Asia and the Pacific, which was already experiencing widespread economic inequalities, has been one of the hardest-hit regions socioeconomically during the COVID-19 pandemic due to population density, sanitation issues, remaining poverty, and large numbers of informal and migrant workers. Poverty levels have increased significantly by heavy labor market disruptions, pushing unemployment to unprecedented levels.
As the pandemic has underscored, social protection programs are critical to ensuring the livelihoods of billions of people, especially during times of crisis. A key challenge governments faced in providing adequate social protection programs during the COVID-19 pandemic was the rollout of emergency safety nets, which included identifying poor households, finding ways to securely make cash transfers, expanding benefits, and renewing program targeting as the pandemic continued to impact economic activity. More than 2 years after the outbreak of the virus, it is essential for governments to assess these challenges and look toward building an enabling environment for more resilient social protection programs.
Challenges of social protection programs during the pandemic
Throughout Asia and the Pacific, the informal economy comprises 1.3 billion people, or 68.2% of the employed population, with shares depending on the subregion ranging from 75.2% in South Asia to 87.8% in the Pacific (International Labour Organization 2018). Migrant workers and women make up a large portion of the informal economy and were severely impacted during the pandemic. However, due to job losses and exclusion from the current social protection programs, the “missing middle” also fell into poverty. The “missing middle”, which is easily overlooked, are people who were neither considered poor enough to be placed on emergency safety net programs nor part of the formal economy where there is coverage by social insurance contributory programs. This is where identifying poor households and vulnerable groups became one of the main challenges in efficiently rolling out emergency safety nets across developing Asia.
Once identified, the next step was for governments to distribute money quickly, securely, and with traceability to citizens who needed assistance. Some developing economies struggled with delivering money transfers since large percentages of the population were without access to mobile financial services or did not have a bank account at all. As the COVID-19 situation progressed and much of the labor force remained unemployed or underemployed, the need for social assistance also continued to grow. Additionally, governments across the region were already facing budget constraints but were pressured to expand coverage and provide additional support to other vulnerable groups impacted by the pandemic.
Addressing challenges and redesigning social protection programs
Moving forward, the rollout of emergency safety nets can be improved by better utilizing existing databases and resources to build agile registries, investing in financial technology and financial inclusion, expanding institutionalized social protection programs, and developing sustainable financial mechanisms for delivering these programs.
Utilizing existing databases and building agile registries
At the onset of the pandemic, it was critical for governments to quickly identify poor households and vulnerable groups impacted by the economic shutdown and provide assistance. Different types of strategies were implemented across the region to help governments identify these groups and expand coverage (Jilani 2020):
- Utilizing existing socioeconomic registries and poverty maps to identify poor households. This can be easily used to scale up assistance both horizontally by relaxing the eligibility threshold for receiving support, thereby including additional beneficiaries, and vertically by increasing amounts of existing beneficiaries. Given that data on household IDs, mobile phone numbers, and payment information are already readily available, disbursement can be quick and efficient without requiring the need for long and potentially costly registration drives, which are particularly risky during a health crisis.
- Partnering with the private sector provides governments access to reliable and high-frequency administrative data for targeting purposes, which can be a rich source of information to complement other sources of data already available. It can also help to facilitate money transfers, either through mobile wallets or direct electronic bank transfers.
- Affluence testing (identifying the rich via income tax files, bank records, or property registration, etc.) is far easier than identifying the poor. This option can immediately exclude the rich from receiving emergency assistance, leaving all others eligible. It also takes a more universal approach to targeting as opposed to one that aims to proxy the income of all poor households. By focusing on exclusion errors, affluence testing recognizes the dynamic nature of poverty.
- Partnering with local governments and reputable nongovernmental and civil society organizations to obtain vital information that can help identify and verify poor households. Prior to the pandemic, many local and state governments were already involved in pre-targeting censuses, poverty monitoring, and the delivery of social assistance. This will also help to further decentralize developing economies by giving some responsibility to local governments.
Improving digital infrastructure, fintech, and financial inclusion
Improving digital infrastructure and using technology is crucial for developing more complex and inclusive social protection programs. Moreover, compared to cash, mobile payments can be made more rapidly, be tracked, cut costs, and avoid leakages (Klapper 2017). Some countries, such as Bangladesh, found success in rolling out emergency safety nets and were able to tap into existing technology platforms and develop new innovative approaches to streamline the targeting, delivery, and verification of vulnerable groups and money transfers.
The Government of Bangladesh relied heavily on technology for targeting the “missing middle,” expanding coverage, and distributing funds through support from district and subdistrict administrators. They used a survey to develop QR code-based cards to link databases with the national identity card system and the Electronic Know Your Customer (e-KYC) system to create accounts for them. Prior to the pandemic, the Bangladesh Financial Intelligence Unit, under the Bangladesh Bank, set guidelines for the launch of the e-KYC system, designed to promote fintech, regulatory technology (RegTech), and financial inclusion and ensure cybersecurity. This helped in rapidly creating accounts so that money could be transferred to citizens quickly.
Expanding institutionalized social protection programs
Governments must establish institutionalized social protection programs in anticipation of future crises. This requires political will from government leaders and subsequent legislation. Institutionalizing social protection programs also requires sustainable financial resources to ensure the provision of adequate services to all those in need, which include cash transfers for poor households, public pensions, and public healthcare (Kwon 2021). Building databases and facilitating a digital transformation across sectors is important in developing agile social protection systems and critical in enabling the government to respond swiftly.
Sustainable financing for social protection programs
As mentioned, sustainable financing is needed to deliver institutionalized social protection programs. Asia and the Pacific spends 5.0% of gross domestic product (GDP) on social protection, compared to the global average of 6.3% of GDP (International Labour Organization 2016).
A study conducted by the Asian Development Bank estimates that by 2030, the social protection floor package is estimated to cost approximately 5.4% of GDP in lower-middle-income countries and approximately 12.4% of GDP in low-income countries (Van der Auwera, van der Meerendonk, and Kumar 2021). In low-income countries where fiscal budgets are already severely constrained, this 12.4% of GDP will need to rely on donor financing from international financial institutions. To support these countries’ efforts and achieve Sustainable Development Goal 1.3 (implementing nationally appropriate social protection systems and measures for all), a recent call for the establishment of a Global Social Protection Fund put forth by the Global Coalition for Social Protection Floors is under serious consideration.
As economies begin to recover from the impacts of the COVID-19 pandemic, now is the time for governments to redesign social protection programs, making them more resilient and inclusive so that no one is left behind when the next crisis hits.
References
International Labour Organization. 2016. Social Protection in Asia and the Pacific and the Arab States [1]. Bangkok: ILO.
International Labour Organization. 2018. Women and Men in the Informal Economy: A Statistical Picture [2]. Third Edition. Bangkok: ILO.
Jilani, A. 2020. Webinar Series on Casting Wider Safety Nets to Reach Asia’s Most Vulnerable: Real-Time Policy Recommendations During the COVID-19 Pandemic (Part One) [3]. 2 June. Tokyo: ADBI.
Klapper, L. 2017. How Digital Payments Can Benefit Entrepreneurs [4]. Bonn, Germany: IZA World of Labor.
Kwon, H. 2021. Virtual Policy Dialogue on Social Safety Nets Beyond the COVID-19 Crisis [5]. 14 July. Tokyo: ADBI.
Van der Auwera, M., A. van der Meerendonk, and A. R. Kumar. 2021. COVID-19 and Social Protection in Asia and the Pacific: Projected Costs for 2020-2030 [6]. Manila: ADB.