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Social
Safety Nets for Poverty Reduction in South Asia
Suresh C. Babu
Senior Research
Fellow and Senior Training Advisor
International Food Policy
Research Institute (IFPRI)
Washington D.C.
Keynote
Address
Sri
Lankan Agricultural
Economics Association, Annual Meeting
Colombo,
March 18, 2004:
[ FULL
PAPER-ADOBE PDF ]
Introduction
Cash
Transfer Programs
Food Based
Safety Net Programs
Supplementary
Feeding Programs
Food-for-Work
Programs
Food Stamp
Programs
Comparing
Food Subsidy Programs
Public Work Programs as
Social Safety Nets
Savings and Insurance
Programs as Safety Nets for Poverty Reduction
Targeting
for Poverty Reduction
Concluding Remarks
IFPRI Website
Introduction
I am pleased to be
here to present the keynote address on “Social
Safety Nets for Poverty Reduction” as part of the Annual General
Meeting of the Sri Lankan Agricultural Economics Association (SAEA).
First of all let me sincerely thank the association for the invitation
and the opportunity to talk before you. I am glad the Sri Lankan
Agricultural Economics Association brings together its members on an
annual basis to discuss the problems, issues, challenges, and solutions
facing the agricultural economy of Sri Lanka.
The role of
agricultural economists in the development process is very
clear. Agriculture, to a great extent, plays a key role in the economic
development of a developing country like Sri Lanka. Hence, the role of
agricultural economists becomes important in the agricultural
development of the country as well as the overall development of the
economy. Traditionally, agricultural economists have concentrated on
economic issues related to production, marketing, consumption, and
trade. Increasingly, issues related to general economic development,
such as poverty alleviation, globalization, trade liberalization,
issues related to WTO, and issues that link us from the farm to the
consumers and from rural areas to urban areas are becoming important.
If we are to successfully contribute to the policymaking process in
agricultural development we need to strengthen our capacity to deal
with these issues.
Today, the topic
of my presentation relates to such issues that are not
generally seen as part of the profession of agricultural economics.
Social safety nets for poverty reduction have become important tool for
achieving poverty alleviation and have been proven to perform well in
several developing countries. However,
broad based growth through appropriate economic policies is needed in
order to benefit from the short-term
poverty alleviation programs designed through social safety nets
(Coady, 2004).
In this
address I will present various program interventions related to
social safety nets and discuss some of the crosscutting issues related
to the institutional design, targeting, evaluation, political process,
and nature of the social safety nets in countries with varying degrees
of development. The program interventions that have been designed in
developing countries, while they provide opportunities for better
understanding, are yet to be fully evaluated for various benefits and
outcomes in terms of poverty alleviation.
Social
safety nets have been designed with various objectives.
Depending on these objectives they could be classified into income
transfers through cash, food related transfer programs, prices
subsidies, human capital related social safety nets, public works
programs, and micro credit and informal insurance programs.
Cash Transfer Programs
The cash
transfer program attempts to provide assistance to poor
households in the form of cash in order to reduce the risk and
vulnerability of these households falling into the poverty trap. Cash
transfer programs could be based on employment generation or a
universal program that transfers some income to poor households, which
can be used to spend on basic needs. Depending on the group of
beneficiaries, the cash transfer programs could be statutory or
voluntary in nature. Cash transfer programs could be used for emergency
purposes in periods of crisis or could be used as short- or medium-term
poverty alleviation program (Tabor, 2002).
Food Based Safety Net
Programs
Many safety
net programs in South Asia use food as a mechanism to
transfer resources to the poor and vulnerable sections of society. The
food based transfers also come from the fact that most of the countries
in South Asia have achieved food self sufficiency and due to the green
revolution technologies in the 1960s and 1970s food grain production
has been substantially increased and thus surplus food available is
used for helping rural and urban poor to attain a certain basic level
of food consumption. However, several challenges confront food-based
programs. The extent to which food-based programs target households in
real need of food remains questionable. Furthermore, the impact of
food-based programs on food prices in the local areas is also a matter
of concern. Several political economy issues should also be considered
in designing and implementing food- based transfer programs. We discuss
some of them below.
