Around 2.7 million Sri Lankans were pushed into poverty as a result of Covid and the economic crisis, according to an estimate by the World Bank. In all, over 25% of the population are in poverty now and a further 20% are tethering at the edge and could fall into poverty if they face some economic shock.

In rich and poor countries, social protection systems seek to assist the poorest people. However, the poor governance and targeting of Sri Lanka’s Samurdhi cash transfer system has excluded many poor people. A World Bank expert on human development, René Leon Solano, says governance is one of five challenges facing social assistance systems for the poor. The bank is providing technical assistance to design Aswesuma, the government’s new cash transfer programme for the poor.

In a wide ranging interview with Echelon, Solano discussed the challenges confronting the design and implementation of social protection schemes and Sri Lanka’s particular case.

Sri Lanka has been steadily reducing poverty for several decades. Can you tell us what the World Bank estimates happened to poverty levels following Covid and the economic crisis?

Many countries around the world are grappling with increased levels of poverty and vulnerability. Just in 2020 alone, the World Bank estimated that 97 million people worldwide were pushed into poverty as a result of Covid. So, it’s not just a Sri Lanka-specific challenge.

Now, in terms of Sri Lanka, it is true that Covid and the economic crisis, according to recent estimates, have doubled poverty. In 2021, we estimated that the poverty rate in Sri Lanka was around 13.1%, and in 2022, the estimate was around 25.6%. Around 2.7 million Sri Lankans were pushed into poverty as a result of the economic crisis in that year alone. A lot of the poor basically became even poorer.

Can you define what you mean by poverty? Is it an income based measure for a family or an individual?

The first definition we have is a national poverty line, which identifies the share of the population that cannot meet basic needs as stipulated by the country. The second definition is an international poverty line. And for Sri Lanka, it’s around $3.65 per day per person. This measure is relevant for low and middle-income countries. Many South Asian countries use that poverty line. The advantage with the international poverty line is its allowing comparisons across counties.

In addition to that, we also use multidimensional poverty measures because poverty is multidimensional. We have to appreciate that other elements can weigh on poverty.

The government’s official poverty line is based on survey data. Does the World Bank do its own surveys to figure out where the international poverty line is? Or how do you do it?

No, we use national survey data to assess the poverty line. Poverty of 25.6% I alluded to is an estimate derived from the HIES survey (Household Income and Expenditure Survey) of 2019. What we do is use that HIES data and take into account the different macroeconomic variables that have affected the country to estimate poverty.

You mentioned income poverty is just one aspect, and that poverty is multidimensional. What do you mean by that?

Income is an important factor in poverty. But often we don’t only rely entirely on it because, basically, income is declared. People can provide different figures for their income. So we also take into account other factors that may affect poor people like education, health, access to social protection, etc. We believe those are also very good proxies for people’s vulnerabilities across the world.

If you look at other countries in a similar state of development as Sri Lanka, how does Sri Lanka’s present poverty rate compare to them?

Covid’s impact was compounded by the economic crisis. So, it’s difficult to tell you how to compare the current poverty rate, precisely because the economic crisis is Sri Lanka specific. However, 25.6% of people in a country living in poverty is very alarming.

The World Bank has been working alongside the government, to help improve social protection.

Many people are also vulnerable to poverty. In 2021, 5.7% of Sri Lankans were just 10% above the poverty line and 5.6% were between 10% and 20% above the poverty line

In the past Sri Lanka’s main social protection scheme Samurdhi has been criticized for its poor targeting. What was wrong with Samurdhi?

It’s important to define social protection. Social protection helps people manage life-cycle risks. One of the risks is poverty, hence the cash transfers. But there are several other risks that we face across the life cycle. Risk of unemployment, risks of disability, etc. So it’s important to recognize social protection’s broader meaning.

It is true that Samurdhi faced important exclusion and inclusion errors. A recent estimate suggests that only around 37 percent of those in the poorest income quintile receive Samurdhi cash transfers, which is relatively low. And 5% of those in the richest quintile actually also receive Samurdhi cash transfers.

A quintile, in this case, is the population ranked according to their income and divided into five equal groups?

That’s right. Many countries have cash transfer programmes, and a lot of these programmes face important exclusion and inclusion challenges. What we’ve learned through Covid is that those countries that had robust and resilient social protection systems were the ones who were able to effectively respond to the crisis.

I think there are a lot of opportunities for these cash transfer programmes to be better targeted. It is also important to note that improving cash transfer programmes takes a bit of time.

The World Bank has had a project from 2017 until 2023 that looked at improving Sri Lanka’s cash transfers to the poor. What did you find was the reason for very poor targeting here? More than 60% of the poorest 20% of the population were not receiving these transfers. How did that happen?

It is important to note that the World Bank project’s main objective was to support Sri Lanka in the development of a social protection system. Several factors must come together for a social safety net to be effective.

The first one is communication. A lot of countries do not have sufficient communication or outreach. Therefore, people do not know about these programmes and cannot register and so, they cannot be provided any assistance.

