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Protecting the vulnerable

Bangladesh has been growing rapidly and overall welfare has improved across the board, but safety nets are necessary for those who are still below the poverty line. The challenge lies in expanding coverage of the extreme poor and reducing leakages.

Xian Zhu and Qaiser Khan
Bangladesh has made considerable progress in expanding and refining its wide range of social safety net programs over the past three decades. Safety’ nets are important because they not only reduce poverty' and inequality’ but also help poor households invest in their children's education and health. In Bangladesh, programs such as the Vulnerable Group Feeding (VGF) have been swiftly scaled up in the aftermath of disasters for close to two decades. Immediately after Sidr. the program was expanded to cover almost all affected households in the disaster zone.
One of the largest conditional cash transfers in rural areas, the Female Secondary School Stipends Program, has greatly expanded girls' access to education. The program was designed with innovations in integrating government and NGO programs, and was so successful that it served as an inspiration to other countries facing similar challenges.
From a public policy perspective, robust safety nets and safety’ ladders allows governments to make difficult changes in trade and industrial policy while assuring that vulnerable groups are protected. Well designed and well-targeted safety nets can be fiscally cost-effective while protecting and. at the same time, helping the poor to get out of poverty.
There are some concerns that safety nets can be a disincentive to work, but evidence shows that this only happens in high-income countries with high mar ginal tax rate on earnings. There is little evidence of this in low or middle-income countries because benefits are low and taxation does not affect these groups.
Bangladesh has been growing rapidly and overall welfare has improved across the board, but safety nets are necessary for those who are still below the poverty line. The challenge lies in expanding coverage of the extreme poor and reducing leakages.
The urban poor have no access to safety nets and coverage is partial among the rural poor, for example, the bottom 10% of the rural population are only partially covered and targeting could be improved significantly. While the majority of beneficiaries of safety nets are from the bottom 20% of the population, those who do not need them receive some benefits.
There are many ways to focus resources on the poor and reduce leakage to the better-off. Investments in geographical targeting arc crucial, and the newly released Bangladesh Poverty Map can be used to direct resources to particularly vulnerable areas. Another method is by employing a proxy means test, which basically uses observable variables --such as quality of housing, household demographics, and other easily identifiable variables - to target benefits to the poor. This proxy means test can be combined with a good appeals process and community verification to assure benefits reach the poor and leakage to the nonpoor is minimal.
Technology can also help increase efficiency and reduce leakages of safety net programs. Bangladesh has come a long way in this regard and is already using digital technology to administer and deliver safety nets. The country's new digitalised national voter data offers an opportunity to move towards the use of smart cards, which can store all beneficiarytransactions.
Combined with new mobile phone banking technology, smart cards can sharply reduce administrative costs and the potential for irregularities and error. Funds could be sent directly to eligible recipients through mobile banking, and they could pick up the funds at local mobile shops using their digital IDs with biometric information.
To expand coverage to those who need the most, Bangladesh has to increase the efficiency while reducing the cost of its safety net programs. For instance, food based safety net programs have evolved to replace the public food distribution system and many were funded by food aid donors.
While food based safety nets in Bangladesh have lower leakage than those in neighbouring countries, the leakage, administrative and storage costs are higher than cash programs. So, one option would be to move towards more cost-effective cash-based safety nets, except for disaster response or for nutrition programs.
A growing challenge is that of the under-coverage of safety nets among the urban poor at a time of rapid urbanisation in Bangladesh. More than half the population is likely to be living in urban areas in less than a decade, and the bulk of thorn in the large metro cities. Studies show that children in poor rural areas now have more access to schooling and future opportunities, whereas poor children in large metropolitan areas are increasingly being left out.
Safety nets targeting the urban poor must, therefore, be an urgent priority. Global experience shows that conditional cash transfers in urban settings will be particularly useful in increasing access to schools. In some countries, participation in safety nets for working age people requires that they undergo mandatory job related training.
Another emerging challenge in Bangladesh is to provide affordable pension schemes for the country' ageing population. Social insurance coverage can be expanded in Bangladesh using the country's unique advantage of a large and vibrant micro-finance network. Grameen Bank already provides pension savings plans and health insurance to its seven million poor member households.
The government can help expand this coverage by establishing the appropriate regulatory framework. Furthermore, the government can provide the right incentives to banks and insurance companies to offer pensions or social insurance to formal sector workers who currently have no access to these services, and give some fiscal incentives for people to take advantage of these services.
Health shocks are a major challenge and driver of poverty in much of the world, and Bangladesh is no exception. In India, the government is launching a national health insurance program with technical support from the World Bank. This program will use biometric data embedded smart cards to identify those enrolled in the program, and members can seek care at any participating health service provider.
The government subsidises premiums for the poor while others pay the full amount. Service providers are required to provide the same pre-defined services to all subscribers and do not know the source of the premium — this avoids the problem of "programs for the poor becoming poor programs."
A final challenge lies in developing a strategic vision for safety nets within government and, most crucially, having a senior-level safety nets champion who can drive this agenda forward, as it involves significant inter-ministerial and inter-agency coordination.
Xian Zhu is the World Bank Country Director for Bangladesh and Qaiser Khan is Lead Social Protection Specialist and a core-member of the World Bank's Global Expert Team on Safety Nets