HUDUMA SMART SERVICE AND PAYMENT CARD (HUDUMA CARD)
HUDUMA KENYA SECRETARIAT

A. Problem Analysis

 1. What was the problem before the implementation of the initiative?
a. PAYMENTS MADE BY GOVERNMENT The Government of Kenya is spending Kenya Shillings 50 billion (500m USD) annually in Social Welfare cash transfers and empowerment of marginalized groups. Majority of the beneficiaries are not banked and therefore receive the transfers directly in cash or through mobile money. The two methods present multiple challenges to the government and the beneficiaries as follows: 1. The cost of managing cash is expensive for the government 2. Transfers made through cash are slow and inefficient 3. Cash handling is insecure 4. Cash payments lack comprehensive records and transparency 5. Accessing mobile money is costly to the beneficiary Additionally, due to poor beneficiary identification and authentication processes, non-bank disbursement methods have loopholes which unscrupulous officials exploit to divert cash transfers to ineligible beneficiaries. a. PAYMENTS RECEIVED BY GOVERNMENT The Government of Kenya is collecting Kenya Shilling 140 billion (USD 1.4b) annually as payments made by citizens for services in public offices. Almost the entire amount is collected in cash. The government therefore bears the high cost of handling cash, faces the increased security risk involved in storing and moving cash, cash payments have weak accountability mechanisms and are prone to revenue leakages. Additionally, cash payments are inefficient and inconvenient to customers who are forced to withdraw cash from their bank accounts and then physically travel to a government cash office to make a payment. 1.2 Why Innovative Solution was Required The Government of Kenya is pursuing a policy towards digitizing all its financial transactions both to and from Government. To achieve this, the Ministry of Public Service through the Huduma Kenya Secretariat adopted the Huduma Smart Service and Payment Card as an innovative solution to achieve the following objectives: i. To enhance accountability, accuracy and efficiency of social welfare/empowerment disbursements to the right beneficiaries ii. To enhance the efficiency, reliability and transparency of payments made for public services and increase government revenue collection iii. To increase access to National Social Security Fund (NSSF) services by enabling NSSF mass member registration, contribution and benefits through the card. iv. To increase access to National Health Insurance Fund (NHIF) Services by enabling NHIF mass member registration, contribution and healthcare services through the card. v. To increase tax collections through Kenya Revenue Authority (KRA) mass PIN registration and introduction of innovative taxation products. vi. Financial inclusion by empowering ordinary Kenyans with access to formal financial services and a convenient platform to pay for both public and private sector services vii. To adopt one official common platform for Government financial transactions with its citizens 1.3 What major problems and issues needed to be addressed and were they of public concern and/or did they affect a large group of the population? What social or other groups were affected and in what ways? 1.3.1 What major problems and issues needed to be addressed and were they of public concern and/or did they affect a large group of the population 1. Inefficiency and lack of accountability of Government Cash Transfers and Empowerment Funds to the right beneficiaries 2. Revenue leakages in collections of Appropriations in Aid 3. Access to social intervention funds and initiatives including National Social Security Fund, National Health Insurance Fund 4. Low number of citizens in the tax pool leading to low tax collections – Therefore, need to increas tax collections through increased customer registration for tax services and enhancing the taxes through the introduction of innovative taxation products 5. Low rates of Financial inclusion – The platform would empower ordinary Kenyans to be “Know” their transactions documented and therefore enhance access to formal financial services 6. Multiple entry points for the registration of several Government services leading to unnecessary resource utilization and time expenditure; 1.3.2 Were the problems of public concern and/or did they affect a large group of the population Yes the problems affected the public/ All Customers/ All Social Groups/ All Kenyans seeking Government Services. The problem affected the poor, the rich, the literate, illiterate, disabled, elderly, women, youth, ethnic majorities and minorities just to mention a few. This is because there was need to: 1. Enhance access to Government’s social net interventions including National Social Security Fund and National Health Insurance Fund. 2. Accountability of those receiving Government disbursements. 3. The financially include more citizens through provision of a platform to bring them onto the Financial Net. 4. Inconvenience to citizens making payment for public services