The second challenge is financing. Just to give you an example, Sri Lanka only spends the equivalent of 0.6 percent of GDP on the social safety net cash transfers. That’s even below the South Asian average of 1 percent of their GDP. If you lack sufficient resources for cash transfers, that prevents transfers from reaching sufficient people.

The third challenge, and one that is linked to targeting, is capacity. A lot of countries grapple with low capacity to implement these programmes. A programme can be beautifully designed, but if you don’t have the capacity at all levels to implement, then you will not do a good job at reaching intended beneficiaries.

The fourth challenge is the lack of a social registry. A social registry is a database of potential beneficiaries of social programmes. Before the crisis, the World Bank was supporting the development of a social registry in the country. Without a social registry, a country cannot identify those who actually deserve assistance.

And last but not least, another challenge is that of coordination and governance. If you don’t have the proper governance and implementation arrangements in place for effective and efficient coordination and mechanisms to deliver these social programmes, then you will not have a system that reaches the poor and vulnerable.

You highlight five challenges to a successful social protection programme; communication, funding, implementation, a social registry, and good governance. Why do you think we are doing poorly on targeting?

The World Bank has not done a thorough enough analysis of the key binding constraints of poor targeting. But broadly speaking, I would have to say that one is indeed the lack of a social registry. As I said, Sri Lanka did not have one before. Right now, we are supporting the government in developing one.

Two; how do you then ensure proper enumeration and registration of people if you don’t have the capacity, both in terms of human resources and know-how, to implement your project well? Social protection is all about implementation, not just design. So I would identify those two main areas where Sri Lanka could focus moving forward.

The Samurdhi Act, which governs the authority and its large staff, was managing the cash transfer scheme previously. So it strikes me, as somebody who’s watching from afar, that the Samurdhi Authority has not been able to do the fundamental things, like have a robust social registry in place. It can look a little shocking from the outside.

Social protection helps people manage life-cycle risks. One such risk is poverty, hence the cash transfers. But there are several other risks that we face across the life cycle

Can you outline for us what the World Bank is doing to support the government in changing the structure of social protection in Sri Lanka?

So, the World Bank does not implement projects. We support the government through technical assistance and financial assistance. In this regard, we have been working closely with the government in a couple of areas.

One, at the strategic level we are supporting the government’s drafting of a social protection strategic framework that will define the way forward for social protection. One element of that is the social registry, the delivery of targeted cash transfers, et cetera.

The second thing we are supporting the government with, is through technical assistance. By this, I mean, to bring international best practices to inform the design of the new social protection scheme, Aswesuma, and also bring international good practices to inform all of the different aspects that I alluded to before. This is the second way we have tried to support the government’s reform. And last but not least, we have this potential for new projects in the pipeline, it’s called the Social Protection Project. Basically once the system is established, we would provide some financing for the new Aswesuma scheme and also continue to support improving the social registry.

What is the legal basis for this new scheme? Does it use the same one that has existed for Samurdhi?

Aswesuma has its own legal set-up. The Welfare Benefit Board (WBB), established within the Ministry of Finance, coordinates not only the design but also the delivery of this new targeted scheme. Welfare Benefit Board, was envisioned as part of an act passed in 2002. It was never operationalized. So I think that’s a very important progress.

The second aspect of this new scheme is basically that it redefines and redesigns the way the schemes are designed. It basically divides the population into four different groups based on their level of poverty and vulnerability and provides targeted and adequate support to those people. That’s another major programmatic design revision to the way cash transfers are delivered in Sri Lanka.

So in implementation, if the new scheme is under the Finance Ministry, then what should the government do with the existing Samurdhi Authority staff and that law? Do they transfer that capacity into the new system?

That’s a very strategic question because it deals with redefining the role of Samurdhi. And I think the government must obviously work on that redefinition of Samurdhi. There are other activities delivered by Samurdhi like the livelihood activities, like the provision of employment opportunities to the poor and vulnerable.

That’s a very strategic question because it deals with redefining the role of Samurdhi. And I think the government must obviously work on that redefinition of Samurdhi. There are other activities delivered by Samurdhi like the livelihood activities, like the provision of employment opportunities to the poor and vulnerable.

One criticism of past social protection schemes in Sri Lanka is that the poor were receiving very small grants. Under Samurdhi, it was 5,000 rupees and following Covid it went to maybe 7,000 rupees. How likely is it that a new system will do better than this?

That question goes to the heart of a policy issue; coverage versus adequacy of benefits. We live in a fiscally constrained environment. So all countries have to decide on the number of people they cover and the amount that they give people.

Samurdhi, was managing the cash transfer scheme previously. So it strikes me that the Samurdhi authority has not been able to do the fundamental things, like have a robust social registry in place

With regards to Aswasuma itself, I think that the government has recognized that increased levels of inflation have really eroded people’s ability to buy anything and they have adjusted the amount of the transfers across these four categories.

