In the first of this two-part blog, Ludovico Carraro, Calum McLean and Simon Little – experts from the FCDO- and GDC-funded SPACE initiative – set out some of the core challenges in setting cash transfer values that meet needs effectively, and share their insights in managing some of the underlying complexities. These include determining what constitutes sustainable adequacy; managing the trade-offs between adequacy and coverage in various contexts; and identifying what is good enough when low administrative capacity means methods for calculating values must be simple.
The setting of transfer values is a fundamental issue for all cash-based programmes – whether for humanitarian assistance or social assistance within a social protection system. It is a topic that has come up a lot through our work on SPACE – supporting donors, governments and delivery partners to think through their options in the cash response to COVID-19. So, we decided to provide some insights from our own work, and others, in this blog.
In setting the transfer value, we always face a fundamental trade-off between coverage and adequacy (SPACE, 2020). In short, providing some level of assistance to a large number of people (coverage) at the risk of low impact, versus a higher value and impact going to fewer people. However, it is crucial to realise that adequacy is not reached with a standard amount, it depends on the objective of the programme as well as personal and environmental conditions of the recipient.
For example, humanitarian assistance is primarily intended to save lives and reduce unnecessary suffering through meeting peoples’ basic needs (food, shelter, WASH, health, nutrition etc.) in contexts where normal livelihoods have been dramatically disrupted. On the other hand, social assistance can support poor households by complementing other income sources (for instance, through public works programmes, child grants, or pensions). In each of these settings, the calculation of an adequate amount would need to be tailored to the specific objective and circumstances faced.
Transfer values in relation to the COVID-19 pandemic: managing the coverage/adequacy trade-offs
Data from the review conducted by Gentilini et al (World Bank, 2020) shows that average transfers in response to COVID-19 are about 30% of the average monthly GDP per capita, and that their value almost doubled compared to the pre-COVID-19 level of transfers. Therefore, one could conclude that the overall direction of the response recognised the greater need, due to the halt of many economic activities, and increased the level of support. However, a closer look reveals that the measures have been of short duration (just above three months on average), and it is unclear whether this addressed the actual requirement of support in relation to the length of the crisis and recession.
In practice, many countries battled with the trade-offs between adequacy and coverage, not only because of budget availability, but also because of limitations in administrative systems, especially in the identification and selection of people in need of support. For example, while Sri Lanka was able to reach a large share of the population with cash benefits (ILO and IBC, 2020) the benefit only constitutes seven per cent of monthly expenditure for an average household, and only one fifth for the poorest households. Globally, coverage and increased level of support did not always align with the actual needs of groups hit by the COVID-19-induced recession. This is highlighted in analytical assessments produced by SPACE – see Understanding the Economic Impacts of COVID-19 in Low- and Middle-Income Countries: Who, Where, How, and When? (SPACE, 2020) and Social Protection and Humanitarian Cash and Food Responses to COVID-19: Needs, Coverage, and Gaps (SPACE, 2020).
The implication is that there needs to be a thorough examination of the adequacy of transfers to determine the extent to which transfers enabled people to offset the economic shock triggered by COVID-19 and prevent any further slide into poverty. This also needs to take into consideration the different types of impacts faced by individuals and households (Holmes, et al., SPACE, 2020). For example, the crisis increasing women’s time on care and domestic responsibilities, the additional financial needs of persons with disability, and the disadvantages that female-headed households may face in accessing markets and services, despite seeming better off by per-capita calculations. In many countries, the setting of pre-COVID level of social assistance was inadequate (ILO, 2017) and very often transfers lost their real purchasing value since they were not updated to keep pace with inflation (for example in Zambia the value of the Social Cash Transfer has not changed since 2017 and, in Mongolia, the value of child benefit lost more than 50% of its purchasing power).
In response to the COVID-19 crisis, Mongolia increased the value of child benefits fivefold, and with poverty strongly correlated to the number of children, the measure appears to have countered – at least in the short-term – the negative economic effect of the pandemic. On the other hand, Sierra Leone struggled to respond at scale with limited additional support translating into limited coverage. This is expected to lead to a significant increase in poverty – a scenario we are seeing in many other countries too.
Setting effective social assistance transfer values: what does it take?
