Introducing basic social protection in low-income countries: lessons from existing programmes

This paper reviews tax-financed social assistance through transfers in kind or cash in low-income countries. Such assistance is often constrained by path dependence at a micro level due to fragmentation of programmes and the presence of attached constituencies. Important factors for the sustainability of social protection programmes are:

• political support or at least the absence of significant opposition –often induced by exogenous factors such as the intervention of donors and NGOs
• cross-national policy transfers led by donors and regional bodies
• domestic policy learning
• perceived opposition to government policies or social unrest urging policy makers to counteract
  

Social protection can contribute to the development process by:

• reducing poverty and associated costs
• helping overcome inefficiencies associated with missing or imperfect markets
• facilitating investment in human capital
• lifting cash and credit constraints
• protecting people and assets against sudden or random hazards
  

However, there is only limited evidence regarding the quality and strength of these effects. Local economy multiplier effects have not been proved, but there is also no sign of rising prices induced by social assistance. This is likely to be due to the programmes' very low level of coverage.

Financing is a key constraint on the development of social protection. Most programmes are financed by donors, which however, exhibit a preference for short-term aid. This leaves national governments in low-income countries with worries about medium and long term fiscal liabilities and strategic positioning vis-à-vis donors. The medium and long run sustainability of social protection programmes will therefore rely on the tax collection capacity of domestic governments.