What works? Best practices of social protection for informal workers

Transcription

WHAT WORKS?
Best practices
of social protection
for informal workers
A cross-country study
Kyrgyzstan, Pakistan, Vietnam
What Works? Social Protection of Informal Sector Employees
EPOS Health Management
I
Contents
Contents .......................................................................................................................................................... II
Abbreviations and Acronyms ........................................................................................................................... V
Summary ......................................................................................................................................................... 1
1
2
Introduction ........................................................................................................................................... 2
1.1
Aims and Objectives of the Study .............................................................................................. 2
1.2
Methodology ............................................................................................................................... 2
1.3
The Study Team......................................................................................................................... 5
Case Study I: Vietnam .......................................................................................................................... 6
2.1
Country Background .................................................................................................................. 6
2.2
The Current National Policy on Social Protection ...................................................................... 6
2.2.1 Supporting Policies on the Labour Market ...................................................................... 6
2.2.2 Supporting Policies on Insurance .................................................................................... 7
2.2.3 Supporting Policies on Social Assistance ....................................................................... 8
2.3
The Informal Sector and Social Protection................................................................................. 9
2.4
Best Practice on Social Protection for the Informal Sector ...................................................... 10
2.4.1 National Social Protection Scheme ............................................................................... 11
2.4.2 Commercial Insurance .................................................................................................. 13
2.4.3 Non-profit Organisations ............................................................................................... 14
2.5
Conclusion and Recommendations for Improved Social Protection in Vietnam ...................... 16
2.5.1 Focus Energy on Formalising the Informal Sector ........................................................ 17
2.5.2 Develop a Targeted Approach to Integrating the Informal Market ................................ 19
2.5.3 Improve the Social Insurance Product .......................................................................... 20
2.5.4 Assist the VSS in Product Distribution and Data Management ..................................... 21
2.5.5 Improve Risk Management Skills .................................................................................. 23
2.6
3
Final Thoughts ......................................................................................................................... 23
Case Study II: Kyrgyzstan................................................................................................................... 24
3.1
Country Background ................................................................................................................ 24
3.2
The Current National Policy on Social Protection .................................................................... 24
3.2.1 The Social Protection Strategy for 2006-2008 .............................................................. 24
3.2.2 The Country Development Strategy/Poverty Reduction Strategy Paper (CDS/PRSP)
2007-2010 ..................................................................................................................... 25
II
3.2.3 The New Social Policy................................................................................................... 25
3.3
The Informal Sector and Social Protection............................................................................... 25
3.4
3.4.1 Social Insurance ............................................................................................................ 28
3.4.2 Health Insurance ........................................................................................................... 29
3.4.3 Social Assistance Programmes ..................................................................................... 31
3.4.4 Private Sector ................................................................................................................ 31
3.4.5 Other Social Protection Schemes ................................................................................. 32
3.5
Conclusion and Recommendations for Improved Social Protection in Kyrgyzstan.................. 33
3.5.1 The impact of the informal sector to social protection in Kyrgyzstan ............................ 33
3.5.2 Gaps in Social Protection .............................................................................................. 34
3.5.3 Government response to addressing need of the informal workers for social security . 35
3.6
4
Final Thoughts ......................................................................................................................... 36
Case Study III: Pakistan...................................................................................................................... 38
4.1
Country Background ................................................................................................................ 38
4.2
The Current National Policy on Social Protection .................................................................... 39
