Maria das Graças Ribeiro, a mother of four from Brazil, used to struggle to make ends meet and provide for her family. She was among the many vulnerable members of society who didn't have any safety net or support system to rely on during a crisis. However, her life took a turn for good when Maria became a beneficiary of the Bolsa Familia Program, a social protection program that provides financial assistance to low-income families. With the help of this program, she was able to pay for her children's education, one of which became the first person in their family to attend university. Maria's story is a testament to the transformative power of social protection programs, which have become increasingly important in addressing the needs of vulnerable members of society.

In recent years, the importance of social protection has been widely recognised, and many governments around the world have implemented social protection programs to address the needs of their citizens.

Financial inclusion has been a priority for many governments in recent years, with programs such as Jan Dhan Yojana in India and similar initiatives in other countries aimed at providing access to financial services such as banking, credit, and insurance to the unbanked population. The introduction of UPI (Unified Payments Interface) in India has also made banking seamless and swift, enabling people to transfer money and make payments with ease. However, despite these efforts, financial inclusion alone has not been able to improve people's financial health significantly. One of the reasons for this is that financial inclusion does not address the underlying issues of poverty and inequality. Providing access to financial services is essential, but it is not enough to lift people out of poverty. In fact, many people who have gained access to formal banking services have yet to see a significant improvement in their financial situation. Most people, especially in rural areas, still prefer informal banking products, which magnify the gulf between financial inclusion and citizens.

Lack of financial literacy and skills among the unbanked population can also hinder the effectiveness of financial inclusion programs. Even with access to banking services, people may not be aware of how to use them effectively or how to manage their finances.

In addition, the COVID-19 pandemic has exposed the limitations of financial inclusion.

While the pandemic has highlighted the importance of having access to digital financial services, it has also revealed the limitations of relying solely on these services. The pandemic has disproportionately impacted vulnerable communities, including the unbanked or underbanked. Financial inclusion alone has not been able to mitigate the impact of the pandemic on their financial health.

Therefore, it is crucial to recognise that financial inclusion is only one aspect of a comprehensive approach to addressing poverty and inequality. Social protection programs are an essential complement to financial inclusion initiatives. By providing financial assistance and support in areas such as healthcare and education, social protection programs can address the underlying issues that prevent people from breaking the cycle of poverty. Additionally, efforts to improve financial literacy and skills among the unbanked population can help them better use financial services and improve their financial health.

 

 

Social protection programs have effectively filled the gaps left by financial inclusion programs. In Mexico, the Prospera (formerly Oportunidades) program provides financial assistance to low-income families in exchange for meeting certain conditions related to health, nutrition, and education. The program has been successful in reducing poverty and improving health and education outcomes for the poorest families in Mexico. In addition, the Prospera program provides cash transfers to low-income households to help them meet basic needs such as food and housing. The program has also been credited with reducing poverty and improving health outcomes.

Similar social protection programs have been implemented in other countries, South Africa's Child Support Grant program, which provides cash transfers to low-income families with children under the age of 18 and Colombia's Familias en Accion program. These programs have had varying degrees of success but, overall, have been effective in providing support to vulnerable individuals and families.

According to data from the World Bank, social protection programs have the potential to reduce poverty by up to 25%. In addition, these programs have been shown to have positive impacts on health, education, and economic growth. For example, a study of the Prospera (formerly Oportunidades program) in Mexico found that it led to significant improvements in child nutrition and school attendance.

Social protection programs have the potential to improve the lives of the most vulnerable members of society, but they also face a number of bottlenecks. One of the biggest challenges is the issue of duplication of social security numbers, which can lead to fraud and corruption. In addition, financial fraud and lack of financial literacy and skills can hinder the effectiveness of social protection programs.

In India, the government has identified several instances of duplicate Aadhaar numbers, a unique identification number used to access various government services, including social security programs. This has led to the fraudulent use of these numbers to obtain benefits meant for other individuals, resulting in significant losses to the government.

Additionally, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has been plagued by corruption and fraud. The program, which guarantees 100 days of paid employment per year to rural households, has been criticised for poor implementation and leakages. According to a study conducted by the Indian Council for Research on International Economic Relations, only 34% of the funds allocated for the program reached the intended beneficiaries in 2007-08.

Similarly, in Indonesia, the government's conditional cash transfer program (PKH) has been criticised for targeting the wrong beneficiaries and being prone to errors and fraud. A 2017 study by the World Bank found that around 18% of PKH beneficiaries were not poor, and around 11% of eligible households were not included in the program.

Trickle-down economics, which suggests that economic growth will eventually benefit all members of society, has also been criticised for not reaching those most in need. In South Africa, for example, despite a period of sustained economic growth, income inequality has remained stubbornly high, with the top 10% of households earning 65 times more than the bottom 10%.

 

Another bottleneck for social protection programs is the lack of financial literacy and skills among the intended beneficiaries. In the Philippines, the government's conditional cash transfer program (Pantawid Pamilyang Pilipino Program) has been criticised for not doing enough to promote financial literacy among the program's beneficiaries. A World Bank Study found that many beneficiaries lacked basic financial knowledge and skills, which made it difficult for them to make informed decisions on how to use the cash transfers they received.

In conclusion, social protection programs are crucial in promoting economic and social development, reducing poverty and inequality, and addressing the needs of vulnerable members of society. While financial inclusion is an essential step towards reducing poverty and promoting economic growth, it alone is not enough to address the root causes of poverty and inequality. Social protection programs, such as the Bolsa Familia program in Brazil, have been successful in filling the gaps left by financial inclusion programs. However, they also face several bottlenecks, which need to be addressed for these programs to be effective. Therefore, it is essential to continue investing in social protection programs that are designed to address the needs of the most vulnerable members of society.

 

Bottomline

Social protection programs are crucial in promoting economic and social development, reducing poverty and inequality, and addressing the needs of vulnerable members of society. While financial inclusion is an essential step towards reducing poverty and promoting economic growth, it alone is not enough to address the root causes of poverty and inequality. Social protection programs, such as the Bolsa Familia program in Brazil, have been successful in filling the gaps left by financial inclusion programs. However, they also face several bottlenecks, which need to be addressed for these programs to be effective. Therefore, it is essential to continue investing in social protection programs that are designed to address the needs of the most vulnerable members of society.

 

 

 

References 

Barrientos, A., & Hulme, D. (Eds.). (2008). Social protection for the poor and poorest: Concepts, policies and politics. Palgrave Macmillan.

Devereux, S., & Sabates-Wheeler, R. (Eds.). (2004). Transformative social protection. IDS Bulletin, 35(3).

World Bank. (2012). The state of social safety nets 2012. World Bank Publications.

Demirgüç-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2018). The Global Findex Database 2017: Measuring financial inclusion and the fintech revolution. World Bank Policy Research Working Paper No. 8443.

Cull, R., Demirgüç-Kunt, A., & Morduch, J. (2018). Financial inclusion and development: Recent impact evidence. World Bank Research Observer, 33(1), 1-27.

Midgley, J. (2013). Social development and social protection: New opportunities and challenges. Development Southern Africa, 30(1), 2-12.

Gentilini, U. (2022, July 13). Ten lessons from the largest scale up of cash transfers in history. Retrieved from https://blogs.worldbank.org/developmenttalk/ten-lessons-largest-scale-cash-transfers-history