system with robust grievance redressal and feedback mechanism. e. To develop a scalable and expandable system that can be extended across departments and geographies.
 3. How did the initiative solve the problem and improve people’s lives?
1. From beneficiary point of view easiness of withdrawal is more crucial rather than mere crediting. NIDAN concentrates more on withdrawal rather than crediting. 2. NIDAN has completely re-engineered process, instead of mere digitization of existing paper processes. It used client-server model. It is based on off-line on-line model, which could be implemented immediately. When Internet connectivity becomes available the data can be entered online. 3. In the fund flow of social sector schemes, particularly, information level of various stake holders is different leading to discretion and corruption. NIDAN solved the problem of information asymmetry. 4. Most of such projects tend to device every subsystem afresh making system financially unviable. However, we designed our processes and system in manner as to leverage all existing ongoing efforts in this field. Thus, our NIDAN system showed that is possible to integrate platforms of public sector banks, bio-metric intermediaries like FINO and even private sector like HDFC bank. 5. One emerging problem of e-governance initiatives, particularly in social sectors, is an unsatisfactory grievance redressal, as key village level functionary washes their hands off totally. We innovatively over came tendency. 6. Our initiative is department and scheme neutral making expandable and scalable. Marginal cost of addition of any new scheme or department is virtually zero. 7. In NIDAN e-transfer process is aligned with existing departmental process. So, it reduced drudgery at all level, leading to better acceptability of the system.