4.2.1 Relevant Legislation ...................................................................................................... 39
4.2.2 Poverty Reduction Strategy Paper (PRSP II) ................................................................ 41
4.2.3 Policy Coherence in Social Protection .......................................................................... 41
4.3
The Informal Sector and Social Protection............................................................................... 42
4.4
4.4.1 Bait-ul -Mal .................................................................................................................... 43
4.4.2 National Rural Support Programme / Adamjee Insurance ............................................ 45
4.4.3 Benazir Income Support Programme ............................................................................ 47
4.4.4 The Bacha Khan Income Support Programme ............................................................. 48
5
4.5
Conclusion ............................................................................................................................... 49
4.6
Final Thoughts ......................................................................................................................... 50
Cross-Country Comparison of Best Practices for the Informal Sector ................................................ 51
5.1
Policy Framework ..................................................................................................................... 51
5.2
Extending Social Protection to the Informal Sector .................................................................. 55
5.3
Comparison of Benefits and Disability Package ...................................................................... 56
III
5.4
Contrasting the configuration of social protection mechanisms available for the informal
workers ..................................................................................................................................... 58
6
Recommendations .............................................................................................................................. 61
Annex 1: Methodological Considerations ...................................................................................................... 63
Annex 2: Meeting Schedule for Vietnam ....................................................................................................... 70
Annex 3: List of People Met in Pakistan ........................................................................................................ 72
Annex 4: List of People Met in Kyrgyzstan .................................................................................................... 73
IV
Abbreviations and Acronyms
ADB
Asian Development Bank
BISP
Benazir Bhutto Income Support Scheme
CFRC
Community Finance Resource Centre
CSR
Corporate Social Responsibility
DFID
Department for International Development
GDP
Gross Domestic Product
GIZ
Deutsche Gesellschaft für Internationale Zusammenarbeit
GoV
Government of Vietnam
HDI
Human Development Index
ILSSA
Institute of Labour Science and Social Affairs (Vietnam)
IMF
International Monetary Fund
MFI
MicroFinance Institution
MHIF
Mandatory Health Insurance Fund
MOF
Ministry of Finance
MoLISA
Ministry of Labour, Invalids and Social Affairs (Vietnam)
MOSP
Ministry of Social Protection (Kyrgyzstan)
MSB
Monthly Social Benefit
NGO
Non-governmental Organisation
NRSP
National Rural Support Programme
OHS
Occupational Health and Safety
PBM
Pakistan Bait-ul-Mal
PRSP
Poverty Reduction Strategy Paper
PwD
Persons with disabilities
SGBP
State Guaranteed Benefits Package’
SOE
State-owned Enterprise
UMB
Unified Monthly Benefit
UN
United Nations
UNDP
United Nations Development Programme
UNHCR
United Nations High Commissioner for Refugees
VHI
Voluntary Health Insurance
VND
Vietnamese currency
VSS
Vietnam Social Security Services
WG
Working Group
V
Summary
Background: Informal
nformal workers make up the majority of the workforce of many Asian partner countries of
German development cooperation. The overwhelming majority of these are not covered by any form of sos
cial protection. Hence, in order to achieve universal coverage of social
social protection, it is crucial to identify well
working schemes and approaches on how to reach and cover this part of the population. However, most of
the studies to date that address the issue of informal workers and social protection, aim at describing certain characteristics of these groups including willingness to pay for social protection coverage. Therefore,
the study at hand aims at closing this knowledge gap at least in part, by drawing a focus on identification of
best practices of social protection
on – and especially social health protection – of informal workers in Kyrgyzstan, Pakistan and Vietnam.
Method: The study was conducted by teams of Epos Health Management in close cooperation with
GTZ/GIZ
GIZ projects and programmes in the respective countries.
countries The conceptual background for the research
questions is the so called universal (health) coverage cube, which basically addresses the three dimensions
of social (health) protection: population coverage (who
(
is actually covered?),
), service coverage (what
(
services are covered by the respective scheme?)
scheme? and cost coverage (what
what proportion of the costs are covco
ered?).1 Three approaches were applied: Desk research,, which aimed to provide an overall picture of the
social protection landscape in terms of legal and regulatory frameworks and the different agents involved
and to list down a menu of social protection systems that are made available to the informal sector following
statutory or legal mandates. Interviews with key informants to substantiate information acquired
a
from desk
research with the intention of deepening appreciation of national policy and the consequent configuration of
social protection systems and their mechanisms. Finally, visits to selected sites were conducted to inquire
about key operation and
nd organisational elements of social protection systems.
