Seminar How can the abolition of user fees and the provision of in-kind support impact on child...

Seminar “How can the abolition of user fees and the provision of in-kind support impact on child poverty?”,Lecture Series “Social Protection: Making Child Poverty History?” London, 15 June 2005

Christina Behrendt Social Security DepartmentInternational Labour Office, Geneva

Poverty reduction through transfers in cash and in kind: Contrasts and complementarity

15 June 2005 ILO SOCFAS 2

Outline

1. Introduction2. Transfers in cash and in kind 3. Affordability 4. Effects on child poverty5. Conclusions


1. Introduction

Social protection is increasingly recognized as an effective way of reducing poverty

Children as a particularly vulnerable group

Right to social security Form of provision: cash or in-

kind?


2. Cash vs. in-kind transfers

Mode of provision dependent on benefit to be provided

What is the role for for cash and in-kind benefits in low-income countries?

Encouraging examples


2.1 Arguments in favour of in-kind transfers Targeting Control over use of transfer Less inflationary risks Less security risks Less prone to corruption and

diversion


2.2 Arguments in favour of cash transfers Choice (recipients’ priorities) Cost-efficient (both administration

costs and for recipients) Stimulation of local markets Multiplier effects Less prone to corruption if regular

and transparent benefits


3. Affordability

Could low income countries afford a minimum social protection package?

To what extent could such a package be financed out of domestic resources?

How much international assistance would be needed over the next years?


3.1 Minimum Social ProtectionPriority basic social protection

package: Universal access to essential

health care Basic education (primary

education) Minimum income security

• Basic old age and invalidity pensions• Cash benefits to children (notably

orphans)


Preliminary Results for Tanzania: Scenario I – Expenditure

Basic social protection expenditure in percent of GDP

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2005 2009 2013 2017 2021 2025 2029 2033

Universal pensions Child benefit Basic education

Basic health care Administrative expenditure


Preliminary Results for Tanzania: Scenario I – Financing

Option 1 (based on 2003 fixed proportion of projected govt. expenditure)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2005 2009 2013 2017 2021 2025 2029 2033

Required External financing in % of GDPGovernment financing in % of GDP


Poverty reducing effects of a universal old-age pension

Simulated impact of a universal old age pension of half the $1/day poverty line in Tanzania (based on basic needs poverty line)

40.8 44.140.2

58.1

47.6

38.642.3

24.7

46.6

3.5

0

10

20

30

40

50

60

70

All individuals Children (0-14) Elderly (65+) Individuals livingin three-

generationhouseholds

Individuals livingin missing-generationhouseholds

Pov

erty

rat

e (h

ead-

coun

t)

Actual poverty rate

Simulated poverty rate


Poverty reducing effects of a child benefit to school-age children

Simulated impact of a benefit to school age children of one quarter of the $1/day poverty line in Tanzania (based on basic needs poverty line)

40.8 44.140.2

58.1

47.6

30.8 31.9 32.0

48.5

8.0

0

10

20

30

40

50

60

70




Po

vert

y ra

te (

he

ad

-co

un

t)

Actual poverty rate



Poverty reducing effects of an old age pension and a child benefit

Simulated impact of a universal old age pension and a benefit to school age children in Tanzania (based on basic needs poverty line)

40.8 44.140.2

58.1

47.6

28.9 30.4

19.8

38.2

0.50

10

20

30

40

50

60

70




Po

vert

y ra

te (

he

ad

-co

un

t)

Actual poverty rate



Poverty reducing effects of a targeted cash transfer to the most vulnerable

Simulated impact of a targeted cash transfer to the most vulnerable of $6 per month in Tanzania (based on basic needs poverty line)

40.8 44.140.2

58.1

47.638.8 42

33.4

56.4

5.4

0

10

20

30

40

50

60

70




Po

vert

y ra

te (

he

ad

-co

un

t)

Actual poverty rate



Conclusions

Both in-kind and cash transfers can play a strong role in broader social protection strategies

Basic level of social protection is affordable to some extent also in low income countries, yet some transitional extrernal support might be necessary

Pronounced direct effect on poverty reduction for children and expected positive long-term effects on social development

Seminar How can the abolition of user fees and the provision of in-kind support impact on child...

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