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A safety net for those who need it

  • Published at 08:00 pm August 27th, 2017
A safety net for those who need it
Over the past decade, Bangladesh has achieved strong economic growth and impressive poverty reduction. Despite this progress, poverty and vulnerability remain a great challenge. A rapid demographic transition, which provides a window of opportunity to utilise young workers before the country faces the issue of population ageing, highlights the need for urgent policy intervention. In light of such dynamic changes in Bangladesh, a comprehensive social protection and labour system is needed which includes measures that strengthen resilience among the poor and vulnerable by mitigating shocks to their well-being such as unemployment or life-cycle changes including old age; improve equity by alleviating poverty and destitution through appropriate support systems; and promote opportunities by building human capital and facilitating access to higher earnings and better livelihoods, especially through employment. Several obstacles hinder the country’s ability to create more decent and inclusive jobs. The Bangladesh Enterprise Survey (2013) suggests that political instability, lack of reliable access to electricity, limited access to finance, and corruption are major challenges to business. Access to training opportunities in the labour market is also very limited. Currently, more than 3,000 Technical and Vocational Education and Training (TVET) institutions provide skills training in the country, and the government is making efforts to strengthen the small but growing sector. However, entry to TVET institutions requires completion of grade 8 and those who are unable to complete secondary education, mostly the poor, do not have access to this skills training. Moreover, the TVET system falls short of placing their trainees in jobs with low demand for TVET graduates from the employer side resulting in poor placement rates. Thus, TVET graduates, despite having mid-level education, remain unemployed or engaged in low quality jobs. The mismatches between the labour market-relevant skills that employers demand and the type of skills trained and fostered through TVET are considered key factors behind the poor TVET sector performance. Bangladesh’s current situation calls for policy measures designed to not only reduce poverty and vulnerability but to ensure that the benefits of strong economic growth are widely shared. Three broad policy tools are discussed below.
The Bangladesh Enterprise Survey (2013) suggests that political instability, lack of reliable access to electricity, limited access to finance, and corruption are major challenges to business
Safety nets  Safety nets are very useful in poverty reduction and prevention but their cost-effectiveness often suffers because of a few overarching issues. Fortunately, the issues can be corrected. The first issue is weak targeting: Most safety net programs aim to provide assistance to the poor and ultra-poor, but it is unclear how program administrators define, identify, and verify the poor. Weak targeting results in substantial inclusion errors where the actual poor are left out and the non-poor are able to participate. Inclusion errors have even increased over time: The overall rate of inclusion among the non-poor increased from 44% in 2005 to 60% in 2010 (World Bank, 2013). The second issue is the fragmentation of safety net programs. There are currently 140 safety net programs provided by multiple ministries, some duplicative with overlapping coverage and objectives. Programs that have similar or duplicative objectives could be consolidated or harmonised. The final issue is efficiency, which is associated with weak administrative capacity, in addition to inefficiencies stemming from targeting and fragmentation, as well as delays in delivery. Microfinance As of 2011, there were more than 576 registered MFIs with more than 35 million active members and over 15 million active borrowers -- an eight-fold increase since 1995. It is debatable whether Bangladesh’s microfinance sector is oversaturated and whether it pushes the poor to over-indebtedness with its over-commercialised practices. However, it seems apparent that relatively easy access to microfinance brings both opportunities and risks. The challenges include high transaction costs, high interest rates, and weak linkages between microfinance and productive labour market activities such as entrepreneurship. Labour market interventions The demand for a better trained workforce is greater than ever in the highly competitive global market. However, the existing Technical Vocational Education Training (TVET) sector is not adequately equipped to step up to the challenge. The limited availability of labour market interventions limits the potential benefits of existing ones; for example, safety net beneficiaries have very few linkages to pursue skills training opportunities to strengthen employability. An unemployed youth looking for wage-based employment has little support available to assist him/her in the job search. Agricultural workers using outdated technology and experiencing diminishing yields have little scope to improve productivity. Poor rural workers planning seasonal migration do not know where to start other than relying on middlemen. Also, there is a lack of evidence-based analytics to support in the planning of such programs. Policy Recommendations Some of the challenges that social protection and labour market interventions need to address are widespread poverty and vulnerability, lack of jobs for youths, gender inequality in the labour market, and vulnerability of migrant labour. To address these challenges, we need to improve existing programs through consolidation. The National Social Security Strategy (2015) delineates five thematic clusters of ministries for such consolidation and harmonisation. We also need a unified targeting system that enables various programs to identify the poor, and significantly improves targeting accuracy and program efficiency. We need to improve program efficiency by improving administrative capacity and by modernising systems, developing more efficient delivery mechanism (such as e-payments), modern storage facilities (for food), and technology for dynamic MIS. Finally, monitoring is an essential management tool for dynamic information so that appropriate action can be taken to improve or modify a program’s implementation. Evaluation is also critical to identify impact and best practices. It is necessary to explore and utilise various other policy instruments. For example, voluntary insurance and savings mechanisms may be explored, the multipronged graduation approach seems effective, programs which promote youth employment through skills development and entrepreneurship are necessary, programs to promote female labour force participation are critical. Potential programs for migration as an employment strategy need to make migration more remunerative, affordable, inclusive, and safe. While the medium to long-term jobs strategies will help the country move forward in achieving its goal as a middle-income country by 2021, short-term action plans specifically targeting the poor and vulnerable to improve their earnings opportunities must be in place, particularly for economic growth, to be more inclusive. Shazia Omar is a poverty activist and a writer, currently working as a consultant at the Social Security Policy Support Project. The article is based on the Bangladesh Social Protection and Labor Review: Towards Smart Social Protection and Jobs for the Poor, Bangladesh Development Series Paper No. 33, World Bank, March 2016.