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Social Protection & Labor Systems
Social Protection & Labor Technical Note June 2014 | Number 3
Why Is It Important
to Ensure that Benefit
Adapting Benefit Transfer Mecha-
Transfer Mechanisms nisms to Respond to Disasters and
Can Respond to
Disasters and Climate Climate Change-Related Events
Change-Related Events?
Mirey Ovadiya
Having in place flexible
Establishing an Effective Benefit Transfer Mechanism
benefit mechanisms
which can provide Cross-country experience indicates that mechanisms can be incorporated into existing
social protection programs, without the need to construct new structures (ISDR
timely and appropriate 2011). Even where only a basic payment mechanism exists, building on the existing
levels and types of institutional base is preferable to establishing a new and separate response mechanism.
benefits following The types and levels of benefits need to meet basic needs and prevent beneficiaries
disasters and climate from adopting negative coping strategies while reestablishing their livelihoods (Harvey
change–related events and Bailey 2011). As with regular social protection programming, benefit systems for
disaster response need to distribute benefits in a predictable and transparent manner,
is critical. Doing so using a reliable payment mechanism.
ensures that social
protection benefits are Determining the Forms, Levels, Frequency, and Duration of Benefits
responsive to changing The nature of the response, the socioeconomic context, and the financing constraints
needs that people who in each country determine the type of benefits and their levels. Program experience
indicates that the initial phase of a disaster response program often requires
were not covered by experimentation, monitoring, and adjustment, even where parameters for benefits
a social protection already exist.
program beforehand do
Good practice points to providing benefits that are adequate for subsistence but not so
not fall into poverty. large as to reduce work incentives or contribute to post disaster inflationary effects (Box
1). Large sums—such as payments triggered by the loss of a house or property—should
be made as lump-sum payments, keeping in mind security considerations, particularly
for households headed by women, elderly people, or people with disabilities.
Successful programs highlight the importance of flexibility in adjusting benefits. In
order to avert the disruptions to incomes of individuals participating in its public
works window, Bangladesh’s Chars Livelihoods Programme put in place a temporary
cash advance against future wages in flood-affected areas where the start of the
works projects was delayed or disrupted. The initiative proved to be very effective in
smoothing consumption.
Benefits levels and the choice between cash or in-kind benefits are often driven by the nature
and magnitude of available funding and size of the target population. The following steps
should be followed in setting benefits (Del Ninno and others, forthcoming):
Technical Notes June 2014 | Number 3
• Use criteria that reflect how households earn their livings.
Box 1. Setting post disaster benefit • Weigh transaction costs and access to markets and essential
levels in Ethiopia, Mexico, and goods in choosing between in-kind and cash benefits.
Pakistan • Develop options based on the availability of funding and
Countries have adjusted benefit levels of safety net programs in a the number of potential beneficiaries to be served.
variety of ways in response to disasters and extreme climate events.
• Establish benefits that complement or supplement existing
Ethiopia social assistance benefits.
Ethiopia’s Productive Safety Nets Program (PSNP) is a national • Set triggers for phasing benefits in and out.
safety nets program that provides monthly transfers to households
for six consecutive months. Public works target able-bodied poor • As part of disaster preparedness plans, develop guidelines
and food-insecure individuals; direct support targets poor and
food-secure beneficiaries who have a physical or other constraint
that drive the allocation of resources.
that does not allow them to participate in work projects. All PSNP
beneficiaries receive the same transfer, regardless of whether they How to establish an Effective Benefit Transfer
participate in public works or receive direct support. Average Mechanism
estimated annual transfers were $137 per household, worth about
10–40 percent of recipient households’ annual basic food needs. Establishing an effective benefit transfer mechanism involves
Following an emergency, poor households receive benefits several steps.1 The first step is the assessment of available
over an extended period of time. After a food shortage caused by
extended periods of low rainfall in Ethiopia’s highlands in August
technology, financial institutions, legal framework, beneficiary
2011, for example, the PSNP extended the duration of its regular access and preferences, and potential service providers. It is
support for 6.5 million beneficiaries by three months and provided important to have good knowledge of the political, institutional,
three months of assistance to an additional 3.1 million people and legal context and the available service provision options.
living in PSNP areas.