Supplementary Feeding
Programs
The
supplementary feeding programs, which provide food to the
vulnerable sections of society such as school feeding programs that are
operated in most of the countries in South Asia, base their economic
rationale on the quality of human capital that is generated that could
further be invested in income generating activities. Furthermore,
supplementary feeding programs focus on the selective needs of its
beneficiaries and reduce the universal nature of the general food
subsidy programs. Supplementary feeding programs also target specific
groups of the community such as children under 5 years of age as in the
case of the Integrated Child Development Services Program (ICDS) of
India and school children through their lunch program to have adequate
food during their attendance at school. Also, supplementary feeding
programs focus on pregnant and lactating mothers through their
attendance to primary health centers. While there are several
challenges that need to be addressed that relate to program design
issues and the criteria for evaluating supplementary programs,
supplementary feeding programs remain one of the most attractive
programs of transferring benefits to intended beneficiaries and
reducing poverty.
Food-for-Work Programs
The economic
rationale for the Food-for-Work program, which uses food
as a wage good in attracting labour for implementing the public works
program, comes from surplus and ready availability of food in rural
areas that can be purchased by the implementing agency and cost
effectively distributed by the public works program. However, if the
program is not properly designed it can attract a wide range of
beneficiaries who may not be entitled to food. Yet, the quality of food
provided through the public works program as wage may be better than
the quality of food available in the open market. However, the
food-for-work programs can target the beneficiaries effectively by
providing geographical targeting approaches and attracting laborers
during the lean season of crop cultivation and by providing low quality
food as wage so that only laborers in real need of food will
participate in the program.
Food Stamp Programs
Another
food-based approach that has been recently advocated in South
Asian countries is the Food Stamp Program, which has been effectively
used in the past in Sri Lanka. Food stamp programs could identify
target groups efficiently and restrict the use of food stamps to those
who receive them. It reduces the leakage that is prevalent in a general
subsidy program. However, implementing food stamps requires good
governance and administrative setup from the public sector.
Furthermore, the food stamp program reduces the role of the
implementing agency in transporting food from one place to another and
thus substantially reduces the cost of transferring food to
beneficiaries. Food stamp programs are also considered an alternative
to the general food subsidy or food rationing programs, which could
enhance the efficiency of the food distribution system. Some states in
India are currently experimenting with the food stamp programs (Dev et
al., 2004).
Comparing Food Subsidy
Programs
An
international comparison of the leakage in food subsidy programs
shows that the untargeted programs of food subsidies and food rations
in India, Pakistan, Brazil, and Egypt have a leakage rate of 50-80
percent to the non needy population. The self- targeting food rations
that use low quality food and tend to have a lower leakage rate of
10-20 percent. The targeted Food for Education programs, which provide
a free ration of food for children enrolled in school, have the lowest
level of leakage as shown in the case of Bangladesh (8-14 percent). The
supplementation schemes where food supplements are provided to the most
vulnerable group through targeting and through identifying
beneficiaries based on need have the lowest leakage levels of less than
3-10 percent. Thus, it is important to identify the cost effectiveness
of food transfer by comparing the food-based transfer programs to
cash-based programs as well as identifying the cost effectiveness of
various food-based transfer programs and focusing them towards the
particular objective of poverty reduction (Rogers and Coates, 2002).
Public Work Programs
as Social Safety Nets
Ravillion
(1999 and 2000) and Subbarao (1997) have identified the key
design features of a good public works program. They conclude that in
order to achieve a high level of effectiveness in term of poverty
reduction, the public works program should set a wage rate that is
equivalent to the existing wage rate in local communities. To attain a
wider impact and to attract a wide range of poor segments of society,
restrictions on the eligibility of participation should be avoided in
the public works program. However, if rationing is required it may be
achieved by targeting the public works program to poor areas. The
labour intensity of work involved in the public works program should be
high because the skill level of participants will be very low and
should be a highly labour- intensive activity. Furthermore, the public
works programs are successful where they are synchronized to the timing
of the slack agricultural seasons when a majority of the labour force
in rural areas is unemployed in farm activities. A major constraint
that reduces the participation of the poor and vulnerable population,
particularly women in the public works program, is the unavailability
of child care opportunities for the lactating mothers of young
children. Providing child care or preschool services can improve the
participation of women in the public works program. The transaction
costs to poor households who are willing to participate in the public
works program should be kept low since they may not have any resources
to begin with. The public works program should also include an asset
maintenance component in order to create sustainable impact on
development activities in the region (Subbarao, 2003).
