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Digital wage payments amid pandemic to ensure RMG workers’ wages

A new report is calling on businesses and governments to scale up digital wage payments for low-paid workers after the COVID pandemic exposed the need for critical support to reach vulnerable populations.

Apparel workers were among the hardest hits in this COVID-19 pandemic. And a new report published by Mastercard Center for Inclusive Growth and BSR’s HERproject highlights the long-standing opportunities of digital wages to drive financial inclusion and flexibility to put low-income workers into the formal financial system and surge their capacity to save, plan and respond to crises like the COVID-19.

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Figure: A report by Mastercard Center for Inclusive Growth and BSR’s HERproject highlights the long-standing opportunities of digital wages to drive financial inclusion and flexibility to put low-income workers.

The pandemic has exposed and emphasized the limitations of cash payments: they are time-consuming, insecure, and disempowering for workers. As lockdowns have brought much of the world to a standstill, governments and the private sector alike have turned to digital financial services to make rapid payments at scale.

For example, the Bangladesh government’s COVID-19 support package for the garment sector was obtainable only for employers paying digital wages; this led to over 800 garment factories rapidly digitizing their payroll, and in April 2020, 1.9 million garment workers received the government support package payments into their accounts—with more than half estimated to be paid digitally for the first time.

There is therefore a really big opportunity to accelerate the transition to digital and generate positive impressions at scale.

Since 2018, BSR’s HERproject and the Mastercard Center for Inclusive Growth have partnered to leverage the HERfinance Digital Wages program to scale up wage digitization for ready-made garment factories and workers in Bangladesh, Egypt, and Cambodia.

Globally businesses and governments need to come together to develop and implement more cash digitization programs.

Through their supply chains in countries like India and Bangladesh, global brands and buyers have unique access to millions of workers and can, in partnership with relevant governments and stakeholders, make digital wages a global reality.

Governments can digitize their social protection payments and support individuals to access and use these much-needed disbursements.

However, while such a shift has enormous potential, it is critical that efforts are carefully designed and managed. And this report draws on the extensive experience of HERfinance Digital Wages programs across multiple countries, highlighting key lessons that can help global brands, governments, financial service providers, and other stakeholders ensure that the transition to digital payments is inclusive, effective, and beneficial to all.

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