B. Strategic Approach

 2. What was the solution?
The Solution: The Huduma Smart Service and Payment Card (Huduma Card) The Huduma Card is a Government of Kenya owned transaction platform/ prepaid card that provides a variety of electronic services and facilitate electronic processing of payments by card users for both public and private sector services. The Huduma Card enables the provision of Services for National Health Insurance Fund, National Social Security Fund, Kenya Revenue Authority and other interventional Government Disbursements as Customers who registers for the card will automatically be registered for the 3 services at one registration point. Further, the Huduma Card is EMV compliant, has functionalities like Near Field Contact, Smart Chip, Magnetic stripe, Multi currency wallets, Multi-platform top-up in order to enable multiple Government Services on one Card. The Huduma Card is being implemented in partnership with MasterCard, Four tier 1 Banks in Kenya and an ICT Integration Solution Provider X Infotech and further the Huduma Card is being rolled out at zero Cost to the Government of Kenya and Customers.

 3. How did the initiative solve the problem and improve people’s lives?
PROBLEM HOW PROBLEM HAS BEEN SOLVED 1. Inefficiency and lack of accountability of Government Social Welfare Disbursements and Cash Transfers to the right beneficiaries  Biometric registration of all beneficiaries of Government Disbursements.  Bank Account based prepaid card instantly issued at point of registration  Development and utilization of the Huduma Electronic Disbursement Portal with clear, electronic business rules guiding the disbursement of Funds. 2. High cost of handling cash, increased security risk involved in storing and moving cash, weak accountability mechanisms for cash payments made to government offices  Citizens empowered with electronic payment card to enable digital payments for government services  Automation of government cash offices and provision of point of sale machines to accept electronic services  Electronic payments are received directly and credited into government bank accounts reducing the cost and time involved in processing cash settlements 3. Low numbers of customers registering for Social Intervention Funds and taxes for example National Health Insurance Fund, National Social Security Fund, Kenya Revenue Authority  One registration point for all the 3 Government Services At one registration point Huduma Card registers a Customer for National Health Insurance Fund, National Social Security Fund and other Government Disbursement Interventions. 4. Multiple entry points for the registration of several Government services leading to unnecessary resource utilization and time expenditure;  One registration point for at least 3 Government Services. NHIF, NSSF and KRA PIN 5. Low rates of Financial Inclusion  Huduma Card is a bank account based product ensuring all beneficiaries have access to formal financial services  The card is issued to the customer free of charge and there are no fees involved in the management of the prepaid bank account  Biometric registration of Huduma Card users enables partnering Bank institutions to Know Customers.  The 4 partnering Banks involved in the project can develop credit facilities based on Business Intelligence data mined from use of Huduma Cards by beneficiaries. 6. The financially excluded left out of the tax pool  Biometric registration of Huduma Card users enables the Kenya Revenue Authority to Know Customers  Therefore, increasing tax collections through increased customer registration for tax services and enhancing the taxes through the introduction of innovative taxation products.  Electronic transactions made by Huduma Card holders in commercial outlets increases visibility of tax obligations and tax revenue collection 7. Complicated forms and multiple service entry points  One registration point for the at least 3 Government Services

C. Execution and Implementation

 4. In which ways is the initiative creative and innovative?
1. Provision of a convenient and integrated payment gateway for the Disbursement of Government Funds with clean know your customer database and electronic business rules to manage funds disbursements. 2. One Biometric and Huduma Card Registration Point for Several Government Services for example: Social Intervention Funds (National Social Security Fund, National Health Insurance Fund), Kenya Revenue Authority, Other Government Disbursement Funds like National Youth Service Stipend. 3. The Huduma Card is the first Government of Kenya issued smart card that ensures inclusion of Kenyans from all walks of life by providing access to financial services, health insurance, social services and welfare programmes. 4. The Huduma Card is a convenient, universal usage card that is “one size fits all” that allows the user to conduct multiple electronic transactions for both private and public sector services. A “One Stop Shop” Model in making payments for Government Services 5. The Huduma Card is issued instantly when the customer fills an application giving the customer instant access to a prepaid bank account and transaction card 6. Partnership with private sector institutions e.g. MasterCard, Banks and X-Infotech has enabled the Government of Kenya to issue Huduma Cards at no cost to the citizen and at no cost to the Government 7. The adoption of a pre-paid card bank account model means the Huduma Card holder (usually at the bottom of the financial pyramid) does not incur account management costs as they would for a normal bank account and therefore enjoys reduced costs 8. The Huduma Card project is being rolled out at zero cost to Government and the Customer this has been achieved through a partnership framework with MasterCard, four biggest/tier 1 National Banks in Kenya and the X Infortec Solution provider to roll out the Huduma Card. 9. Partnership with MasterCard ensures global acceptance for the Huduma Card giving the card holder a convenient method to access financial services online or anywhere in the world 10. Enhanced tax collections - Employers of low income earners such as domestic workers and SMEs will be urged to pay employee wages through the card account upon which automatic deductions will be made for NSSF, NHIF and KRA income tax. Statistics from developed countries have demonstrated that there exists a growth in GDP commensurate to the percentage increase in the usage of card transactions.

