Undercover Economist

December 7, 2012 6:50 pm

A question of identity

Anti-poverty programmes in India have benefited from an iris-scanning ID system that dramatically reduced fraudulent duplicate payouts
Illustration by Raymond Biesinger of Indian identification cards©Raymond Biesinger

Imagine you’re a government minister in a developing country, with responsibility for improving the lives of the poorest 20 per cent of the population. Given a blank slate, it’s not hard to make a list: get everybody a basic bank account; pay a small cash sum to the poorest households; enrol every poor child in primary school, using sticks or carrots to make sure the children show up; provide handouts of cash or food to those hit by natural disasters; provide free basic healthcare and vaccinations. Such a list is ambitious, but not because it’s too expensive. The real constraint is that to implement any of these policies, you need to be able to identify your own citizens.

In spy thrillers, the ability to disappear from official databases is rare and highly prized. In most poor countries, the reverse is true: it’s useful but hard to acquire an official identity. A state that can cheaply and reliably identify individual citizens can also provide services that would be hard to imagine without a universal identification (UID) system.

Lacking UID, well-meaning governments are forced to resort to cruder approaches to poverty reduction: grain handouts that are hijacked by well-connected middlemen; subsidised fuel that’s expensive and ill-targeted and distorts the economy. According to a World Bank report last year, Social Protection for a Changing India, the country has hundreds of official anti-poverty programmes, and many of those who enjoy the benefits are not poor.

You can get a sense of the opportunities available from the iris-scanning ID system introduced by the state of Andhra Pradesh in 2008 after a botched effort in 2005. The system dramatically reduced fraudulent duplicate payouts. Frances Zelazny of the Center for Global Development estimates that the system paid for itself within one month.

ID systems have proved their worth elsewhere. In the Democratic Republic of Congo, 180,000 former soldiers have received cash pensions as an incentive to demobilise. The system uses mobile ATMs, smart cards and iris-scanning technology.

Alan Gelb and Julia Clark, also researchers at the Center for Global Development, draw a distinction between “functional” and “foundational” ID systems. Functional systems are set up to support a particular policy – child benefit, perhaps, or flood relief. Foundational systems are designed to support any and all policies requiring unique identification.

My personal prejudice is towards the functional. I fear foundational systems will become unwieldy and bureaucratic failures. It seems better, if messier, to get something up and running with a particular policy in mind, learn as you go along, and extend the system later.

But I may be in the process of being proved wrong in India, where a fantastically ambitious UID scheme is taking shape under the gaze of Nandan Nilekani, who made his fortune running Infosys and now holds cabinet rank. The scheme aims to give everyone in the country a number and to be able to identify them through fingerprints and iris scanning, using remote systems that consult a central database over the internet. If it works, it will open the way for well-targeted government handouts and for incentive payments to encourage parents to take their children to schools and clinics. It can underpin other systems such as crop insurance, bank accounts and driving licences. The growing system already holds more than the combined population of the UK, France and Germany. Nilekani hopes to enrol 600 million of India’s 1.2 billion people by the end of 2014.

Despite glitches, the system mostly seems to be working well: cheap and flexible, it accommodates those with damaged eyes or fingers, and has a tolerably low error rate. A great deal is riding on its success. No wonder development geeks are watching.

Tim Harford is the presenter of Radio 4’s ‘More or Less’

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