Results: For Kyrgyzstan and Pakistan, no “best practice” schemes of social protection for informal workers
as such could be identified. This is due to the fact that in both countries no explicit laws
laws and/or programmes
have been established to date that address the specific issue of (extending) social protection for (to) inforinfo
mal workers. The national social health insurance scheme of Vietnam, however, in deed proved to be a
best practice case for reaching
eaching out to informal workers in terms of social health protection coverage. The
Vietnamese government provide full subsidies for social health insurance contributions of those informal
workers and their families living below the poverty line (BPL), while providing in-part
part subsidies of contribucontrib
tions of those who are defined to be near poor. Although, the principle of providing tax-financed
tax
subsidies
for social insurance contributions of those, who don’t have a regular or
o only a very low income is not new, it
could be of interest for those countries in the region that currently strive to achieve universal coverage. Enforcement of compliance with existing laws on social protection,
protection however, is a major issue in Vietnam and
Kyrgyzstan as well. Especially employers’ reluctance to register their employees in existing social insurance
schemes was reported to be a troublesome issue.
issue This is not just problematic in terms of coverage and aca
cess to social services for those who are not registered. Moreover,
Moreover, this deprives national social insurance
schemes of contributions,, which would otherwise increase the pooled funds and thereby enhance the finanfina
cial viability of the respective schemes. Accordingly, more research is needed on how to effectively enforce
companies’ registration to national social protection schemes.
1
Cf. WHO (2010) The World Health Report. Health systems financing. The path to universal coverage. Geneva, p. XV.
1
1 Introduction
1.1
Aims and Objectives of the Study
On behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) the Deutsche
Gesellschaft
haft für Internationale Zusammenarbeit
Zusamme
(GIZ) intends to further support partner countries in
strengthening their social protection schemes in order to reach more effectively the
t excluded and vulnerable
segments of the population,, with a particular focus on workers in the informal sector.
So far little is known as to “what works” to protect informal sector workers in selected partner countries. To
what degree
ree do public and private (profit and non-profit)
non profit) schemes already exist, that cater for the need of
the informal sector and what conclusions
conclusions can be drawn from the experience? This study intends to fill a
knowledge gap with regard to good practice in the area of social protection in the countries of Vietnam,
Pakistan and Kyrgyzstan.
For each of the three countries the study aims to provide the following:
A brief description of the existing social security systems;
A brief description of respective state provisions and legal framework conditions, especially labour
and social security law and tax law where relevant, including the political background;
background;
The identification and description of (good) practice examples for the inclusion of informally eme
ployed persons in social protection systems; and the establishment of specific social protection
systems
tems for this group; the emphasis is on schemes for which target groups are paying contribucontrib
tions, i.e. micro-insurance
insurance schemes;
The description of the potential of cooperation (both in terms of technical exchange and expanding
coverage for development aims) with the private sector in the different identified
identified mechanisms;
The description of potential lessons learnt that may be derived from the comparison of the councou
tries; the study will provide recommendations as to which of the good practice found may be replirepl
cated elsewhere and under which conditions.
1.2
Methodology
This study intends to showcase social protection systems that cater to informal sector groups. To further
scope this study, we have subscribed to the International Labour Organisation’s (ILO) definition of the informal sector, which is “broadlyy characterised as comprising production units that operate on a small scale
and at a low level of organisation, with little or no division between labour and capital as factors of producprodu
tion, and with the primary objective of generating income and employment
employment for the persons concerned.” Statistically, they are considered to comprise those household unincorporated enterprises with market producprodu
tion that are:
Informal own account enterprises (optionally, all, or those that are not registered under specific
forms
rms of national legislation);
2
Enterprises of informal employers (optionally, all those with less than a specified level of employemplo
ment and/or not registered and/or employees not registered).
Other than providing an inventory of notable social protection systems, our study took particular interest in
the mechanisms employed by these systems that could be categorised as best practice in targeting and
covering risks among the informal sector. There are several organisations
organi ations that implement social protection
mechanisms
echanisms for the informal sector and come from the ranks of the private and public sectors, or non-profit
non
organisations.
ations. Best practices cited here come from organisations
organi ations given special mention by credible agenage
cies in the countries we have visited. Instinctively,
Instinc
organisations
ations that deserved mention are those that have
considerable membership bases and/or have gained notice of the government and development partners.
We identified best practices as successes in three broad criteria:
1.
Coverage Ratio:: number of people participating in the scheme within the target group vis-à-vis
vis
total target population
2.
Coverage Depth:: how much financial mitigation is provided in cases of catastrophic expenditure or
when exposed to risks
3.
Coverage Breadth:: the range of social protection
protection products made available for clients.
These criteria mirror the framework adopted by GIZ in supporting countries in achieving universal coverage.
These dimensions are shown in the figure 1 below.