 5. Who implemented the initiative and what is the size of the population affected by this initiative?
5. Who implemented the initiative and what is the size of the population affected by this initiative? In no more than 300 words, describe the organization through which the programme is administered and how many people it benefitted. 5.1.1 Who implemented the initiative The Huduma Card project is implemented by the Government of Kenya, Ministry of Public Service, Youth and Gender Affairs through the Huduma Kenya Secretariat. 5.1.2 What is the size of the population affected by this initiative? All Customers of Government Services Currently, over 200,000 Huduma Cards issued, half of these are receiving Government Disbursement and Intervention Funds through the National Youth Service Government Intervention. 800,000 Huduma Cards are in the Country and being issued to all citizens through Huduma Centers and Bank Branches of the 4 National Banks partnering with the Government of Kenya in this initiative for free. An additional, 2Million Huduma Cards have been fully financed by MasterCard and are being produced to be brought to Kenya for the continuing issuance exercise. 5.1.3 Organization through which the programme is administered and how many people it benefitted. The Huduma Smart Service and Payment Card (Huduma Card) is being rolled through the Huduma Kenya Programme Institutional Governance Structure that was gazetted by H.E The President vide Gazette Notice No. 2177 of 4th April 2014. The unique Governance framework is led by H.E the President and His Cabinet as the Service Delivery Summit. The Summit has given the Programme the required Policy, Managerial and Political Leadership to anchor such an extensive transformational Programme in the Public Service. Falling under the Summit is the Huduma Kenya Technical Committee comprising accounting officers (Principal Secretaries and CEOs) of Agencies and Departments represented at the Service Delivery Summit. The committee defines the strategic actions to be undertaken in the roll out of the Programme and oversees overall implementation of the programme. The committee is chaired by the Cabinet Secretary Ministry of Public Service, Youth and Gender Affairs. The Technical Committee has the Huduma Kenya Secretariat as the Operational Secretariat responsible for the implementation of the decisions of the Technical Committee and is involved in the day to day management of the Huduma Kenya Programme.
 6. How was the strategy implemented and what resources were mobilized?
6.1.1 How was the strategy implemented Five Key Areas were identified in putting together the Huduma Card Action Plan: i. Huduma Card Programme Strategy & Approach Developed ii. Value proposition Development iii. Customer enrollment and onboarding iv. Card Processing & Issuer operations v. Ongoing cardholder, programme management, monitoring and evaluation Below is a highlight of the Activities in each component as per the four above stated categories. Note: The detailed Action Plan is attached as per guidelines 1. Huduma Card Programme Strategy & Approach Developed  Target segment identification  Business model designed  Business plan/ card tariffs defined  Operating model & organization design developed  Roles and responsibilities of stakeholders defined  Rules of engagement & SLAs defined 2. Value proposition Development  Prototype system development and integration testing  Network configuration and Testing  Product development (NHIF, NSSF, KRA and Government Disbursements)  Bank partnerships  Merchant partnerships  Customer enrollment and onboarding  Card Processing & Issuer operations  Ongoing cardholder & programme management 3. Customer enrollment and onboarding  Customer awareness  Marketing & advertising  Recruitment campaign  Customer registration/ data capture  Card issuance / fulfilment  Card personalization  PIN generation  Card activation 4. Card Processing & Issuer operations  Transaction processing  Authorization  Transaction data capture / tracking  Clearing and settlement  Technology / platform management 5. Ongoing cardholder, programme management, monitoring and evaluation  Card Load points & use network management  Promotions  Ongoing cardholder engagement  Card usage development  Data analytics  Portfolio/Partner management  Cardholder experience/service  SLA/ KPI management  Continuous monitoring through customer surveys and contact centre customer response call backs.  Multi partner project appraisal and evaluation. 6.1.2 What resources were mobilized 1. Financial Resources The entire Huduma Card project is being rolled out at Zero Cost to the Government of Kenya. Our Partners including Mastercard, four tier 1 Banks in Kenya and the X Infotech Solution provider are fully supporting the project roll out and target to recoup their investment through a Huduma Card/ Cashless/ Cash light driven economy. This model elaborates a successful public private partnership with a focus on social interventions but leveraging on economic opportunities available in the Cashless/ Cash light sector. However, the Partners have committed over Kenya Shillings 1.5 Billion (Approximately 14.5 Million US Dollars) in Financial and Technical support for the roll out of the Huduma Card Project. 2. Technical Resources/ Human Resources / The Huduma Kenya Secretariat The Ministry of Public Service, Youth and Gender Affairs through the Principal Secretary Public Service appointed a team of Technical Officers from the Private and Public Sector to spearhead the day to day running of the Huduma Kenya Programme and the Huduma Card under the Huduma Kenya Secretariat. However, the partners have fully provided additional technical/ specialized human resources for the Huduma Card roll out as it being a prepaid card and the partners are conversant with this arena.

