1. Making Services Work for Poor People
World Development Report 2004
(Green Cover Draft)
Shanta Devarajan

2. Messages Services are failing poor people. But they can work. How?
By empowering poor people to
Monitor and discipline service providers
Raise their voice in policymaking
By strengthening incentives for service providers to serve the poor
Too often, services are failing poor people—in access, quantity, quality.
But governments, citizens and donors can make them work—by putting poor people at the center of service provision—in three ways:
By empowering poor people:
To monitor and discipline service providers
Raise their voice in policymaking
By strengthening incentives facing service providers to serve the poor.

3. Why focus on human development? MDGs—Global Aggregates
Universal Primary Education
Eradicate Poverty & Hunger
1. We begin with the MDGs, and consider global aggregates only. For income poverty we are on track. Of course, this is because rapid growth in India and China, the two most populous countries, is reducing poverty at a rapid rate. This global aggregate doesn’t show that in Africa, we’re off track on the poverty goal too. [All these numbers come from the MDG website
2. But for the HD goals, we are seriously off track, even at the global level.

4. Why focus human development? MDGs—Global Aggregates
Promote Gender Equality
Reduce Child Mortality
Ratio of girls to boys in primary and secondary school (%)
Furthermore, we are off track because these aggregates are even worse for poor people.
Not only are we falling short on these human development goals, but we need to invest in people to accelerate progress towards them. Why? Because growth—while necessary and the most important determinant—is not enough.

5. Outcomes are worse for poor people Cumulative deaths per 1000 births
Poorest
quintile
Richest
Source: Analysis of Demographic and Health Survey data

6. Outcomes are worse for poor people Percent aged 15 to 19 completing each grade or higher
Poorest
quintile
Richest
Why are these outcomes worse for poor people? Why are we falling short of the health and education goals? Is it simply because there has not been enough economic growth?
Source: Analysis of Demographic and Health Survey data

7. Growth is not enough Percent living on $1/day
Primary completion rate (%)
Under-5 mortality rate
Target
2015 growth alone
East Asia 14 4
100 19 26
Europe and Central Asia 1 15
Latin America 8 95 17 30
Middle East and North Africa 96 25 41
South Asia 22 99 43 69
Africa 24 35 56 59
151
If we look at how close we will come to reaching the MDGs based on growth alone, we find that:
In five of the six regions we will reach the poverty goal. The only one we won’t is Africa.
But relying on growth alone, we reach the education goal in only two regions.
And we will hit the child mortality goal in none of the regions by relying on growth alone.
Clearly, we will need more resources to accelerate progress in these areas. The current estimates are that we will need around $40-60 billion per year in additional financial assistance—provided countries undertake the necessary policy and institutional reforms to make that aid productive.
This WDR is about those reforms. Without them, we will not accelerate progress towards the MDGs, because services too often are failing poor people.
How do we know?

8. How are services failing poor people?
Public spending usually benefits the rich, not the poor

9. Expenditure incidence
Health
Education
Percent to
richest quintile
poorest quintile
If you look at health and education spending—usually thought to be pro-poor. In Guinea, 48 percent of public spending on health goes to the richest quintile, while less than 8 percent goes to the poorest.
***This is one of the areas where we updated the data (most recently available, credible studies)
This anti-poor expenditure incidence is reflected in data about access to public facilities.
Source: Compiled from various sources

10. Access to primary school and health clinics in rural areas

11. Use of an improved drinking water source
Richest quintile
Poorest quintile
Average
And in access to drinking water, which is critical for infant mortality.
Source: Analysis of Demographic and Health Survey data

12. How are services failing poor people?
Public spending usually benefits the rich, not the poor
Money fails to reach frontline service providers
In Uganda, only 13% of non-wage recurrent spending on primary education reached primary schools
If we can reallocate public spending towards primary education and health, there is a second problem: Money fails to reach the frontline service provider.