Fig. 1: Universal (health) coverage cube2
What this means conceptually is that the cases we showcase here are what we perceive as mechanisms
that could viably assist towards universal coverage, particularly reaching the informal sector by offering
products that address their specific
specific risks. The case studies focused on schemes that beneficiaries are rer
quired to contribute to.
2
WHO (2010) The World Health Report. Health systems financing. The path to universal coverage. Geneva, p. XV.
3
The study employed three methods to gather information about social protection practices.
practices The use of the
three methods made possible cross-referencing,
cross
data verification and cross-validation.
validation.
1.
Desk research.. The review of available documents provided an overall picture of the social protection landscape in terms of legal and regulatory frameworks and the different agents involved. The
objective of this activity was to list down a menu of social protection schemes that are made available to the informal sector following statutory or legal mandates. The documents had been propr
vided by governmental units e.g. departments of labour and social welfare, as well as, constituted
cons
bodies and institutes and civil society organisations.
2.
Key informant interviews.
interviews Interview of key informants substantiated information acquired from
desk research and had the intention of deepening appreciation of national policy and the consecons
quent configuration of the social protection system and their mechanisms. The interviews inquired
about how access to a social protection system is assured and whether adjustments in the system
were made to accommodate the needs of the sector.
sector Key informants were
ere asked about noteworthy
social protection schemes within and outside the government establishment.
3.
Site visits. From a list of noteworthy social protection schemes, organisations were visited to inquire about key operation and organisational elements of their respective social protection scheme.
s
The purpose of the visit is to unpack good practices that could be readily attributed to successes in
reaching the scheme’ respective coverage targets and/or providing substantial risk protection. This
study consequently
equently looked at schemes as run by three agents: state or public sector instituinstit
tions, commercial enterprises and cooperatives systems.
We have selected key informants for interviews on the basis of referrals from our national experts and nan
tional agenciess and later through snowballing. It is assumed that national agencies would have an overview
of social protection schemess that are in operation in their respective countries. Key people of these national
agencies are themselves respondents in interviews to supplement information gathered from document rer
view.
Annex I provides an overview of the methodological considerations for this study. In chapter two, three and
four of this report, the findings from each of the three countries are described in detail. Chapter five makes a
comparison of the findings from the three countries and draws conclusions for the replicability of the results.
4
1.3
The Study Team
The study team was deployed in tandems for each country, except for Kyrgyzstan. With the tandem, the
short-term
term experts were able to cross-validate
cross validate their findings in interviews and site visits. The appropriation
of expert days are shown in the following table.
Table 1: Distribution of Expert Days
NAME
Laura Donovan
Gary Asperas
Monica Burns
Ashar Malik
Bart Smet
Patrick Krause
Total Working
Days
ED
Total
12
17
12
11
16
6
74
Vietnam
Desk
3
3
Kyrgyzstan
Field Report Desk
6
6
Pakistan
Field Report Desk
2
2
3
3
4
22
6
4
14
Meth./
Quality Check/
Field Report
Consolidation
1
6
6
2
1
2
6
2
6
22
16
5
2 Case Study I: Vietnam
2.1
Country Background
Since implementing the Doi moi (Renewal Policy) in 1986, Vietnam has succeeded in advancing its sociosocio
economic development. With sustained high economic growth over the last 25 years, Vietnam has lifted
millions of people out of poverty. The poverty rate of the country was reduced impressively from 58% in
1993 to 9.45% in 2010. Per capita income rose from 220 US$ in 1994 to 1.169 US$ in 2010.3 It is no surprise that living standards
ndards have been improved significantly.
2.2
The Current National Policy on Social Protection
It is in this backdrop that the social protection system was set up in Vietnam. The social protection system
stands on three pillars. The first pillar is composed of policies affecting the labour market, which include job
training, job matching, financial assistance for job creation and labour export. The second pillar involves
policies on insurance, which includes social insurance, healthcare insurance, unemployment insurance and
crop insurance. The third pillar pertains to policies on social assistance, which covers cash transfers, povpo
erty reduction and social services.
2.2.1 Supporting Policies on the Labour Market
Social protection policies that address the labour market
market target the poor, youth, workers in rural areas,
workers in informal sector, redundant workers, persons with disabilities (PwD) and other vulnerable labour
groups affected by socio-economic
economic policies and globalization. Through several policies, the Government
Governm
of
Vietnam (GoV) has been striving to create employment opportunities.
