Cash Transfer Programs as a Safety Net during COVID-19: The good and the bad
by Jason Lakin & Andrés Ponce Morales, IBP— Nov 01, 2020
Social protection policies play a fundamental role in sustaining minimum living conditions for the most vulnerable, and during COVID-19, an increasing number of countries are adopting specific social protection measures to counteract the economic impact of the pandemic. According to the World Bank, as of June 2020, at least 131 countries have put in place conditional or unconditional cash transfers schemes to protect the most marginalized populations. Cash transfers are by no means a new policy tool; they have proven effective to prevent households from falling below subsistence levels in various settings. However, the pandemic is testing these policies as never before and raising new concerns around their effectiveness, spurring the International Budget Partnership (IBP) and our partners to examine how we can improve and transform these programs.
Cash transfer programs: a global success story, but with persistent challenges
COVID-19 presents an unprecedented challenge to economies around the world and its impacts will be felt the most among the most marginalized individuals in society. Economy-wide lockdowns, overwhelmed health care systems and quarantines are already impacting the most vulnerable and could push a staggering 71 to 100 million people into extreme poverty by the end of 2020, with many of those individuals living in regions that are already impacted by poverty-related challenges.
Rigorous evaluations of cash transfer programs have supported their implementation to fight poverty all over the world since the 1990s. Nevertheless, even before the pandemic, these programs had certain weaknesses, such as inadequate targeting mechanisms, improper implementation and insufficient benefit levels. As cash transfer programs have been expanded to respond to the pandemic, these limitations, as well as some newer constraints, have come into sharper relief. Inspired by the work of our partners within our Learning Network, we will collaborate to confront the limitations of current cash transfer policies and deepen our collective thinking and advocacy around income support.
Here, we highlight five of the many issues that we hope to explore further as an organization and alongside our Learning Network partners.
- How can we improve targeting approaches that currently prevent eligible recipients from receiving benefits? Even before the pandemic, many cash transfer programs suffered from challenges in reaching the right beneficiaries, starting with the extent and quality of information available to facilitate proper targeting. In countries with limited administrative capacity, reaching individuals that live in informal settings or otherwise lack official records can be particularly difficult.
In Indonesia, the government launched a relief scheme for workers earning less than Rp 5 million per month in September 2020. The program targets employees who have been registered in the Workers Social Security Agency by their employers, however, according to the Indonesian Forum for Budget Transparency (SEKNAS FITRA), the agency did not include a number of eligible workers. They argue that the government should collaborate with trade and labor unions to improve the identification process, while a complaint center could be established for workers who meet the requirements but are not yet included.
In South Africa, the Public Service Accountability Monitor (PSAM) along with the Budget Justice Coalition (BJC) have raised concerns about the government’s pandemic relief package which requires banking details, proof of residence and identity documents, thereby excluding millions of individuals living and working in informal areas.
- Can cash transfer programs be expanded so that more of those in need are included? Traditionally, most cash transfer programs are narrowly targeted to the poor, the extreme poor and specific sectors. Cash relief programs introduced during the pandemic have also been designed to benefit the most vulnerable individuals but given the scale of the impact of COVID-19, many more households now fall in that category.Arguments are being put forward to substantially expand the types of households that might qualify for such support and how we define who qualifies. Some of IBP´s partners are also encouraging their governments to expand access to cash assistance to a much wider range of groups.
CBGA in India maintains that the provision of Rs. 500 (USD$ 6.50) for three months to poor women is too low and have called for a cash transfer scheme of at least Rs 7.000 per household for three months to effectively help families as a whole. They also propose expanding the existing PM-KISAN program to ensure landless agricultural workers are not excluded.
- Can cash transfer programs be fortified to operate on a more permanent basis instead of an ad hoc response to crises? The COVID-19 pandemic is not the first global crisis that governments have had to navigate, nor will it be the last. It is worth exploring how cash transfer programs can evolve into automatic entitlements rather than ad hoc emergency responses. Resolving this might mean permanent extension of some programs or the introduction of rule-based entitlement schemes (e.g., when unemployment rises, some schemes automatically start or expand without further authorization needed).
- Do we need programs that do more than fight extreme poverty? Initially created to address extreme poverty, it is now worth asking if cash transfer programs can and should do more to address the structural inequities that exist in many economies and be improved to provide support to all those who need it. This might involve moving beyond current conceptions to universal basic incomes, full employment guarantees or increased redistribution through taxation to support aggregate demand.INESC in Brazil initially advocated to expand the support devised by the government, calling for a three-month emergency basic income to the poorest. The government reacted by approving a proposal consisting of three installments of 600 reais per month. However, by partnering with multiple organizations, they now seek to establish a permanent basic income system.
- Who’s going to pay for this? Governments will need to ask themselves how to pay for social protection programs like cash transfers, especially as they expand in times such as the pandemic and addressing the challenges discussed above could be prohibitive. Context matters here and some governments have access to easier finance and more domestic borrowing than others.
With no end in sight to the economic fallout of the pandemic, cash transfer programs will likely continue to be a critical resource for governments looking to support their constituents. Moving forward, IBP – alongside our partners – will be facilitating discussions and collaborations on these programs around the world to not only understand what’s working and what’s not working but to explore different ways of working on various policy areas more broadly. Watch this space for updates and opportunities to join the conversation.