Social assistance is a crucial component of social welfare and can help alleviate poverty and inequality. But poor people are being left behind by the current system due to lack of effective targeting by lower-income countries. To tackle this issue, we offer the following policy recommendations:
- Explore social policy designs that reduce exclusion errors, such as self-evaluation, opt-in or universal schemes. In places where cash grants are not reaching the poorest and the costs of universalisation are not feasible, self-targeting mechanisms coupled with small barriers to dissuade the rich from accessing the grant can help overcome mistargeting. For example, a study in Indonesia (Alatas et al., 2016) demonstrated that introducing a small application cost to a transfer programme substantially improved targeting through self-selection.
- Increase and improve the efficiency of funding for social assistance programmes. Apart from increasing social assistance spend, which is relatively low in developing countries (1.5% of GDP) when compared to advanced economies (15% of GDP), low-income countries should explore other implementation channels such as digital transfers to reduce administrative costs. A study in Niger (Aker et al., 2016) demonstrated that where infrastructure is available, mobile payments can reduce transaction costs and increase diet diversity making it a simple and low-cost way to deliver transfers.
- Use more data to design and implement effective policy. Different social assistance programmes have varying effects on poverty likely due to differences in targeting, coverage, and transfer amount. Governments should collate and harness data from existing programmes with effective targeting mechanisms for other schemes, and to understand the profile of the excluded population.
- In times of crisis, do not limit relief efforts to existing programmes. In situations such as during the COVID-19 pandemic, the efficacy of existing social transfers to soften the blow of economic shocks is limited in regions such as sub-Saharan Africa. Please see the IGC blog COVID-19 underscores need to overhaul social policies across Africa for COVID-19 specific recommendations based on this analysis.