The Vietnamese Government has paid increasing attention to training, especially vocational training, for
vulnerable groups. As a result, there are over one million people of working age attending technical and
professional training annually. Within the period 2006 – 2009, there were on average more than 300.000
300
rural workers participating in short-term
short term and elementary vocational training, accounting for 2% of total rural
youth.4
The employment
mployment service system has been operating since the early 1990s. Employment introduction serse
vices are being provided by both state and the private sector. By 2010, 150 employment introduction cence
tres were established nationwide. These centres provide employment
employment consultancy for about 603.000 jobjob
seekers. From among them, about 230.000 employees are sent to work
work.5 Furthermore, the GoV has been
focusing on supporting migrants, particularly ethnic minorities, as they work and settle in new economic
zones.
3
General Statistics Office, Statistical Hand Book of Vietnam 2010.
http://www.gso.gov.vn/default.aspx?tabid=512&idmid=5&ItemID=11022
4
The Current Situation of Vietnam’s Social Welfare in 2001-2010
2001 2010 Period, Draft of Vietnam’s Strategy for Social Welfare 20112011
2020, Ministry of Labour – Invalids and Social
Soc Affairs.
5
Ibid
6
For PwD,, employment funds have been established to assist employment creation. In the periods of 1999 –
2004 and 2005 – 2008, there were 19.000 and 8.000 disabled people, respectively, participating in vocavoc
tional training programmes.
s. By 2010, among the 260 vocational training centres nationwide, there are 55
centres especially catering to disabled people.
people 6
To sustain employment generation, the GoV has set up preferential credit programme
programmes. Some of the credit
programmess that were instituted include: those that
that were set up in 62 poor districts according to Resolution
No. 30a/2008/NQ-CP;
CP; credits for traders in difficult settings as per Decision No. 92/2009/Qð-TTg
92/2009/Q
from the
Prime Minister on 8 July 2009; and, credit programs for housing among low-income
low income people. The
T National
Target Programme on Employment issued in 2007 ties in training and job introduction to set up of preferenprefere
tial credit programmess as combined approaches to promoting employment creation. In the period 2006 2009, the National Fund for Employment provided loans to 418.000 participations, annually created
250.000- 300.000
000 labourers (comprising 20% of the total employment created annually) with business genge
erated through the employment creation model
model.7 A significant number of the beneficiaries of this
thi Fund are
the poor and vulnerable groups.
2.2.2 Supporting Policies on Insurance
The Government made social insurance, healthcare insurance and more recently unemployment insurance
as the main cornerstones of this system. It involves participation of three parties:
parties: employees, employers
and the GoV, with the aim of reducing the burden on State’s budget in conformity with the fundamental
principles of market economy.
Social Insurance
In 2006, the State issued the law on Social Insurance which is a policy milestone
milestone with regard to Vietnam’s
pursuit of universal social protection. This law covers compulsory social insurance (for formal sector eme
ployees),, voluntary social insurance and unemployment insurance, which broadens access for workers,
especially those in the informal sector, to participate in social insurance.
The implementation of this law has improved the coverage of social insurance. Millions of workers have
benefited under the social insurance regime, which covers sickness (time away from work due to illness),
illn
maternity (time away from work due to a pregnancy),
pregnancy), retirement, survivors' benefits and disability. The
number of people participating in social insurance has been increasing by about 400.000 people per year,
from 4,8
8 million people in 2001 to 9,1 million
million people in 2009, accounting for 18% of the total labour force.
The revenue from compulsory social insurance has grown dramatically, up to 36,8
36 8 trillion VND (2,041 billion
US$) in 2009 from 6,348 billion VND (0,431 million US$) in 2001. Total expenditure
re of compulsory social
insurance also increased rapidly, from
from 1,856 billion VND (0,126 million US$) to about 54.9
54. trillion VND
(3,045 billion US$) in 2009, of which the
t state budget spending was 26.8
8 trillion VND (1,486 billion US$).
Implemented since the beginning of 2008,
200 , the number of people participating into voluntary social insurance
6
“Vocational Training for the Disabled Should be Prioritized”, The Laodong Online, April 15, 2010.
