Financial and Monetary Systems

10 lessons from the largest scale-up of cash transfers in history

Most studies show that cash transfers provided significant support in mitigating the effects of the pandemic, but without countering its full impact.

Most studies show that cash transfers provided significant support in mitigating the effects of the pandemic, but without countering its full impact. Image: Unsplash/Omid Armin

Ugo Gentilini
Senior Economist, World Bank
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Financial and Monetary Systems

  • COVID-19 triggered unprecedented social protection responses, with pandemic cash transfers reaching over 1.3 billion individuals globally.
  • But cash transfers were uncertain and spread unevenly across countries, with high-income countries investing about 93 times more than low-income countries.
  • The pandemic points to the need for improved social protection financing and universal delivery systems that could potentially reach entire populations.
  • More measures are also needed to protect unemployed and precarious workers.

Over the past 30 months we have been carefully tracking countries’ unprecedented social protection responses to Covid-19. But what are we learning from such wealth of experiences?

A new paper – Cash Transfers in Pandemic Times: Evidence, Practices, and Implications from the Largest Scale Up in History – combines analysis of large datasets with a review of about 300 pandemic papers, evaluations, and practical experiences while focusing on a particular form of social protection – cash transfers. Before turning to the ten lessons for the future featured in the report, let’s first reflect on the past.

Ten learnings from the recent past:

1. Pandemic cash transfers reached unparalleled levels of coverage but spread unevenly across countries and were largely concentrated early in the pandemic. Transfers reached over 1.3 billion individuals globally, but the average coverage rate of the population in low-income countries was in single digits.

2. Cash transfers were of short duration and uncertain in extension. The average duration of cash transfers was only 4.5 months. Extensions were uncertain and when implemented, lasted for an additional 6.3 months on average.

3. Transfers were generous, but not enough to counter forgone labor incomes. Most studies show that cash transfers provided significant support in mitigating the effects of the pandemic, but without countering its full impact.

4. Governments simplified the design and delivery of cash transfer programs in several ways. A range of practical innovations and brave experiments introduced during Covid-19 were absorbed into routine delivery systems.

5. Most responses relied on introducing new programs. These included beneficiary identification mechanisms like open registration, social registries, tax databases, and others (such as mobile money operator records). Online platforms were the most utilized registration methods.

6. A total of 763 million people were reached by digital cash transfers. One important benefit was that transfers were received on a timely basis. Yet lack of access to a digital account might have led to some exclusion.

7. Preexisting social protection delivery systems helped with response but were not always a necessary nor sufficient condition for scale-up. The pandemic highlighted the fundamental importance of delivery systems, which were often unable to reach people at the middle of the income distribution.

8. The timeliness of transfers varied substantially. On average, coverage scale-up took 26 days, with program performance ranging from 2 to 119 days.

9. Governments moved centerstage, but civil society actors played an important role. National and local civil society actors engaged in direct provision of assistance. The pandemic also accelerated linkages between international humanitarian assistance and domestic social protection.

10. A total of $3 trillion were invested in social protection responses, amounting to an average of 2% of GDP per country. High-income countries invested about 93 times more than low-income countries. Transfers from the existing budgets, budgetary reallocation, contingency funds, and in some cases, taxation were complemented by extrabudgetary mechanisms.

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Ten lessons for the future:

1. Whether Covid-19’s response is a “historical game changer” depends on a range of factors. These include whether it’s the scale of response; the capacity of the response to withstand the crisis; the influence it exerts on existing, routine delivery systems and practices; the effects on fomenting or amplifying public debates; and the ability to alter the structural configuration of systems. Framed in those terms, the pandemic has clearly been a game changer in some respects, but not in others.

2.The pandemic shed light on major blind spots in the labor market. There is a need for better protecting unemployed and precarious workers, including strengthening, establishing, or rethinking unemployment insurance, social assistance, and their interactions for workers in non-standard employment, the self-employed and informal sector workers.

3. Future crises scale up may be enhanced by a wider use of social protection automatic stabilizers. Because social protection responses relied heavily on discretionary choices, automatic stabilizers along with early warning systems, scale-up triggers, stress-testing, and protocols for program expansion including pre-positioned financing could have helped determine who receives support, how much, and for how long.

4. Strong fiscal headwinds may be looming on the horizon. The pandemic-induced crisis offers an opportunity to reenergize the debate on social protection financing, and the relationship between subsidies and transfers, the role of indirect taxes, and innovative earmarked taxation .

5. The economic multipliers of cash transfers helped fiscal and unconventional monetary policy converge. In a number of cases, central banks used cash transfers to revitalize the economy. Boosts in spending may help illuminate knock-on benefits of cash transfers also in non-crisis settings.

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6. The locus of cash transfers shifted, in part, to cities. New generation of urban social assistance could help enhance the salience of social protection in urban areas, large informal settlements and throughout the urban-rural continuum.

7. Covid-19 points to the need for universal delivery systems that could potentially reach entire populations. Large-scale, dynamic, and interoperable information systems combined with digital approach to delivery functions like identification, enrolment and payments based on the surrounding ecosystem and user preferences will be critical.

8. Given the simplicity of Covid-19 cash transfers benefit structure, there is renewed interest in benchmarking programs against basic unconditional design. Other user-friendly delivery choices tested in the pandemic (e.g., remote applications) could also be benchmarked against standard practices.

9. Enhance information on global social protection responses. The experience from extensive Covid-19 social protection tracking suggests the need for more proactive, comprehensive, coherent, and coordinated reporting systems.

10. Historical antecedents and current experience suggest four post-Covid scenarios. Depending on if and how they act on pandemic lessons, country scenarios may include “the ostrich” (ignoring lessons), “the refresher” (marginal improvements), “the constrained reformer” (relatively significant enhancements), and “Beveridge redux” (comprehensive reform).

If crises provide the proverbial opportunity for improvement, it’s time to seize it.

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Financial and Monetary SystemsCOVID-19
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