The second step is the identification of the most appropriate
Mexico payment mechanisms and systems for reaching the affected
Mexico’s Programa de Empleo Temporal (PET) uses established daily
population—that is, the selection a modality that ensures
wage rates in emergency situations. However, the Ministry of Social transparency, predictability, and timeliness. The following
Welfare and other implementing ministries have the flexibility to options can be used alone or in combination:
adjust the number of days each beneficiary is entitled to work, the
length of the work day, and hence the total benefit per household. • using existing payment mechanisms by temporarily
Benefit levels are set slightly below market wages for unskilled expanding staff and equipment where outreach already
labor (at 99 percent of the wage level) at a rate of 60 pesos ($4.50)
exists in affected areas
a day. The actual number of work days allowed per beneficiary
can vary according to the emergency situation, lasting as long as
the state of emergency is in place (up to three or four months in
• establishing temporary registration and payment or point-
some instances). The average intervention is 76 working days per of-sale offices in affected areas
intervention (or $342).
• contracting with institutional partners (payment
Pakistan agencies) that have the ability to reach the largest number
of affected population and distribute benefit transfers
Following major flooding in 2011, the government of Pakistan rapidly. Partners can include commercial banks, financial
provided cash payments to millions of affected households, using
housing damage as a proxy for impact. It provided cash rather than
institutions, nongovernmental organizations (NGOs),
in-kind assistance because doing so was less costly and provided and public institutions such as postal services or other
beneficiaries with more flexibility. The initial Phase I payment of government agencies.
PRe 20,000 ($220) was insufficient for recapitalization of assets
given the extent of damage and loss, but it helped households cover The case studies2 demonstrate the value of making effective
immediate needs. The rapid evaluation of Phase I found that families use of modern technologies to develop post disaster benefit
were spending the grants mostly on food, healthcare and medicine,
transfer systems at scale (Box 2). Doing so can reduce leakage
home repairs, and debt repayment (Hunt and others 2012). When
additional funding from external donors become available, the (from fraud, targeting errors, and other sources) and facilitate
government provided total additional payments of PRe40,000 ($440) wider coverage. Service providers’ and beneficiaries’ access
to flood-affected households in Phase II. Beneficiaries in this phase to technologies, their capacity to efficiently use them, and
were expected to use the funds to not only cover basic consumption cost—together with the length and scale of the planned
but to also recapitalize assets and recover their livelihoods.
intervention—will be important determinants of the most
appropriate choices.
1
This material is adapted from the World Bank website on Safety Nets How to:
Making Payments: http://go.worldbank.org/OOY62CHT80
2
Five case studies-Ethiopia (2), Bangladesh, Mexico and Pakistan featuring use
of social protection programs as platforms for disaster risk management can be
found in www.worldbank.org/sp.
Social Protection & Labor | World Bank Group
Finally, it is important that payment processes and mechanisms at public work sites to monitor the timeliness and accuracy of
are monitored to detect problems and correct them as payments to beneficiaries. Reported leakages dropped from 19
appropriate. Programs in Ethiopia, Mexico, and Pakistan percent early in CLP-1 to less than 1 percent in the program’s
involve regular checks. Bangladesh’s Chars Livelihoods last two years (CLP/Maxwell Stamp PLC 2012).
Programme (CLP) uses regular customer satisfaction surveys
Box 2. Making benefit payments in Bangladesh, Ethiopia, Mexico, and Pakistan
Program officials need to consider the adequacy of different elements of an Food transfers follow established food management system and
existing payment mechanism in view of the size, location, and needs of the emergency response processes of the government, the World Food
affected populations and the capacity to administer the mechanism. High- and Programme, and NGO systems.
low-technology options have been implemented with success; the key is to use
the most cost-effective option in line with the public and private institutional Mexico
capacity given the location and accessibility of the target populations.