7
418,000 participations loaned from the National Fund for Employment, Hanoi Moi Online, January 21, 2010,
http://www.hanoimoi.com.vn/newsdetail/Chinh
http://www.hanoimoi.com.vn/newsdetail/Chinh-tri/306208/418000-luot-nguoi-duoc-vay-von-tu-quy
quy-quoc-gia-ve-vieclam.htm.
7
is about 50.000 people, and the revenue of voluntary social insurance fund was estimated to be 69,5 billion
VND (3,855 million US$) and its spending was 10,9 billion VND (0,605 million US$) in that year.8
Health Insurance
The healthcare insurance system went through a series of policy amendments. Started in 1992 by the DeD
cree No 299/HDBT dated 15 August 1992, and then further defined by Decree No 58/1998/ND-CP
58/1998/ND
dated 13
August
gust 1998 and Decree No 63/2005/ND-CP
63/2005/ND CP dated 16 May 2005, the State had set up the healthcare ini
surance through community contribution with the aim of achieving social justice and humane healthcare and
medical treatment, health protection and the reduction of financial burdens on households. The Law on
Health Insurance finally came into effect on 1 July 2009, additionally articulating the objective of attaining
universal health insurance by 2014. Participation costs 4,5% of a salary (or of the minimum wage for
f nonformal sector workers. Employees pay 1,5% and employers 3%. In the voluntary scheme, participants pay
the entire 4,5% unless they are subsidized by the government.
The Health Insurance Law demonstrates the Government’s commitment to fund health insurance
ins
contributions for the poor and near poor, ethnic minority people, households living from agriculture, forestry and salt
industries with medium and lower incomes and beneficiaries of social preferential treatment and social asa
sistance. The number of participants in compulsory and voluntary health insurance increased sharply to
53,3
3 million people nationwide in 2009, accounting for more than 60% of total population. The compulsory
scheme covers formal-sector
sector workers. The voluntary scheme is composed of either the poor / near-poor
near
(subsidized by the GoV) or those from the informal sector who choose to enrol. 30 million of those participated via the compulsory health insurance with 20% in rural areas.9 There were 13,2%
2% of the poor participartic
pating in health insurance, 93% of whom were in rural areas. Nearly 9,6%
9 6% of pupils and students are covco
ered by health insurance, of which participants from rural areas account for nearly 40%. Around 11 million
people participated in voluntary health insurance, of which 66,6%
66 6% are from rural areas10.
Unemployment Insurance
In terms of supporting workers who have lost their jobs, the unemployment insurance has been providing
benefits since 1 January 2010.. According to information gathered during our interview with MOLISA, in
June 2010, there were about 6,4
4 million people participating in this insurance regime. By October 2010,
there were 128.000 who have received an unemployment allowance. 80% of them also received employemplo
ment consultancy services.
2.2.3 Supporting Policies on Social Assistance
The social assistance policies include two groups, namely regular assistance and emergency relief. Both
programmess have played important roles in providing income
income to vulnerable groups such as PwD elderly,
children with special needs, etc. allowing
allowing them some economic stability and protection from risks.
8
Vietnam Social Insurance Agency,, Report on Social insurance for the development of Socio-economic
Socio economic Development Plan in
2011-2015.
9
Vietnam Social Insurance Agency.
10
Vietnam Social Insurance Agency.
8
A major step to expand regular
egular social assistance was the issuance of Decree No. 13/2010/ND-CP
13/2010/ND
dated 27
February 2010, established with Decree No. 67/2007/ND-CP
67/2007/ND CP issued on 13 April 2007, which expanded
exp
social assistance to non-poor
poor household members with severe disabilities who are unable to work. Later,
through, amendments and supplementary articles were added to the 2007 decree, and the number of beneben
ficiaries increased rapidly from 416.000 people
peopl in 2005 to more than 1,25
25 million people in 2009. The assisassi
tance level is adjusted to match economic growth, thereby ensuring that benefits matches rising living stansta
dards.11 The number of social protection centres similarly increased.12 By December 2008, there were 571
social protection centres nation-wide
wide serving about 14.613 beneficiaries. More than one third of these ese
tablishments are non-state-run.
Emergency relief is designed to deal with unforeseeable events that cause financial risks. Emergency relief
re
has been socialized and has been getting financial support from individual benefactors, mass organizations,
enterprises, international organizations and Vietnamese oversees workers, which make up for the shortage
of resources from the GoV budget.