Savings and
Insurance Programs as Safety Nets for Poverty Reduction
Formal and
informal savings programs and insurance schemes that
encourage poor households to save part of their earnings and insure
against systemic shocks are seen as an important element of
strengthening public safety nets. Mordoch and Sharma (2002) identify
various savings and insurance mechanisms that can strengthen public
safety nets. The informal coping mechanisms used by poor segments of
society could be through either ex-ante management of risks or ex-post
risk coping mechanisms. Furthermore, risk sharing among the poor could
be done through spreading risk spatially and by sharing risk through
inter temporal smoothing mechanisms. The risks that the poor segment of
society face should be identified before any safety net mechanism is
designed. Communities also respond to many types of risk by
transferring income from one household to another, through intra
household transfers of individual members of the households, and
through indigenous insurance mechanisms and community institutions that
help vulnerable groups within the communities.
The safety
net programs that attempt to strengthen the savings and
insurance mechanisms for poverty reduction should take into account the
nature and magnitude of household savings that are generated by
household members and the nature of diversification of assets between
various productive activities. Any policy response that addresses
poverty reduction through savings and insurance mechanisms should build
on the existing mechanisms of savings and insurance. Microfinance
schemes emerging in many parts of South Asia provide opportunities for
new types of savings and community participation in addition to micro
insurance schemes that could be helpful in insuring against the weather
related disasters.
Targeting for Poverty
Reduction
Targeting is
an issue that has received wide attention in designing
safety net programs for reducing leakage as well as increasing the
effectiveness of safety net programs in reaching the intended
beneficiaries. However, targeting comes with an associated set of costs
while it can increase the benefit of the programs and reduce the
inefficiencies associated with the leakage of the benefits to the non
intended population and the associated corruption in implementing
safety net programs. However, targeting requires adequate resources to
be spent on screening, delivery and monitoring of the targeted
population (Coady, 2004).
Concluding Remarks
In this
talk, I have presented a general review of existing safety net
programs in developing countries provides an opportunity for designing
and implementing effective safety net programs in South Asia, including
Sri Lanka. However, several possible roles for safety net programs in
very poor countries should be recognized. Safety net programs can fill
the poverty gap among very poor segments of society. They can also
bring the poor in countries where poverty is widespread to an
acceptable level of consumption of the basic needs in life. Safety net
programs can provide consumption smoothing over seasons and years when
natural disasters frequently affect vulnerable groups. Safety nets, in
addition to protecting poor segments of society from major shocks, can
insure them against risks and associated income losses, thereby
allowing the poor to take on riskier but high return productive
activities. Safety nets have also proven to be an effective method of
building human capital through interventions in the health and
education sectors providing school-based or health-based income
transfers.
The design
and implementation of food safety net programs in South Asia
require pilot programs that could be evaluated to identify ways of
avoiding the pitfalls of existing programs in order to save resources
and to better target programs to the intended beneficiaries. Finally,
safety net programs alone cannot reduce poverty in the long run.
Economic policies designed and implemented to provide a conducive
environment for broad based economic growth are also necessary to pull
a large segment of society from poverty in the long run.
Once again I
thank the officers of the Sri Lankan Agricultural
Economics Association for inviting me to present this keynote address.
I look forward to working with your association in the future.
References
Coady, David
P. (2004). Designing and Evaluating Social Safety Nets:
Theory, Evidence and Policy Conclusion. Discussion Paper 172,
Food Consumption and Nutrition Division. Washington D.C.: IFPRI.
Dev, M., C.
Ravi, Brinda Viswanathan, Ashok Gulati, and Sangamitra
Ramachander. (2004). Economic Liberalisation, Targeted Programmes and
Household Food Security : A Case Study of India, MTID Discussion Paper
No. 68. Washington D.C.: IFPRI.
Mordoch, J.
and M. Sharma. (2002). Strengthening Public Safety
Nets from the Bottom Up. Social Protection Discussion Paper Series No.
0227. Social Protection Unit, Human Development Network, Washington
D.C.:The World Bank.
Ravillion, M. (2000). Monitoring Targeting Performance When
Decentralized Allocations to the Poor are Unobserved. The World
Bank Economic Review. 331-45.
Ravillion, M. (1999). Appraising Workfair. The World Bank Research
Observer. 14(1):31-48.
Rogers, B. L. and J. Coates. (2002). Food Based Safety Nets and Related
Programs. Washington D.C.: The World Bank Institute.
Subbarao, K. (2003). Systemic Shocks and Social Protection: Role and
Effectiveness of Public Works Programs. Social Protection Discussion
Paper Series No. 0302, Social Protection Unit, Human Development
Network. Washington D.C.:The World Bank.
Subbarao, K. (1997). Public Works as an Anti-Poverty Program: An
Overview of Cross Country Experience. American Journal of Agricultural
Economics. 79:678-683.
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