Call 2011 the year of the biometric ID. Once the territory of high-security enclaves and spy novels, identification by iris scan, fingerprint, and other unique physical features has now become de rigueur around the world—especially in India, whose program to ID every citizen has been the subject of almost giddy reports about the technology's potential to democratize society. The New York Times described India's biometric database as "building real citizenship" for the first time. Wired emphasized how biometrics can finally bring the disenfranchised into the formal economy. The New Yorker detailed the necessity of IDs for the poor in accessing formal savings opportunities.
But entirely underemphasized is another major upside of biometric IDs and the shift to electronic payments: solving the ghost-worker problem.
For decades, the developing world has tried to bust ghost workers: make-believe police, teachers, and bureaucrats furtively planted into payrolls by corrupt government staffers, particularly in remote areas. These fictional "workers" bear the names of infants, the deceased, or real adults who simply aren't employees. This long-running scam drains millions of dollars each year from already strained public coffers in countries like India, Nigeria, Zimbabwe, and Afghanistan.
Waste, fraud, and abuse are often blamed on too much central government. But ghost-worker scams illustrate the opposite problem: Ghost scams flourish in areas characterized by decentralization—where cash payment systems for government salaries, pensioners, and welfare recipients are particularly hard to monitor.
The scale of the problem can be jaw-dropping. In Zimbabwe, a recent examination reportedly revealed 75,273 ghost workers out of 188,019 employees from various ministries. Eliminating these phantom employees would save taxpayers more than $200 million annually. The potential savings are immense in a country where up to 80 cents for every dollar of government revenue goes to salaries.
Using biometric IDs instead of traditional paper documents can eliminate duplicate enrollments and guarantee that the actual payee receives the money, usually by employing fingerprint verification at pay points. These high-tech IDs have been used in at least 15 developing nations over the last decade for payments or money transfers. In June, Alan Gelb and Caroline Decker of the Center for Global Development estimated that at least 450 million people in developing countries have had their biometric information recorded, with that figure set to triple over the next five years.
Nigeria provides a telling example. This year, as announced in July, the government used biometric IDs—fingerprint scans, in this instance—to eliminate an astonishing 43,000 ghost workers from the public payroll, for a savings of more than $75 million dollars. A separate audit of 337,000 policemen turned up a whopping 107,000 ghosts whose salaries were regularly paid and stolen.
In the past, ghost workers were identified through exercises like "pay parades" in which employees gathered for head counts to collect their salaries. House-cleaning operations of this sort could eliminate workers who didn't exist and others who weren't actually showing up. Still, in the aftermath of such purges, it was easy for local bureaucrats to simply pad the payrolls again. Cash payments and difficult-to-verify hiring protocols made graft easy.
But centrally managed biometric databases and electronic payments alter this dynamic dramatically. Infants and the deceased can't be signed up (although presenting a baby for biometric registration would be entertaining, the fingerprints wouldn't be the right size), and nonworking "workers" now feel uniquely identifiable. A fingerprint reader at a pay point is often enough to discourage no-shows from attempting to collect payments, probably because they are afraid of the electronic trail incriminating them. Even in the most remote areas, where cash payments were once the only option, government payments can be centrally auditable for the first time, thanks to point-of-sale devices, payments with mobile-phone notification, and mobile ATMs with fingerprint scanners that function even where telecommunications infrastructure doesn't.
After Liberia's 14-year civil war, Princeton's Jonathan Friedman reported recently, the successful switch to biometric IDs for paying civil service employees saved the government $4 million annually. Malawi is saving $2 million a month, it announced in May, after abandoning cash salary payments. In Afghanistan, USAID announced its hopes to convert 400,000 personnel payments into mobile payments after a pilot program found that 10 percent of payments were going to nonexistent policemen.
E-payments will significantly reduce government overhead, too. India's biometric ID, for instance, is now enrolling 1 million people every day. By helping to lay the foundation for an electronic platform for processing payments—like salaries and taxes—the government is poised to save roughly $23 billion a year, according to a 2010 McKinsey report. And verified electronic payments can also help bust not only fake workers, but ghost pensioners and welfare recipients. By employing electronic means for welfare payments, in particular, governments have a chance to provide the first formal savings opportunities for the most vulnerable poor.
The shift to e-payments won't eliminate corruption in government payments entirely, of course. And biometric IDs are not without their own potential drawbacks: One obvious concern is that autocratic regimes could misuse biometric IDs to monitor citizens. Furthermore, in some places, wages are intentionally set low because workers can expect extra pay in the form of graft. In those instances, it may also be necessary to raise wages simultaneously alongside with biometric enrollment.
But coupling new identification tools with electronic payments has shown stunning first returns, and there is no doubt the international development community has begun to grasp its potential. As 2012 approaches, new payments systems are shifting power away from previously unaccountable local officials, illuminating how available tools, not cultural tendencies, shape the way anti-corruption campaigns succeed or fail.