2.3
The Informal Sector and Social Protection
The population of Vietnam was 86.9
6.9 million of which almost 47 million are of working age. Approximately
12,3
3 million people (27% of the labour force) are working in the formal sector (public sector, registered ene
terprises, semi-public
public institutions, etc.). Those working in the formal sector are supposed to be covered by
social insurance,, this, however, is not always the case..
case.
The majority of the labour force is working in the informal sector. The informal sector is defined as farmers
and workers in the agriculture sector, rural non-farm,
non
own-account
account workers, and household businesses. In
Vietnam, the informal sector is regarded as one of the pioneers in the renewal process and it has contribcontri
uted significantly in the transformation from a planned economy to a market economy. The flexibility and
adaptability played an important role in helping the Vietnamese economy overcome the most difficult periper
ods in the early 1990s and the recent world economic recession in 2007-2008.
2007 008. The informal sector has also
absorbed the redundant workers and laid-off
laid off workers resulting from the economic restructure and SOEs
reforms. It has created jobs and generates income for many labourers in Vietnam. It is estimated that about
33,3 million people working in informal sector,
sector, and generate annually about 20% of total GDP of Vietnam.13
With this significant number, providing social protection to the informal sector had to be an essential part of
the goal to attain universal coverage. Yet, only 3,7%
3
of labour forces working in the informal sector benefit
from the voluntary social insurance and about 3,7% of them from the voluntary health insurance. 15,9%
15
of
11
Do Trong Huynh, Some Views on Reforming the Social Protection System in Vietnam,
Vietnam, November 3, 2010,
http://www.molisa.gov.vn/news/detail2/tabid/371/newsid/51857/seo/BAN-VE-CAI-CACH-HE-THONG
http://www.molisa.gov.vn/news/detail2/tabid/371/newsid/51857/seo/BAN
THONG-AN-SINH-XA-HOI-OVIET-NAM/language/vi-VN/Default.aspx
VN/Default.aspx
12
These are the protection centers for people with severe mental disorders, disabled, elderly, etc.
13
Dong Quoc Dat, Social protection for informal sector in Vietnam: Current Situation and Recommendations.
Recommendations. Journal of EcoEc
nomics and Forcast, No 15 (431), August 2008.
9
labour forces working in the informal sector benefit from the compulsory health scheme as their
th premium is
paid by the government (decided by poverty levels)14.
The illustration below shows how the informal sector enters into the state social protection systems – mainly
tapping into the voluntary schemes that were setup within the national social insurance and national health
insurance.
Figure 1: Participation of the Informal Sector to the National Programmes
Ironically in terms of government policies, there is no mentioning
mention
of the informal economic sector as a disdi
tinct group with specific needs.. Therefore, there is no official policy to support this sector. The protection of
labourers in this sector goes through different pathways, and despite its capacity to do much for the informal
sector, these policies have not been made specific enough to their
their increase enrolment. In the interim, comco
mercial insurance and mass organizations have been attempting to offer social protection to this group. The
sections below identify and analyse best practices coming out from these institutions in providing social
socia protection to the informal sector.
2.4
Best
st Practice on Social Protection for the Informal Sector
There are presently three actors involved in offering social protection15 to the Vietnamese: the government,
commercial insurance and social organizations. In the
the case of social protection benefiting the informal secse
tor, we have identified examples from each of these three categories which deserve mentioning so that their
best practices can serve as lessons. The schemes themselves might not be the answer but there are practices that can be learned from the below examples.
14
Ibid.
15
It should be noted here that – according to BMZ’s sector strategy on social protection – the term social protection includes
also approaches like conditional or non-conditional
non
cash transfers, cash-for-work, food-for-work,
work, school feeding schemes
as well as social insurances. Hence, the term social protection is a broader concept than social insurance.
10
2.4.1 National Social Protection Scheme
Interestingly enough, in our opinion, the best practice in the domain of social protection in Vietnam would
have to be the government scheme. For the formal sector, the coverage in terms of population covered is
relatively wide. The voluntary scheme for the informal sector has the majority of the poor and near poor
population.. To date, enrolment in the health insurance scheme has been high and this high health care outreach can – potentially – be replicated for social insurance. Features of the national programmes are sumsu
marised in the following table.
