Nepal’s Digital Identity Transformation Faces Challenges

Nepal is undergoing a transformative journey to develop a comprehensive digital identity system, aimed at overhauling governance, improving service provision, and driving economic development. Initiated in 2012, this ambitious project seeks to replace traditional paper-based citizenship certificates with biometric smart national ID cards that include photos, personal data, and fingerprint biometrics. Key achievements include the recent implementation of unique ID numbers assigned at birth and the issuance of millions of digital ID cards, facilitated by collaboration with Idemia.

Challenges and Concerns

Despite significant progress, the next steps pose challenges. Digital security professionals and lawmakers have raised concerns about data privacy and safety, highlighting issues related to storage access and handling sensitive personal information. Comparisons to data breaches in other countries, such as India’s Aadhaar system, underscore the need for robust security measures to prevent similar occurrences. Addressing these security concerns is crucial for the project’s success.

Progress and Milestones

A World Bank report notes that, supported by the Strengthening Systems for Social Protection and Civil Registration Project (SSSPCR), over 97 percent of local government units in Nepal now register crucial events online. Additionally, 3.5 million Social Security recipients receive payments directly to their bank accounts. This digitization has significantly improved service delivery in local administrations.

Nepal’s transition from paper-based citizenship certificates to biometric smart ID cards is a major shift. Collecting biometric data for over 14 million citizens, representing more than 90 percent of the eligible population, is a significant milestone. The government has printed 3 million biometric ID cards, distributing 1.8 million to district offices and 350,000 to citizens.

International Collaboration

Collaboration with global identification leader IDEMIA has been critical. This partnership has enabled the development of a robust digital identification infrastructure, supporting the secure and fast issuance of ID cards. Advanced biometric systems, such as Automated Biometric Identification Systems (ABIS), process data from millions of citizens.

Current Developments

The digital identity program in Nepal is rapidly progressing. One key update is the implementation of unique ID numbers at birth, ensuring digital identity starts from infancy. Mukesh Kumar Keshar, director of the Department of National ID and Civil Registration, confirms that approximately 2,000 unique ID numbers are assigned daily during birth registrations. Efforts are also underway to incorporate biometric data into civil registration and vital statistics systems, with plans to use the same technology for passport issuance.

Public Concerns

Despite advancements, public concerns remain. The Kathmandu Post reported skepticism about the national ID card, which aims to integrate multiple identity documents. Citizens like Bharat Pokharel have expressed frustration that the digital ID card does not replace traditional paper forms in certain government offices. This highlights the need for legislative amendments and digital integration to enhance the card’s functionality.

Research Insights

Research on digital finance in Nepal’s Madhesh Province indicates that digital banking access, usage, and quality significantly enhance financial inclusion. However, there is a high rate of voluntary financial exclusion. Another study emphasizes challenges such as political instability, inadequate infrastructure, and limited education, which have hindered the digital identity project since its inception in 2008.

Digital Payment Transformation

Digital payment gateways in Nepal, such as CellPay, eSewa, Fonepay, Khalti, Prabhu Pay, and Namaste Pay, have transformed financial transactions by offering secure and smooth services, reducing payment fraud risks. The rapid digitization of the payments sector is driven by the growing use of digital currencies, biometrics, and real-time payments, accelerated by the pandemic.

Nepal’s efforts toward a comprehensive digital identity system are commendable, with significant achievements such as the biometric identification of 14 million citizens and collaboration with Idemia. However, addressing privacy concerns and implementing necessary legislative changes are crucial for the project’s success. If successfully implemented, the digital ID system could greatly enhance Nepal’s administrative effectiveness and economic status.