13. How are services failing poor people?
Public spending benefits the rich more than the poor
Money fails to reach frontline service providers
Service quality is low for poor people
And even if the money reaches the frontline provider, the incentives for delivering good quality services are weak.
The clearest manifestation of this is the high levels of teacher and health-worker absenteeism we find in low-income countries.

14. Examples of low service quality
Bangladesh: Absenteeism rates for doctors in primary health care centers: 74%.
Zimbabwe: 13% of respondents gave as a reason for not delivering babies in public facilities that “nurses hit mothers during delivery”.
Guinea: 70% of government drugs disappeared.
Costa Rica: absenteeism rate is 30% in public health facilities.
But the news is not all bad…There are many success stories in service delivery. The question is how they can be scaled up.

15. But services can work
Infant mortality and malnutrition reduced in Ceará, Brazil
Citywide services in Johannesburg, South Africa reformed
Cash transfers to households in Mexico increased enrollment, lowered illness cases
Citizen report cards in Bangalore, India
More money reached primary schools in Uganda
A program in Ceara, by recruiting, training and deploying community health workers, and introducing the Ceara Municipal Seal of Approval award for “child-friendly” municipalities, reduced infant mortality from 100 per 1000 in 1980 to 27 per 1000 in 2001.
In 1997, Johannesburg declared bankruptcy. They rationalized the many services—sold some (airport, produce market, etc.), contracted out waste management, sanitation, electricity, etc., and corporatized the zoo. By 2000, the city was solvent and services improved.
PROGRESA , covering 40 percent of rural families in Mexico, lowered illness rates by 20 percent among children, and increased enrollment rates by 8 percentage points for girls, 5 for boys. Program is now being scaled up to cover one in five households.
An NGO introduced citizen report cards in Bangalore, which were widely publicized in the press, leading to a response from the state government. These cards have now been launched all over India, and in Ukraine, Philippines, Vietnam.
The discovery that only 13 percent of the money reached primary schools led to a campaign that tracked the flow of funds monthly in the newspapers, accompanied by public announcements by Museveni, all of which helped double enrollments in Uganda (from 3.4 million in 1996 to 6.9 million in 2001).

16. A framework of relationships of accountability
The framework is very simple. Think about why there is no service delivery problem in shoes or vegetables or other competitive market transactions. The reason is that there is a clear system of accountability between the customer and the provider. The customer provides money, in return for the service. The customer can tell whether or not he has received the service. If he doesn’t like the service, he has several options—he can go elsewhere for his business next time (there is no repeat business), or he can seek legal recourse. And the point is that the provider knows this, and behaves accordingly.
In the case of most services, society has decided not to use the traditional market mechanism to provide it. In this case, the customer—or client—can exert power over the provider (or hold the provider accountable) through indirect means:

17. A framework of relationships of accountability
We call this the long route of accountability.
The client influences the policymaker (politician or bureaucrat), and the policymaker has to exert power over the provider. This “long route” is where services break down. But we can also strengthen them by strengthening the two relationships.

18. A framework of relationships of accountability
Let’s start with the citizen-policymaker link. Citizens can exert power over policymakers through elections, and through other means of expressing their “voice.” But even in democratic societies, the provision of (free or subsidized) public services becomes the currency of political patronage and clientelism. Politicians don’t locate pro-poor programs where poor people live necessarily; they locate it where people who vote for them live.

19. Citizen-Policymaker
Political economy of public services

20. Mexico’s PRONASOL,
Large social assistance program (1.2% of GDP)
Water, sanitation, electricity and education construction to poor communities
Limited poverty impact
Reduced poverty by 3%
If better targeted, could have reduced it by 64%
In the late 1980s, Mexico introduced a social assistance program aimed at delivering services to the poor. But the program had a limited impact on poverty. Why? The bureaucrats chose to reward those municipalities that voted for the majority party, which was PRI.