C. Execution and Implementation

 4. In which ways is the initiative creative and innovative?
List of services that were ICT enabled: A. Citizen can withdraw money in neighborhood only without investing any opportunity cost. B. Citizen can get instantaneous information if his payment has been rejected bank. C. Citizen can get his due or entitlement at a predictable date. D. Payment related complaints of citizen are resolved expeditiously. E. Citizen can get information the date and time when his money was sanctioned so that he can claim it from banks Services provided by NIDAN meet all the top four criteria. Details are as under: a) Front-end is electronic: Department officer creates a voucher online after feeding beneficiary details into the database. b) Workflow/approval process is electronic: This voucher is then approved and digitally signed by the Officer-in-Charge of the scheme. c) Database is electronic /digitized: This DSC-marked voucher is automatically converted into a bank file. Many such vouchers are aggregated on the NIDAN server and processed sequentially for payment with the help of an intermediate bank server [HDFC Bank]. d) Service delivery is electronic: Money debited from scheme account is credited instantaneously into the beneficiary’s. The beneficiary receives an SMS informing her of the credit details. This money can then be withdrawn from the nearest ultra small bank branch. e) Service delivery is automatic and without human discretion f) Knowledge asymmetry of beneficiary addressed: all stake holders are immediately alerted about crediting of payment in to beneficiary accounts through SMS. This removes knowledge advantage, if any, with any of stakeholders. g) Every department including Gram panchayat first generates its e-pay order. it is done off-line or on-line depending upon connectivity availability. All such pay orders are aggregated at district level and all relevant checks are conducted. After this the composite bank e-pay order is generated. Once executed, money is transferred to beneficiary account. Our system does not stop here, we put in a system of robust and functioning business correspondence of banks in all such villages, which allowed to people to draw credited amount. h) From beginning project was designed to be expandable, so that it can be integrated with other e-governance projects. As of now, we are integrating this with e-uparjan system of wheat/paddy procurement.
 5. Who implemented the initiative and what is the size of the population affected by this initiative?
Three categories of stakeholders were consulted, and dynamically involved in the development of the system. First, we tried to understand what bottlenecks they faced in discharging their duties or accessing services and then we adapted the system to address these concerns. After consulting these groups we designed and launched the system. a) Service Intermediaries: 16Banks and their partner agencies in financial inclusion drives (such as FINO, Biotronics) and HDFC bank (for their platform integration)were involved in the system development through monthly meetings under the aegis of the Collector. b) Service Facilitators: Departmental officers (from Programme Officers right up to the data entry operator), sub-engineers, block officers, rozgar sahayaks etc. were all involved at every stage of the software developed to seek feedback on work flow and user-friendliness. Nearly 32 training and feedback sessions were held for them. c) Service Providers: such as Gram Panchayats and elected representatives were asked to test the software and on their recommendation it was changed 1642 times to ensure it reflected the best possible combination of ease and efficiency. We organized 42 interactive sessions with sarpanch. d) Service receivers: we undertook around 68 gram chaupals to make villagers aware of the functional veracity.
 6. How was the strategy implemented and what resources were mobilized?
The entire software was built for Rs. 5 lakhs over a period of 3 months. Additional costs relate to hardware and are : Sr. No Description Cost 3 Server 17,15,000 4 Back-up Server 1,10,000 5 HDFC Server 45,000 6 Firewall 1,10,000 7 Software development 5,00,000 8 Connectivity enhancers 72,000 Total 25,52,000 The funds were arranged by District Administration by convergence of various schemes of Zila Panchayat as NREGS and IAP. IAP is Integrated Action Plan for Naxal affected area for innovative projects.
 7. Who were the stakeholders involved in the design of the initiative and in its implementation?
1. Scalability and Sustainability: In a very short period of two years, we have scaled up project. From nearly Rs. 1.8 crore in Oct-11, we achieved net disbursement of nearly Rs. 129 crores in Jun-13 0f 13 departmental schemes. Nearly Rs. 129.9 crore to 188200 people in villages of nearly 350 gram panchayats of district. 2. Efficiency - A beneficiary on average has to travel nearly 9.3 Km to collect his entitlements from various banks. He never used to get his money on his first visit. He was making nearly 2.7 trips. This all meant the opportunity cost of nearly Rs 260 for withdrawing his money, a very substantive sum. With NIDAN disbursal is available in village only even in nights with average travel distance of 1.9 Km. He no more has to make any costly trips to banks. He can withdraw money even in nights. One of spinoff of this reliable withdrawal has been that people of average has saved around Rs 93 on cycle of two payments, which was nil earlier. 3. Fund flow between district level and gram panchayat became very fast. Earlier, it used to take around 42 days for money to reach beneficiary account which reduced . As whole data is electronic, so grievance redressal is very efficient and fast. 4. Stable BC system- we had around 143 BC working across the district and none of them quit or failed. We were able to bring uniformity in commission practices of various banks. Banks were convinced to shift to off-line on-line mode of payment disbursal. We successfully showed that how PPP architecture can work in core rural areas provided certain sensible approaches are adopted. In this project, as a district administration we interacted and co-opted many private sector organizations namely, HDFC bank, FINO, AISECT, Baratronics. 5. Lastly, concerned sarpanch and secretaries of Gram Panchayats became computer literate. Large numbers of them were women. System instantly transfer information of all financial transactions to all concerned stakeholders. This destroys any information asymmetry and system is much more transparent and less corrupt.
 8. What were the most successful outputs and why was the initiative effective?
The project was conceived by District Magistrate & Collector of that period, who was doing continuous monitoring starting from conceptualization, development of software to implementation of project. For day to day functioning of project, a NIDAN committee with Additional collector (Development) as a chairman has been instituted. This committee has DIO (NIC) as technical member. Dedicated team of Prime Minister Rural Development Fellow and District e-governance manager and team of block level managers manage network and hardware part. These teams also created continuous training modules for all stakeholders. BC’s were monitored by banker and gram panchayats.Daily payment reports were another to evaluate the progress of project.Toll free number for registering complaints was the way to sort out the problems generated during implementation. Thus, whole project is managed by very robust organizational structure.
 9. What were the main obstacles encountered and how were they overcome?
Basic challenges faced can be summarized as follows: 1. Banks, generally, shows no interest in financial inclusion projects as they tend not to be profitable. However, our the biggest challenge was to ensure the sustainability of local payment system. As it was our cardinal link without which e-transfer has no meaning, we were determined to design a workable and sustainable BC model. 2. Lower government staff did not support computerization partly because it reduces corruption and partly because it has always resulted in duplication of their work. 3. Rural People still do not believe in technology. Biggest challenge is convince masses that it is possible to transfer their money in to their account directly and draw in their village bypassing intermediaries. Human mediated system has got ingrained deeply social psyche. 4. There was no political acceptability of idea of direct transfers because of worry of bypassing them. However, their cooperation is must to implant on rural society as they can effectively communicate to rural masses. 5. Society learns in very heuristic manner, and may not follow any preset timetable. To design system and pace of roll out as per needs of society (not of technology) was a tough challenge. 6. An e-government system is adopted and sustained only when it reduces the drudgery and work load of every stake holder. 7. Internet connectivity in rural area is very unreliable and sparsely available. So, we strived to design a system keeping in view the poor connectivity and poor power availability in rural areas. 8. Low budget for innovative projects. Whole project was to designed to be low cost, expandable, scalable, and secure with minimum marginal cost. 9. All government work is process centric with large amount of rules and regulations. So system must be legally compliant to replace an existing system. Error detection and correction should be self-invoicing.