 7. Who were the stakeholders involved in the design of the initiative and in its implementation?
The Stakeholders of the Programme: A. Institutions 1. The Presidency 2. The Ministry of Public Service, Youth and Gender Affairs 3. National Social Security Fund 4. National Health Insurance Fund 5. Kenya Revenue Authority 6. Pensions Department 7. The National Treasury 8. Ministry of Information, Communication & Technology 9. Ministry of Labour, Social Security and Services 10. Higher Education Loans Board 11. National Transport and Safety Authority 12. Kenya Police 13. MasterCard 14. Equity Bank Kenya Limited 15. Diamond Trust Bank Kenya Limited 16. Commercial Bank of Africa Limited 17. Kenya Commercial Bank Limited 18. X Infortec Limited 19. Huduma Kenya Secretariat B. Civil Servants 1. Madam Cecily Kariuki – The Cabinet Secretary in charge of the Ministry of Public Service, Youth and Gender Affairs and Chairperson of the Huduma Kenya Technical Committee. 2. Madam Lillian Mbogo Omollo – Principal Secretary, Public Service and Youth. 3. Mr. Dennis Mutuku – Secretary, Huduma Kenya Secretariat 4. Mr. Geofrey Mwangi – Chief Executive Officer/ Board Secretary, National Health Insurance Fund. 5. Mr. Anthony Omerikwa – Chief Executive Officer/ Managing Trustee, National Social Security Fund. 6. Mr. John Njiraini – Commissioner General, Kenya Revenue Authority

 8. What were the most successful outputs and why was the initiative effective?
1. Accountability for Government Disbursements – All Government beneficiaries entitled to Government disbursements are biometrically registered and the disbursement is done to their Huduma Cards. Further, the disbursement is done through a uniquely developed Huduma Disbursement Portal that has electronically developed business rules that define the disbursements being done to the beneficiaries. i. Over 200,000 customers have been issued with Huduma Cards and over 100,000 have received their Government stipend/ social funds through their Huduma Card. ii. Financial Inclusion – Of the 200,000 customers who have Huduma Cards 70% of this group have never had a Bank account and this now avails an opportunity to access Financial Products from the Huduma Card Partner Banks. 2. Efficiency, transparency and accountability in the collection of Government Payments Citizens empowered with electronic payment card to enable digital payments for government services. Electronic payments are received directly and credited into government bank accounts reducing the cost, risk and time involved in handling and processing cash settlements 3. Enhancing Social Inclusion – Customers able to register for Social Interventions Funds: National Health Insurance Fund and National Social Security Fund at one registration point. This has also enhance convenience to customers through the single registration approach. Further, has led to Health and Welfare inclusion through the National Health Insurance Fund and National Social Security Fund. 4. High Customer satisfaction for the use of the Huduma Card that stands at 85% (Measured through a Customer Satisfaction Survey and Contact Centre Continuous Customer Call and Feedback Mechanism). Customers have lauded the one card concept where their social intervention card can be used for other private purposes. 5. Successful Public Private Partnership for Social Intervention Projects – This has seen the Huduma Card project that has cost over Kenya Shillings 1.5 Billion (Approximately 14.5 Million US Dollars) rolled out at Zero Cost to the Government of Kenya.

