Safety Nets for Social Protection: Sri Lanka’s Samurdhi Programme

1. Safety Nets for Social Protection:Sri Lanka’s Samurdhi Programme Ramani Gunatilaka March 2010

2. Introduction • Sri Lanka’s social protection system more extensive than those in other South Asian countries. • Among the significant gaps in coverage: A third of all households are beneficiaries of the largest safety net programme, Samurdhi. But it provides limited benefits, suffers from large inclusion and exclusion targeting errors. • Paper provides up-to-date assessment of Samurdhi using most recent household income and expenditure data of 2006/7. • Assesses benefit incidence of Samurdhi • Compares the determinants of the probability of being poor, with the determinants of getting Samurdhi.

3. Outline • Introduction to the Samurdhi Programme • Data and variables used in the analysis. • Results – Benefit incidence • Results – Analysis of determinants of probabilities of being poor, of getting Samurdhi • Conclusions • Prospects for reform

4. Samurdhi Programme • GOSL spent 3.8 % of GDP on transfers and subsidies in 2008. Samurdhi consumed 0.3 % of GDP. • Samurdhi’s large inclusion and exclusion errors, in turn giving rise to limited benefits, are due to the programme not having explicit eligibility criteria at its very inception in 1995. • Politicization of beneficiary selection. Programme used as an instrument of patronage disbursement. • In 1999/2000, a World Bank study found that Samurdhi missed 36 % of households in lowest expenditure quintile and 14 and 30 per cent of households in the highest two quintiles got the transfer. • Targeting errors found to be systematic. • Reform in 2002 – Welfare Benefits Act, introduction of Proxy Means Testing. • Before PMTF was implemented, budgetary dictates saw government ‘retire’ nearly 400,000 households from the programme in 2003 – coverage dropped from 1.9 million to 1.5 million families.

5. Resistance to reform • PMTF proved disappointing. One size fits all approach, unreliable given heterogeneous local communities, high rates of economic growth. • Government jettisoned PMTF. Began to develop eligibility criteria through community participation and screening methods. • Advantage – community acceptance. Disadvantages: depends on capabilities of facilitator, poor inter-rater reliability. • But new targeting methods yet to be implemented. • Resistance to reform comes from three sources: • local level politicians who do not want their key supporters to be ejected from the programme; • Samurdhi development officers who feel that they may lose their jobs if numbers decrease; • Samurdhi Bank officers who are resisting change because the viability of the banking system depends on the participation of the non-poor who have threatened not to repay their loans if they are removed from the income-transfer programme.

6. Data and Variables • Data sourced from Department of Census and Statistics’ (DCS) HIES 2006/07. • Data excludes Northern and Eastern Provinces. No data for Northern Province; Samurdhi extended to East only after 2006/07. • Household is the principal unit of analysis. • Equivalent scale used to determine whether the household is poor is per capita consumption. • Expenditure data adjusted for spatial differences in cost of living using DCS’ Laspeyre’s price index for 2006/07. Data adjusted for for sample weights. • Poverty line is the official poverty line constructed by DCS using Ravallion’s (1994) CBN method. • Four groups of explanatory variables included in the model: they relate to income, demographic and household composition variables, household employment and assets-related variables, community variables.

7. Results – Benefit Incidence • Although fewer wealthy households are getting support than before, more poor households who need support remain outside the programme. • In 2006/07, 47% of individuals in the lowest consumption quintile who ought to be getting Samurdhi, did not. In 1999/2000 the figure was 36%. • In 2006/07, 6% and 16% in the highest consumption quintiles get Samurdhi. In 1999/2000 the figures were 14% and 30%. • 2003 reforms eliminated many households who should not have been getting Samurdhi, but no commensurate increase in the number of those who should be getting support. • Samurdhi accounted for even less of household food expenditure in the lowest quintile in 2006/07 , (11 %), than it did in 1999/2000 (21%).

8. Results - Probability of being poor, probability of getting Samurdhi • Some targeting errors may be systematic. • Bias in the award of Samurdhi towards the rural poor and against the poor in urban areas and in the plantations • A greater share of employed household members in manufacturing and services also increases the likelihood of receiving the grant, than if a greater share were employed in agriculture. • Ownership of agricultural land significantly reduces the likelihood of being poor and significantly increases the likelihood of getting Samurdhi. • When education and occupation characteristics of households are controlled for, although most of the smaller ethnic and religious groups are less likely to be poor than the majority Sinhalese and Buddhists, they are even less likely to receive Samurdhi.

9. More results … • In terms of most of the other variables investigated in this analysis, the targeting of Samurdhi appears in line with characteristics of households that increase the likelihood of being poor, though there may be some degree of overkill. • Receipt of income from a pension reduces the likelihood of receiving Samurdhi by significantly more than it reduces the likelihood of the household being poor. • A better educated household workforce reduces the probability of being poor and reduces even more strongly, the likelihood of getting Samurdhi. • A similar result is obtained for the occupation and job status composition of the household workforce. • Access to power and water also reduces the likelihood of getting the transfer by more than it reduces the chances of being poor. • Living in a richer district reduces the likelihood of being poor, and by much more, the chances of getting Samurdhi. • Suffering a natural calamity the year before has no significant impact on poverty but significantly increases the likelihood of receiving Samurdhi.

10. Conclusions • The probability analyses of the present study suggest that targeting as far as observable characteristics are concerned, has been fairly consistent. • Given the ad hoc manner in which the beneficiaries were selected for the programme in the first place – no explicit selection criteria, on the basis of incomes declared by potential recipients recommendations by Samurdhi development agents, themselves nominated by politicians it is almost gratifying that Samurdhi manages to target the poor even as effectively as it does at present. • Or else the probability analysis may itself be evidence that formula-based approaches can be misleading, and that given heterogeneous local communities and high economic growth rates, community screening with proper guidelines may be more practical and more effective.

11. Prospects for Reform • Brighter now than they have ever been during the 15 years in which the programme has been in operation. • Samurdhi is not a flagship of the present regime: although the same political alliance which introduced Samurdhi forms the government, the leadership has changed, and is preoccupied with a different set of development programmes. • Consensus between officials of the Samurdhi Commissioner General’s Office and the World Bank about the direction that reform needs to take, with the World Bank willing to listen and learn rather than simply to criticize and dictate. • Conflict has ended, biggest constraint to Sri Lanka achieving its full economic growth potential has been removed. Should be easier to whittle down by at least 30 percent the total number of households receiving Samurdhi - that is those who are in the highest consumption quintiles - when the economy is growing, than when it is moving in fits and starts in the shadow of a violent conflict. • Economic growth should also open up some fiscal space to extend the programme to those poor households which are currently excluded, and to increase the amount of support offered.

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