D. Impact and Sustainability

 10. What were the key benefits resulting from this initiative?
Before going into quantitative comparison, it is proper to have a look on the methodology of collecting and analyzing the data. For the purpose of the study 83 GPs were selected, an average of 8 GPs per block. Further, 20 beneficiaries selected from each GP, totaling 1600 beneficiaries. Individual beneficiaries were selected from the Job card Register using a random process wherein, starting from the first name in the list, every sixth name was selected. During selection, an effort was made to choose workers who had worked under MGNREGS for two years consecutively. Data was collected from GP and beneficiary bank statements from April 2010 to July 2012 to assess delays before and after the new payment system. Through these statements we traced the flow of MGNREGS funds from the Zila to the Gram Panchayat and finally to the beneficiary. Parameters of assessment: Given that MGNREGS payment delays occur due to systemic lapses at various levels, we decided to study the impact of efficiency improvements at all these levels. We analyzed data from 83 GPs to trace three things in the system (before and after the innovations): How much time does it take for a cheque issued by the Zila Panchayat to be credited in the GP account? How much time does it take for a cheque issued by the GP to be credited in the laborer’s account? How much time lapses between when the GP issues a cheque for payment, and the actual date of the payment? A. Time taken by fund movement: a. From district level to Gram or village level: One can easily see that nearly 40 % of transactions were taking more than 7 days before initiative. However, thus number got reduced to merely 7 %. Sample size was 773 transactions. b. From Gram Panchayat account to beneficiary account: Here we can see that earlier 51% of transactions were taking more than 15 days. There were nearly 4% of transactions, which were not completed even in 90 days. Our initiative has bought down these figures drastically. Now 72% of transactions are getting completed within 7 days. None of transactions is taking more than 21 days. The sample size was 2713. Earlier the average delay was 49 days for fund to reach from account of Gram Panchayat to account of beneficiary. Post implementation, it got reduced to merely 10 days, a reduction of nearly 80%. c. Overall delays for complete transfer. Following chart shows that how we were able to reduce overall payment in all blocks of district. Biggest reduction was seen in Birsa block which is a highly naxal Affected block. Block of Baihar has not seen program roll out. B. Distance travelled to collect payments: It is a known fact that poor have to travel large distances to collect their payments. Following graph shows that they were nearly travelling around 9.3 Kms on average. Nearly 54% of people had to travel more than 5 km to collect the payment. Nearly 12% was travelling as much as 15 Km. Post implementation, this distance came down to 1.3 Km as payments were being distributed in neighborhood only. C. Amount of saving: Earlier people were withdrawing nearly whole amount in one go. One reason could be that they were not sure when they would get next opportunity to withdraw. However, after implementation of project , as withdrawal facility became more reliable, they had a saving of Rs 174 on average.
 11. Did the initiative improve integrity and/or accountability in public service? (If applicable)
Project is self sustainable because – 1. Technological sustainability: We have already shown that our system is NeGP compliant. Our whole hardware and software is fully secure. Our network and server access is highly controlled. Whole information transmission in encrypted. We have used MS encryption engine. We possess all valid licenses of all software that we are using including our databases. Till now, our down time is zero 2. Organizational sustainability: The whole project was conceived and executed by District E-governance society. For day to day functioning of project, a NIDAN committee with Additional collector (Development) as a chairman has been instituted. This committee has DIO (NIC) as technical member. Dedicated team of District e-governance manager and team of block level managers manage network and hardware part. Theses teams also created continuous training modules for all stakeholders. Thus, whole project is managed by very robust organizational structure. Even, the Government of MP has given grant of Rs.30 lakhs for expansion of this project. 3. Operational sustainability: Our model has proven to be highly operationally sustainable. Following diagram indicates the speed with which our user base increased. It just indicate that how our system is operationally sustainable. 