Mexico’s Programa de Empleo Temporal (PET) program uses an array
Bangladesh of payment mechanisms to respond to the needs and circumstances of
its clients. The program is active during nonemergency periods, when it
For years, Bangladesh’s Chars Livelihoods Programme used points provides temporary employment and livelihood support.
of sale at particular locations on specific days to disburse payments An “emergency” arm, called PETi, is activated in response to disasters.
through its implementing partners—with good success. In 2012, it On average, PETi payments are disbursed within five working days
began piloting the use of mobile phones to transfer monthly stipend after a disaster is declared. Disbursements are made in cash through the
payments to its participants, using bKash, a mobile banking service Mexican Telecommunications Agency (Telecomm), which has a broad
provider. The system was piloted in one village. Villagers received network of cash disbursement facilities around the country. Where fixed
SIM cards and opened electronic accounts with bKash. The program’s cash disbursement facilities do not exist or conditions make it difficult for
implementing partners transferred payments directly to the bKash beneficiaries to reach them, Telecomm sometimes uses mobile facilities.
accounts of registered participants, who collected their cash from In general, for smaller amounts of cash, the program make payments
local registered agents. The program expected to scale up mobile to community committees, which distribute the cash to households.
cash transfers for all beneficiaries in 2012, reaching about 30,000 In areas with better connectivity or areas in which a larger number of
participants a month. beneficiaries live, cash disbursements are made through commercial banks
This innovation decreases transaction costs, reduces the risks or Telecomm.
of fraud, and allows beneficiaries to access their payments at their
convenience. The technology also has spillover effects that may benefit Pakistan
the rest of the community. Beneficiaries can use the facility for other
transactions, such as phone usage, SMS, and other cash transfer Pakistan’s Citizen Damage Compensation Programme used an electronic
functions. Temporary migrants can use bKash to send money back to payment system, making payments through a debit card called the Watan
households on the chars. The presence of service agents should spur card. Payments can be withdrawn at automated teller machines (ATMs)
SIM card and mobile phone ownership and increase their use for social or via payment agents using a point-of-sale device issued by the program.
and trade needs. Other projects and programs could use the same SIM These devices use a computerized operating system that may have a built-in
cards to disburse transfers. barcode reader, optical scanner, or magnetic stripe slot that captures and
validates information from recipients’ cards. During both Phase I and Phase
Ethiopia II of the program, isolated instances were reported of beneficiaries either
not being able to collect their cash transfers (because of technical problems
A lower-technology option that has worked well is the use of direct or theft, for example) or being asked to pay bribes (Hunt and others 2011).
payments (in-kind or cash) to beneficiaries through local government Recognizing these challenges, the program introduced financial literacy
structures or implementing agency structures based on a computerized training during Phase II to facilitate use of the Watan card.
payroll and attendance sheet system. This system is relevant for cash-for- The distance and accessibility of the communities to the Watan Card
work and noncash transfer programs. Facilitation Centres or banks varied greatly across the country, constituting a
Ethiopia’s Productive Safety Net Program makes monthly cash payments big challenge to the program. In some remote communities, the government
to beneficiaries by transferring funds from the Ministry of Finance directly provided transportation to the points of sale.
to bank accounts in districts (woredas). Payments are made at several key Three commercial banks were selected based on their experience with
locations to all community members at the same time. Beneficiaries are disasters and internally displaced people, the coverage of their branch
paid against confirmed attendance by checking the master attendance networks, and their ability to facilitate payments through points of sale
sheet and payroll sheets. Payment predictability seems to be a challenge, in various provinces. Where branches were not conveniently located,
however, even though improvements have occurred (Berhane, Sabates- banks set up 101 payment desks—called Watan Card Facilitation Centres
Wheeler, and Tefera 2011). (WCFCs)—within program registration and payment centers.
In 2010, the PSNP started distributing paper-based client cards. The More than 2 million households received payments through payment
cards help the authorities keep track of payments received and provide centers, points of sale, and the commercial branch network. Payment
basic information about the rights and responsibilities of beneficiaries. The mechanisms evolved over time and were adjusted based on beneficiary
cards are intended to improve the transparency of the program and improve satisfaction, ease of access, and fraud-prevention considerations. Very low
information flows. In 2011, 43 percent of beneficiaries had these cards. levels of fraud have been associated with the program.