When we look at the number of people that will benefit from the new scheme, it’s over 2 million households. This translates to 40% of the population or so. Not bad for a cash transfer to cover 40% of the entire population. In addition to that, as I mentioned, the adequacy of benefits, or the amount given to people, at least for the bottom 20% of earners should increase. Sri Lanka is doing both. It’s reaching 40% of the population, and it’s providing adequate support to those that are in the lowest 20% meaning those that are in the lowest part of the income distribution, will receive significantly more than what they were receiving under Samurdhi.

So we have around 25% of the population in poverty and there’s another 10% of the population that’s close to poverty. So when we have 40% coverage, we are essentially extending some support to this 10% also?

Poverty is relative. So the government is providing assistance to the lowest 40% of the population in terms of income distribution. As you correctly alluded to, in addition to that, those who are not poor but vulnerable, are close to the poverty line. So then the policy question is: what happens to them, and how do we really ensure that they are covered in the event that they fall into poverty? And I think that’s why it is important for a social protection system to be dynamic.

It is important for the social registry to be able to allow anyone who feels that they deserve social protection because of a shock, because that’s the definition of social protection, to go and register and have their application evaluated. And if they fall into poverty, then they can come into the social protection scheme of the government.

In a practical sense, there are over 2 million people receiving benefits. What are the challenges of administering such a scheme?

First and foremost, I think it’s important for the recertification process for these 2 million people to happen every two or three years. The second thing is to revisit the design of schemes and whether we are indeed covering sufficient people and indeed providing them with adequate support. Revisiting the design is also important to have flexibility based on these changing conditions. Those two elements in terms of policy are crucial to move forward but they require a lot of capacity. This is why I was referring to our capacity as being a very important challenge for Sri Lanka and many other countries.

How do you then re-certify 2 million households, every two or three years. Fortunately, we did see that Sri Lanka recently did a good job at enabling the registration process of 3.7 million households in record time and they also did a very good job of actually validating the data of these 3.7 million households in record time.

So if the communication were good, people who think they’re poor would come and register. What are the likely challenges in validation?

So let’s assume that communication is no longer an issue and that people actually register. One important challenge in that respect is having a lot of capacity to actually go to every household and validate this data and the data that people use to register. There are over 20 indicators these enumerators have to verify with each household to make sure the information provided by people, who are probably eligible, is accurate.

The capacity of the enumerators to go to these households is the second challenge. In this process it’s also important to recognise that sometimes, even if enumerators go to these households, there are all kinds of issues preventing the collection of data. For example, the residents may not be at home. Then the data is not validated, and they cannot receive cash transfers. Out of the 3.7 million households that registered for this cash transfer program, around 3.3 or 3.4 million had their data validated. So there was a gap. The government really needs to understand why 300,000 households’ data was not validated. So that’s an important challenge moving forward.

Some countries, it appears, have been successful in using technology to help bridge these gaps in data. India has got a digital ID they’re using very effectively to identify and help the poor. How can technology be deployed in Sri Lanka to do this?

I think technology is key to improving the governance of the system. So there are a couple of things that Sri Lanka has already done that I think are important. Enumerators visiting the households are using tablets to verify and enter the data. Once you actually capture that data, you’re able to rank beneficiaries based on their score. So that in itself is already a good step in the right direction.

The second thing that I think Sri Lanka did well is that they provided, following this validation process of the data, QR codes to ensure, from the beneficiary perspective, the data was accurately inputted. I think that is critical because it gives possible beneficiaries the right to complain if their data was not properly input. That’s another technology innovation. And last but not least, you develop a good social registry.

Strong and robust monitoring and evaluation systems to track progress in the implementation of programmes, as well as grievance and redress mechanisms to ensure that people have the right to complain if they did not receive cash transfers are also included.

Do middle-income countries, like Sri Lanka, require significant budget allocations to deal with poverty?

Forget about middle-income countries, look at OECD countries, like the United States, and how much money they spend on social protection programmes. It is important to allocate sufficient resources for social protection because anyone can fall into poverty.

How exactly will the World Bank support the government’s social protection strategy? Are you giving some money to the budget that can then be used directly to distribute as benefits to beneficiaries?

So we’re working in very close collaboration with the National Planning Department, basically the Ministry of Finance, to establish the social protection strategic framework and to define the priorities moving forward.

So that is the programme that you currently have in operation?

Well, the current programme is coming to an end this summer. And then the new programme will hopefully be approved soon. The new programme has a budget associated with it. As I said, we’re still discussing the final touches to it, but it will support the new Aswesuma scheme, and will also continue to support this development of systems.

Social protection is critical, both for productivity and economic growth. But one important thing is the agenda of jobs and how social protection can be linked, or is usually linked, to sustainable livelihoods. We and other development partners are supporting the government in designing a new, what we call, economic inclusion pilot that will precisely link cash transfer beneficiaries to job opportunities.

I think that’s important as Sri Lanka recovers from this crisis.