Financing social protection

No extension of social protection without a sustainable social contract

Social protection helps communities, households and individuals to protect themselves against contingencies threatening their living standard. Financing has emerged as a key constraint on the extension of social protection in developing countries. Given the importance of ‘out of pocket’ financing and external sources, developing countries should raise the share of government financing and increase the overall spending on social protection. However, the options for low-income countries to expand social protection are very limited. There are trade-offs between the availability of insurance and precautionary saving and ultimately, the extension of social protection requires the development of a politically sustainable social contract.

International organisations also finance social protection in developing countries and they do so through structural adjustment finance supporting policy reforms, general budget support and project aid. Budget support allows identification of linkages between different sectors and providers more easily and is more flexible in responding to changes in the pattern of risks. As social protection interventions are most effective in the medium and long term, establishing partnerships between governments, international donors and the local civil society will be important so that donors may rely on the government to gradually take over the financing.

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Financing social protection