Reducing vulnerability and enhancing social protection

Reducing vulnerability and enhancing social protection Safety nets are crucial in improving growth: Create assets Protect assets Improve household allocation of resources Protect individuals who are unlikely to benefit in the short term from reforms Reduce inequality Conditional cash transfers: Conditional cash transfers have proven success in reducing poverty in the short run (through cash that is given) and in the long run (through the human capital formation that it encourages) However they are not a magic bullet – they do not work in every country and they are not sufficient. Other investments such as investments in schooling may be needed.

Reducing vulnerability and enhancing social protection Social security: useful in targeting the young, unemployed and the elderly. In South Africa a cash transfer program (unconditional) for parents with young children and the state old age grant have had large impacts on reducing poverty. There are challenges in implementing these programs: administrative efficiency and good governance. Most importantly cooperation across actors as it is not the sole responsibility of the government In OECD countries social security has reduced poverty greatly (from 16% to 70%). Can low income countries learn from OECD countries? A limited yes as there are differences between OECD countries and low-income countries. Need to delink social security from labour market status, increase financing from general taxation, create new institutions, take important complimentary measures. Health insurance: Per capita health insurance is an increasing function of GDP / capita, and aid increases the amount spent on health care very little. Out of pocket expenditures by individuals for health care decreases with income We need to use the amount that individuals are paying and are willing to pay privately to develop health insurance for the poorest The provision of health care has to be contracted based on performance. Again, complementary investments in health care are crucial.

Reducing vulnerability and enhancing social protection Insurance There are means by which the poor – even in the absence of formal insurance – insure themselves. Often through mutual insurance groups. These groups do not insure perfectly, but can be used to develop more comprehensive insurance. Also need to understand that one product will not fit all problems – different types of risk have different challenges. Information is a big problem for crop insurance and here weather based indexes can help. Insurance often crowds out credit, need to think about integrating credit and insurance Ultimately a mix of all approaches is needed. The goal is to ensure people do not find themselves constrained in making health, education and production decisions and all these approaches have their role.