Technical Notes June 2014 | Number 3
Tips for Practitioners: Principles to Follow in Creating a Disaster- and Climate Change-
Sensitive Payment System
The following tips can help practitioners adapt payment beneficiaries’ potential lack of financial literacy. Educate
systems following a disaster or climate change–related event: staff and implementing partners on how to use the system.
Conduct a rapid assessment of the institutional environment, Guidelines should cover periodicity, reporting, beneficiary
available service providers, and technology options to develop registration and verification, delivery, reconciliation, and
alternative payment mechanism scenarios for a given budget grievances. Compile steps and guidelines in a manual that is
and target population. made available to all stakeholders.
1. Develop specific outreach mechanisms for socially 6. Invest in extensive communication about the payment
marginalized groups and people with mobility constraints, system, which is critical to reducing fraud and corrupt
including elderly people, people with disabilities, and practices. Provide information about the benefit amount,
women in certain societies, to ensure timely access to payment locations, payment dates, and requirements to
payments/benefits. Consider using mobile banking facilities, collect payments, as well as public education about legal
providing transportation, and establishing special payment rights and grievance and redress mechanisms and how to
days to address the problem. access them.
2. Use objective criteria that reflect the population’s sources of 7. Monitor and evaluate performance, in order to identify
livelihood and asset damage assessment data to determine and correct bottlenecks and leakages. Ensure that the M&E
benefit levels. Ensure complementarity of disaster response system includes payment monitoring. Incorporate citizen
benefits with existing social assistance benefits, and have participation in this process through electronic and more
clear criteria and limits on the duration of benefits. traditional means. Citizen and community participation
and oversight of the system foster transparency, create
3. Develop a payment mechanism that reflects the country’s confidence in the program, and provide regular feedback
institutional capacity and allows the best geographic to implementers. Websites, community noticeboards, and
coverage and rapid coverage of beneficiaries. meetings with beneficiaries are commonly used; standard
social protection program monitoring tools, such as client
4. Use a combination of public and private institutions and/or
satisfaction surveys or community scorecards, can also be
NGOs and civil society organizations to deliver payments.
harnessed.
The choice should depend on the robustness of public
institutions, governance concerns, and transactions costs. 8. Manage information flows using appropriate technologies
such as computerized payroll and attendance sheets,
5. Provide formal guidance (guidelines and orientation/
records of disbursements, and banking records and existing
training) to service providers on how to operate the system.
beneficiary databases and rosters to verify beneficiary
Compile and widely disseminate guidelines on payment
identities, track beneficiaries, and verify payments to them.
mechanisms and cycles, taking into account potential
Biblography
Berhane, G., R. Sabates-Wheeler, and M. Tefera. 2011. Evaluation of Ethiopia’s Food Security Program: Documenting Progress in the
Implementation of the Productive Safety Nets Programme and the Household Asset Building Programme. International Food Policy
Research Institute, Washington, DC.
Del Ninno, C., K. Subbarao, and R. Quintana. Forthcoming. Improving Payment Mechanisms in Cash-Based Safety Net Programs.
Social Protection Discussion Paper, World Bank, Washington, DC.
Harvey, P., and S. Bailey. 2011. Cash Transfer Programming In Emergencies. Good Practice Review No. 11, Overseas Development
Institute, London.
Heltberg, R. 2007. “South Asia Copes Better with Natural Disasters: The Role of Social Protection.” Development Policy Review
25 (6): 681–98.Hunt et al. 2011. Evaluating Implementation of Pakistan’s Citizen’s Damage Compensation Program (Phase I). Final
Report. Oxford Policy Management.
CLP/Maxwell Stamp Plc. 2012b. The CLP’s Approach to Reducing Leakage. CLP/Maxwell Stamp/Australia Government Aid
Program/UKAID.
UNISDR, 2011. Disaster Risk Reduction in the United Nations 2011. New York: UNISDR.
The findings, interpretations, and conclusions expressed herein are those of the author(s), and do not necessarily
reflect the views of the International Bank for Reconstruction and Development/The World Bank and its affiliated
organizations, or those of the Executive Directors of The World Bank or the governments they represent. The World
Bank does not guarantee the accuracy of the data included in this work.