Nepal’s Social Protection Response to Covid-19
Key Insights
- The Child Grant program could be a useful mechanism for Nepal’s Covid-19 social protection response, since it already reaches 48% of all households and 54% of food-insecure households (compared to less than 20% coverage by all other existing social security programs).
- Distributing Covid-19-related benefits via banks is not optimal, since only 24% of child grant beneficiaries receive their benefits via bank accounts.
- By contrast, providing benefits in cash at the ward level would be optimal, since 64% of child grant beneficiaries receive their benefits this way. Such an approach would also leverage Nepal’s Federal structure.
Background
Covid-19 in Nepal
The policy reaction to Covid-19 followed a predictable pattern: governments initially downplayed the disease and undertook limited testing, until sustained community transmission took hold—at which point governments imposed severe social distancing measures, which resulted in substantial economic contraction. Nepal enacted its first social distancing measures on late March 2020. While cases were very low at the time, this reflected limited testing capacity; the actual spread of Covid-19 was likely worse, due to the importance of migration and tourism to the economy.
Wage earner households were particularly badly affected by the economic effects of Covid-19. In poor countries like Nepal, where daily earnings are critical for fulfilling basic needs, the urgent policy imperative is to get cash to the neediest as fast as possible. Doing so provides immediate protection to those who have lost their livelihoods, and helps vital economic relationships persist through periods of social distancing. There should be no ambiguity: Nepal’s economy has and will suffer tremendous damage from Covid-19, and bold action is required to protect the economy and the most vulnerable.
This document reviews the viability of distributing additional assistance through existing programs. However, it is important to point out that urban wage workers are particularly vulnerable. These groups are likely to be the first to see major reductions in wages from measures to reduce disease transmission, and yet they are not typically covered in social protection schemes. Rapid responses to provide relief to these groups seem essential to mitigate the economic damage from Covid-19.
Related Literature
The literature consistently shows that cash transfers have positive effects on income, assets, food expenditure and dietary diversity, school attendance and performance, health, labor force participation, and domestic violence. The evidence is also clear that cash transfers to poor households in low-income countries stimulate the broader economy through a multiplier effect (see evidence from Zambia and Kenya).
Resource limitations necessitate targeting the most vulnerable. Geographical targeting is simpler but likely less precise, than social group targeting, which is challenging even in the best of circumstances. Using existing group-targeted programs provides a solution. We advocate specifically for targeting child grant beneficiaries. In addition, because this is a crisis response, we believe strongly that grants should not have any conditions attached to them. Time is of the essence and the potential benefits of any conditions are likely to be overwhelmed by the costly delays and additional human interaction (creating opportunities for disease transmission) required for verification. For example, the onerous conditions placed on earthquake reconstruction grants in 2015 resulted in a substantial number of households waiting years to receive government assistance. Along these lines, evidence suggests that conditional transfers can lead to worse unconditioned outcomes, especially for the poorest households, compared to unconditional cash transfers. Recent evidence from Yemen also suggests that cash transfers during a period of violence provided households with the liquidity necessary to retain investments in capital-intensive agricultural production (livestock). More generally, cash transfers can be effective so long as local markets continue to function (i.e. households can still use the cash to purchase the goods they require).
While we advocate against conditions, cash transfers accompanied by information campaigns could make them more effective, provided the campaigns do not impose delays or increase the potential for community disease transmission (see evidence from Nepal and Nigeria).
Other countries’ approaches to Covid-19 social protection
As of March 20, 45 countries in the world had introduced social protection measures to mitigate the economic consequences of Covid-19, nearly half of which were lower- to upper-middle-income countries. Cash transfer efforts in these countries included rescheduling existing payments sooner (Colombia and Indonesia), making additional payments (Argentina, Armenia, and Turkey), increasing existing payment rates (China), and substituting school feeding programs with cash (Jamaica and Bolivia). High-income countries typically used more advanced tools, such as sickness benefits (France and Ireland), subsidized social insurance contributions (Germany and Hungary), and temporary unemployment benefits (Bosnia and Herzegovina, Netherlands, Romania). Other social protection measures utilized included wage subsidies, subsidized sick leave, and various forms of subsidized social security contributions and unemployment insurance.
Key Findings
Finding 1: The Child Grant is a useful tool for reaching vulnerable populations
In Nepal, daily wage earners and remittance-dependent households are likely to be the two groups most affected by Covid-19. The child grant presents the most viable option among existing social security programs to reach the most vulnerable households in remote rural areas. The grant is being delivered in the 14 most economically insecure districts of Nepal in Province 2, 6, and 7. These districts were selected due to having the lowest human poverty indices (HPI), which measure average deprivation in three basic dimensions of human development – a life expectancy, adult literacy, and standard of living (access to safe water and under 5 malnutrition).
Based on the Oxford Policy Management (OPM) survey in 3 districts with the universal child grant in Provinces 2 and 6, the child grant can reach 48% of all households. Moreover, the child grant will be able to reach 54% of food-insecure households. This is in contrast to all other social security allowances, which can only cover fewer than 20% of food-insecure households in the surveyed areas.
However, the child grant will not reach urban daily wage earners who might be most immediately affected by Covid-19 and imposed social distancing measures. Reaching these individuals with emergency support might require going beyond existing social security programs.
Finding 2: Distributing benefits via banks is not optimal
While distributing cash transfers through banks could provide increased tracking and auditing, there are simply too few bank branches to reach the most vulnerable populations. In the relatively well-off province 2, for example, 56% of wards have a bank branch and 38% of child grant beneficiaries receive their transfers via banks. But in poorer province 6, only 41% of wards have a bank branch and only 14% of beneficiaries receive their transfers via banks.
Unsurprisingly, receiving grant payments via banks is less likely in wards that lack bank bran
ches. In wards with bank branches, 35% of beneficiaries receive bank payments, but in wards without bank branches, only 14% do so. Access to payments via banks also seems linked to demographic group. While X% Dalit beneficiaries and Y% of Muslim beneficiaries receive payments via banks, only Z% of Brahmin/Chhetri/Thakuri/Sanyasi beneficiaries and X% of Madhesi beneficiaries receive payments via banks.
Overall, only 24% of the child grant beneficiaries in the surveyed wards receive their benefits via bank accounts (see below). As such, the delivery of Covid-19-related transfers via banks does not seem optimal for any effort seeking to reach the most vulnerable groups.
Finding 3: The Federal structure can be leveraged for Covid-19 response
By contrast, approximately 64% of the beneficiaries surveyed receive their child grant benefits in cash at the ward level. Other payment modes, such as pay camps at wards and cash at the municipality or during home visits, are much less common.
Recommendations
To reach the largest share of vulnerable groups, distribution of Covid-19-related cash grant supplements should be given in cash at the ward level. Importantly, this approach would build on the federal structure. The distribution program could also disseminate information on handwashing and social distancing via elected representatives (possibly supplemented by community health workers or ward user committees). These efforts can be built on the emerging experience of local governments launching information awareness campaigns about Covid-19