The setting of transfer values for social assistance programmes – at either individual or household level – should be based on an existing understanding of poverty and vulnerability in the country which also takes into account gender inequalities and intersecting risks. In fact, the value of the transfer should be calculated with the aim of protecting the household economy, complementing other income sources, reducing social risks and preventing already vulnerable people from slipping further into poverty. This is in contrast to the humanitarian objectives of saving lives through meeting basic needs (see Part 2 of this blog here).
In practice, the setting of transfer values should look at:
- The country minimum income standards, such as the national poverty line or minimum wage (updated to current prices), and the gap between household income and such values among different groups of the eligible population. The fundamental aim of the transfer is to attenuate – or overcome – this gap. Such calculation could be based on relevant representative surveys, or rapid qualitative assessments.
- The expected duration of support. This depends on the evolution of needs over time. Support might be temporary to help people overcome the effect of a short shock, or more sustained if the intervention aims at addressing more chronic and persistent difficulties. In the COVID-19 response, many countries have been extending short-lived transfers acknowledging the ongoing recession.
- Market prices - to maintain purchasing power and adjust to inflation.
- Household size and composition (e.g. additional needs of people with disabilities, number of children, number of working-age adults etc.).
- Additional urgent needs created by the crisis – such as disadvantages faced by women, people with disability, adolescents, and children.
- The capacity of programmes’ administrative systems to manage the complexities of accurate needs assessment and transfer value calculation. For example, varying transfer levels based on individual or household characteristics requires the capacity to deal with the extra complexity this entails.
Humanitarian vs social protection transfer values
As discussed above, for the most part, social assistance transfers tend to be lower than those provided by humanitarian responses due to the predictable nature of the transfer, different objectives and timeframes. However, when social protection programmes are used to respond to shocks, such as COVID-19, the objectives are much more aligned with those of humanitarian responses and so their value should be reconciled. The importance of aligning humanitarian cash transfers with existing social protection mechanisms is therefore something the SPACE team has been advising in all our engagement with practitioners at a country level. For a more in-depth discussion of this see Part 2 of this blog.
List of References
Barca, V. et al. (2020). SPACE Strategy Decision Matrix, SPACE, Accessible: https://socialprotection.org/discover/publications/space-strategy-decision-matrix
Gentilini, U. et al. (2020). Social Protection and Jobs Responses to COVID-19: A Real-Time Review of Country Measures, Washington, D.C.: World Bank Group, Accessible: https://documents.worldbank.org/en/publication/documents-reports/documentdetail/590531592231143435/social-protection-and-jobs-responses-to-covid-19-a-real-time-review-of-country-measures-june-12-2020
Holmes, R. et al. (2020). Gender and Inclusion in social protection responses during COVID-19, SPACE, Accessible: https://socialprotection.org/sites/default/files/publications_files/SPACE%20Gender%20and%20Inclusion_20052020v1.pdf
International Labour Organization (ILO) (2017). World Social Protection Report 2017-19: Universal social protection to achieve the Sustainable Development Goals, Geneva: International Labour Office, Accessible: https://www.ilo.org/global/publications/books/WCMS_604882/lang--en/index.htm
International Labour Organization (ILO) and United Nations Issue-based Coalition (IBC) for Inclusion and Empowerment (2020). Social Protection Responses to COVID-19 in Asia and the Pacific: The story so far and future considerations, Accessible: https://www.ilo.org/asia/publications/WCMS_753550/lang--en/index.htm
Wylde, E. (2020) Social Protection and Humanitarian Cash and Food Responses to Covid-19: Needs, Coverage, and Gaps, SPACE, Accessible: https://socialprotection.org/discover/publications/space-social-protection-and-humanitarian-cash-and-food-responses-covid-19
Wylde, E. et al. (2020). Understanding the economic impacts of Covid-19 in low- and middle-income countries: Who, where, how, and when?, SPACE, Accessible: https://socialprotection.org/discover/publications/space-understanding-economic-impacts-covid-19-low-and-middle-income-countries
This blog is part of the blog series ‘Social Protection Approaches to COVID-19’ from Social Protection Approaches to COVID-19: Expert Advice (SPACE). It is funded by the UK Foreign, Commonwealth and Development Office (FCDO) and German Development Cooperation (GDC). SPACE is managed by DAI Europe Ltd contracted through the FCDO framework agreement EACDS Lot B service ‘Strengthening resilience and response to crises’, and the technical advice is provided by independent consultants contracted by FCDO, GIZ and other partners.