21. average per capita PRONASOL expenditure according to party in muncipal
Mexico :
average per capita PRONASOL expenditure according to party in muncipal
government 50
100
150
200
250
300
350
400
450
1989
1990
1991
1992
1993
1994
Real pesos of 1995 per capita
PRI
Institutional Revolutionary Party
PAN
National Action Party
PRD
Party of the Democratic Revolution
Other

22. A framework This is a problem for two reasons:
The provider may not have incentives to provide the service. His pay is unaffected by whether or not he provides the service. Absenteeism rates in schools and clinics is an example of this.
One way to improve upon this is to make the provider’s pay depend on the service—as in a contract. A good example is from Cambodia.

23. Policymaker-Provider: Contracting NGOs in Cambodia
Contracting out (CO): NGO can hire and fire, transfer staff, set wages, procure drugs, etc.
Contracting in (CI): NGO manages district, cannot hire and fire (but can transfer staff), $0.25 per capita budget supplement
Control/Comparison (CC): Services run by government
12 districts randomly assigned to CC, CI or CO
In post-civil-war Cambodia, the government needed to get a health program going in a hurry. So they decided to experiment with three different types of arrangements, two of which used NGOs.
In fact, they used two different types of contracts, namely contracting out—where the NGO can use whichever staff they desire; and contracting in, where they NGO had to use existing staff, but could manage them as they wished. Finally, and importantly, they had a control group where the services were run by the government.
Before showing the results of this exercise, I want to point out that the Cambodian government decided to randomly assign districts to the different arrangements. This was an explicit case where the government wanted to be able to learn from the experiment in a systematic way. This is an example of a more general theme that is recurring in the WDR. If we are to scale up, we need to be able to learn from these service-delivery innovations in a systematic way.

24. Utilization of Facilities by Poor People Sick in last month, %
The results are quite dramatic.
But contracting out is not always feasible. For one thing, you cannot specify exactly everything in a contract. You can’t specify exactly what teachers teach in the classroom, or what the doctor does in the clinic. In fact, it could be unproductive to do so (as when Parisian taxi drivers bring traffic to a halt in the French capital by following the rules exactly).
In this case, you could choose providers who will have an incentive to serve the poor. Faith-based NGOs in Uganda work for 28% lower salary, but provide better quality health services than the public clinics.
But the bottom line is that policymakers can best get the incentives right when they can monitor the service provider’s actions and results.
When they can’t monitor, however, we should remember that the client can often be the monitor. So we may want to return to the short route of accountability.

25. A framework
Finally, we turn to the relationship we started with, the “short route”—between client and provider. For even though these are non-market transactions, there may be ways to increase the client’s power over the provider by giving him increased choice and the chance to participate.

26. Client-Provider
Reveal demand and strengthen accountability by:
Choice

27. FSSAP Bangladesh Criteria:
Attendance in school
Passing grade
Unmarried
Girls to receive scholarship deposited to account set up in her name
School to receive support based on # of girls
This program has not been evaluated yet, but initial results are impressive. Secondary enrolment for girls is rising faster than for boys in Bangladesh. Single-sex schools are cropping up. And other schools are building separate latrines for girls and boys.
The FSSAP shows two things. First, that clients are heterogeneous. [Just like the poor are heterogeneous]. Girls have different preferences—for single-sex schools, separate latrines. Giving clients are choice enables those preferences to get revealed. Second, giving clients a choice disciplines the provider to provide the service.
What this tells us is that no single service delivery mechanism—privatization, central-government provision—will work in all circumstances. But does anything go? No, in fact, our framework tells us that certain arrangements will work in certain circumstances. And what those circumstances are.
While no one size fits all, perhaps eight sizes do.

28. Client-Provider Strengthen accountability by: Choice
Participation: clients as monitors

29. Client-Provider: EDUCO Program in El Salvador
Parents’ associations (ACEs)
Hire and fire teachers
Visit schools on regular basis
Contract with Ministry of Education to deliver primary education

30. EDUCO promoted parental involvement…
EDUCO promoted parental involvement… …which boosted student performance (% increase in test scores per visit)

31. EDUCO Effect: School days missed due to teacher absence
Avg # of days
missed: 1.34
Despite the much higher levels of teacher experience in traditional schools, they are pad the same.
This reflects the fact that on afverage, for the same expereince, EDUCO teachers are paid more -- but they have less tenure

32. What not to do Leave it to the private sector
Simply increase public spending

33. Increasing public spending is not enough

34. Increasing public spending is not enough

35. Similar changes in public spending can be associated with vastly different changes in outcomes
What this means is that countries that spend the same amount could have vastly different outcomes (e.g., Ethiopia and Malawi).