4. Financial sustainability: Marginal cost of expansion of services is ZERO in our system. We are adding new village and new service at nil cost. Internally, our system is revenue saver. We have been able to transfer fund at smaller cost than what is provided in scheme itself. Thus, we were charging 1% of such saving from all user departments. In fact, some private parties have also shown interest in using our system. System is transferable because of its adaptability and scalability due to following features- 1. Local language support: The front end of our software fully support the Hindi language. It is, in fact, in Hindi only. All data entry interfaces are in Hindi. Following screen shots would show that even client end application is also in Hindi. All help messages are also in Hindi. In fact, the whole project was so well received because only of the fact that local people were able to identify themselves with the project. Our system is fully Unicode compatible At back end, both Hindi and English are supported. 2. Standardization of technology used: For better interoperability, we , from beginning, standardized all the hardware to be used. We standardized the configuration of machines for client end. It resulted in completely uniform machine sets at village level. Advantage was that all client ends were interchangeable.For back end, data center security was prime consideration. Compliance with NeGP standards: following sheet shows that our all components and system is NeGP compliant.
 12. Were special measures put in place to ensure that the initiative benefits women and girls and improves the situation of the poorest and most vulnerable? (If applicable)
Rural e-governance projects, particularly financial inclusion projects, cannot be treated and executed as purely technology demonstration or driven projects. Underlying technology is the least bothersome part in execution. It is the socio-political acceptance of such projects, which is the critical parameter for success, or failure of such projects. So, such projects must be executed as techno-social projects rather than merely a technology projects. 2. Such paradigm shift would necessitate complete reorientation of the execution ideology. It would require that such projects couldn’t be top down beyond a point. Even technology development part, particularly front end, needs to be bottom up. Minimum level of customization must be ensured to suit local aspirations and idiosyncrasies. Otherwise, the projects face the problem of adoption, as rural stakeholders are able to identify with it. 3. As community takes time to learn and respond, such projects are extremely process intensive. Firstly, they need to sell to community as a worthwhile project. We undertook around 43 meetings local sarpanchs and secretaries even before launching the project. The whole software was developed with continuous feedback from these people. They were also consulted in selection BCs 4. Political acceptability of project is essential requirement for scalability and sustainability of such projects. From beginning, all MLA s and MP were briefed properly. In fact, project was launched itself by Rajya Sabha MP. MLA or other public representatives inaugurated all additions or expansions. We even invited Chief minister and Chief Secretary to felicitate the expansion of the project. We learned very early that Politician have one quality in abundance that most of us do not have that is effective mass communication. 5. It is not crediting of amount into bank account that is critical but it is easiness of withdrawal, which is of critical importance from public perspective. In fact, without solving the problem of withdrawal, the online crediting of amount creates more problem than solving. For example, in absence of easy withdrawal, the amount can get effectively lost. Person can, effectively, loose interest in entailment itself, as he cannot get it in time. Poor and non-transparent withdrawal facility breeds corruption. As beneficiary has to pay to get his amount in his account in time. Thus, rolling over of such projects must be proceeded by rolling over of local withdrawal facilities or neighborhood banking. 6. Stabilization of BC model requires key changes in approach itself. It must not be taken as a rural employment initiative. In fact, our experience shows that it is a high-risk business, which poor youth cannot afford to undertake. A BC must have sufficient asset base to overcome the risk cycles. To avoid them behaving like another moneylenders, local community must have some indirect social control. 7. Systems are more important than personalities. For example, the delays in funds transfer in government system are not a person specific problem. Neither because everybody does not want to work or is corrupts. It is because they are hamstrung by a dead weight clumsy system. Before implementation of project, the fund flow diagram looked something like below.

Contact Information

Institution Name:   Office of Zila Panchayat Balaghat, Madhya Pradesh India
Institution Type:   Government Agency  
Contact Person:   Vivek Kumar Porwal
Title:   District Magistrate and Collector  
Telephone/ Fax:   +919425811710
Institution's / Project's Website:  
E-mail:   vivekias@gmail.com  
Address:   Office of Zila Panchayat Balaghat,Madhya Pradesh India
Postal Code:   481001
City:   Balaghat
State/Province:   Madhya Pradesh
Country:  

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