 9. What were the main obstacles encountered and how were they overcome?
1. Implementation Delays Partners have at certain project periods not managed to meet the set implementation timelines. To address this joint project management teams were constituted to oversee the Huduma Card Project and they were tasked to implement a Task Specific Project Plans to track progress and therefore act on any delays. 2. Transformation Public Cash use Culture For a long time cash has been the medium of economic transaction that the public has been used to and transformation of this means there is need for continuous sensitization and awareness creation on the benefits of the Huduma Card. 3. Information, Communication and Technology (I.C.T) We have experienced downtimes with the Huduma Card ICT systems. To resolve this we have leverage on the ICT capacity of our Huduma Partner Banks as regard redundant links and Data Center Infrastructure and Capacity. 4. Multi Stakeholder Management Operational gaps in aligning the different partners for the successful roll out of the Huduma Card Project has at times adversely impacted the project roll out. This has emerged as the partners also have other running projects. To address this a steering committee was constituted to align the leadership of the different organizations that were involved in the Huduma Card Project and the steering committee had the overall project oversight.

D. Impact and Sustainability

 10. What were the key benefits resulting from this initiative?
1. Enhancing Social Inclusion – Customers able to register for Social Interventions Funds: National Health Insurance Fund and National Social Security Fund at one registration point. This has also enhance convenience to customers through the single registration approach. Further, has led to Health and Welfare inclusion through the National Health Insurance Fund and National Social Security Fund. 2. Accountability for Government Disbursements – All Government beneficiaries entitled to Government disbursements are biometrically registered and the disbursement is done to their Huduma Cards. Further, the disbursement is done through a uniquely developed Huduma Disbursement Portal that as electronically developed business rules that define the disbursements being done to the beneficiaries. 3. Over 200,000 customers have been issued with Huduma Cards and over 100,000 have received their Government stipend/ social funds through their Huduma Card. 4. Financial Inclusion – Of the 200,000 customers who have Huduma Cards 70% of this group have never had a Bank account and this now avails an opportunity to access Financial Products from the Huduma Card Partner Banks at no cost 5. High Customer satisfaction for the use of the Huduma Card stands at 85% (Measured through a Customer Satisfaction Survey and Contact Centre Continuous Customer Call and Feedback Mechanism). Customers have lauded the one card concept where their social intervention card can be used for other private purposes 6. Successful Private Public Partnership for Social Intervention Projects – This has seen the Huduma Card project that has cost over Kenya Shillings 1.5 Billion (Approximately 14.5 Million US Dollars) rolled out at Zero Cost to the Government of Kenya.

 11. Did the initiative improve integrity and/or accountability in public service? (If applicable)
Yes. 1. Accountability for Government Disbursements – All Government beneficiaries entitled to Government disbursements are biometrically registered and the disbursement is done to their Huduma Cards. Further, the disbursement is done through a uniquely developed Huduma Disbursement Portal that has electronically developed business rules that define the disbursements being done to the beneficiaries. 2. Cash less Payment for Government Services – Customers are able to pay for Government Services using their Huduma Cards. This eliminates the cash interface therefore reducing corruption incidences at Huduma Centers and enhancing revenue collection.

 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)
Yes. 1. Most Huduma Card users are the vulnerable poor – The Card is issued at no cost to the user and has no monthly bank charges. It is therefore relatively cheap to maintain and operate. 2. The bundling of National Health and Insurance Fund and National Social Security Fund in the Huduma Card enrollment process has ensured that those at the bottom of the pyramid also have access to health services and social insurance services.

Contact Information

Institution Name:   HUDUMA KENYA SECRETARIAT
Institution Type:   Government Department  
Contact Person:   MARTIN MUGAMBI
Title:   EXECUTIVE ASSISTANT  
Telephone/ Fax:   +254 20 6900011
Institution's / Project's Website:  
E-mail:   mmugambi@hudumakenya.go.ke  
Address:   47716
Postal Code:   00100
City:   NAIROBI
State/Province:   NAIROBI
Country:  

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