36. and vastly different changes in spending can be associated with similar changes in outcomes.
Conversely, countries with different spending patterns have similar outcomes.

37. What not to do Leave it to the private sector
Simply increase public spending
Apply technocratic solutions

38. Eight sizes fit all?
Difficult to monitor
Easy to monitor

39. Eight sizes fit all? Difficult to monitor Easy to monitor
Heterogeneous clients
Homogeneous clients
Emphasizes the heterogeneity of poor people (disabled, women)

40. Eight sizes fit all? Difficult to monitor Easy to monitor
Heterogeneous clients
Pro-rich politics
Pro-poor politics
Homogeneous clients
And the politics

41. Eight sizes fit all? Difficult to monitor Easy to monitor
Heterogeneous clients
Pro-rich politics
Pro-poor politics
Homogeneous clients
Government provision or contracting
Let’s consider two polar opposite. If the service is easy to monitor (e.g., vaccinations), the government is pro-poor (such as Cuba or Costa Rica or Sri Lanka), and the clients are relatively homogeneous (such as Norway), then central-government provision will work (as will any other arrangement).
But if the service is difficult to monitor, such as school teaching, the clients are heterogeneous, and there is evidence of political patronage, such as education in India, then demand-side interventions (such as FSSAP in Bangladesh) coupled with increasing the power of citizens to monitor the provider, such as EDUCO, may yield better results.

42. Eight sizes fit all? Difficult to monitor Easy to monitor
Heterogeneous clients
Pro-rich politics
Pro-poor politics
Homogeneous clients
Central-government provision
Government provision or contracting
Let’s consider two polar opposite. If the service is easy to monitor (e.g., vaccinations), the government is pro-poor (such as Cuba or Costa Rica or Sri Lanka), and the clients are relatively homogeneous (such as Norway), then central-government provision will work (as will any other arrangement).
But if the service is hard to monitor (such as student learning), then with homogeneous population and pro-poor politics, you may want to have government provision. This is the situation in Scandinavia.
Example of homogeneous becoming heterogeneous—immigrants in Sweden.
But if the service is difficult to monitor, such as school teaching, the clients are heterogeneous, and there is evidence of political patronage, such as education in India, then demand-side interventions (such as FSSAP in Bangladesh) coupled with increasing the power of citizens to monitor the provider, such as EDUCO, may yield better results.

43. Eight sizes fit all? Difficult to monitor Easy to monitor
Heterogeneous clients
Pro-rich politics
Demand-side subsidies, co-payments by households
Pro-poor politics
Homogeneous clients
Central-government provision
Government provision or contracting
But if the service is difficult to monitor, such as school teaching, the clients are heterogeneous, and there is evidence of political patronage, such as education in India, then demand-side interventions (such as FSSAP in Bangladesh) coupled with increasing the power of citizens to monitor the provider, such as EDUCO, may yield better results.
So what does this imply for action? We took your advice and made some bold claims in the report. I’d like to share some of those. Without bold actions, we won’t have scaling up.

44. What we can do to scale up
Tailor service delivery arrangements to service characteristics and country circumstances
Expand information
***Bold steps.
Information is important for another reason. We can’t get by with one innovation here, another one there.

45. What we can do to scale up
Donors
Harmonize
Integrate aid in recipient’s budget system
Finance impact evaluation of service delivery innovations ($300 million a year)
Bold steps.
Donors should strengthen, not weaken, the accountability relationships in the country. In particular, the policymaker-provider relationship can be undermined by fragmentation, and project implementation units.
Information is important for another reason. We can’t get by with one innovation here, another one there.