Table 2: Main Features of the National Social Protection Schemes
Social Insurance
No. of Insurees
Health Insurance
Compulsory
Voluntary
Compulsory
Voluntary
9.05M
50T
30M
23.3M
Outreach
Urban and rural
Urban and rural
20% in rural
66.6% in rural
Elgibility
Formal workers
Informal
Formal workers
Informal workers,
students
Monthly
Premium
7,84 US$ (22%
of min. wage)
6,41 US$ (18%
of min. wage)
1,60 US$ (4.5%
of min. wage)
1,60 US$ (4.5%
of min. wage)
Benefit
package
Sickness; matermate
nity; labour acciacc
dent/ occupaational disease;
retirement; survisurv
vorship allowwance
Retirement; suvivorship allowance
Outpatient:
100% medical
cost if under 4,88
US$, 80% if
over; Inpatient:
80% but not exceeding 976,80
US$
Outpatient:
100% medical
cost if under 4,88
US$, 80% if
over; Inpatient:
80% but not exceeding 976,80
US$
The GoV is already making considerable progress in embarking on universal coverage with social protecprote
tion. It claims to have reached 60% of the population with its National Health Insurance, although efforts
have been much more modest with its social insurance. Dissemination
Dissemination of the two programmes
program
is most effective for the formal sector with the compulsory scheme – essentially obligating employers to register and
pay a share of their employees’ insurance premiums. This is enforced following the Labour Code and Social
Soci
Insurance Law. In the case of the National Health Insurance, the Government is aggressive on subsidising
premiums of the poor. Similarly, the poor are targeted under the national targeted program on poverty rer
duction. The middle segment, the informal sector,
sector, which is a significant part of the population estimated to
be between 75% - 80% of the population,
population 16 is expected to participate with the voluntary scheme.
Both in terms of coverage and potential enforceability, the national programme is best able to provide social
protection to the informal sector,, especially if many of the workers become eligible for the compulsory
16
Although there is no official accounting regarding the informal sector,
sec
the 75-80%
80% figures were repeated by different governgover
ment ministries.
11
scheme.. This is primarily for two reasons. First, the national schemes are set-up
set up for country-wide
country
coverage,
which means resources and logistics are invested so that the government will not just be able to attain its
membership target but also provide the corresponding benefits. Even though the informal sector coverage
is today proportionally small compared to other target groups, the number of informal sector members in the
national scheme is still considerable when compared to any community insurance schemes (which remain
very local).. Second, because of their membership base, the national programmes
program s are potentially more fif
nancially viable. They have the potential to reach a scale that effectively distribute financial risks as against
small risk pools that are prone to adverse selection, epidemiological risks, and the like.
The premium sharing that the government is implementing
implementing for voluntary membership in the national health
insurance scheme (and later potentially in the social insurance scheme17) is particularly notable in removing
disincentives for low-income
income individuals to participate and in reducing adverse selection. The government
pays 100% of the premium for the poor and 50% for the near-poor.
near
Premiums are determined as a percentpercen
age of the national minimum wage.
In early 2011, the government strongly raised the ceiling of the income levels of the categories of the poor
and near-poor.
poor. The number of new beneficiaries of the health insurance scheme (and other social assisassi
tance) is not yet known but it is expected that there will be an increase over the 10 million presently benefitbenefi
ting from the programme.. The new ceilings underline
underline the GoV’s efforts to assist the poor in accessing risk
protection.
Table 3: Income Levels (monthly) Receiving Government Benefits
Urban
Rural
Earlier System
(income ceiling)
260.000 VND (12,64 US$)
200.000 VND (9,72 US$)
2011-15 Poor
500.000 VND (24,30 US$)
400.000 VND (19,44 US$)
501.000 – 650.000 VND
(24,35 – 31,59 US$)
401.000 – 520.000 VND
(19,49 US$ - 25,27 US$)
2011-15 Near Poor
Likewise, in what was perhaps a response to the financial crisis with the realisation
reali ation that a significant
si
number of formal sector workers could be moving to the informal sector, VSS (Vietnam Social Security, the govgo
ernment body managing social insurance) instituted a system that allows members to move easily from the
compulsory scheme to the voluntary
voluntary scheme and vice versa. This allows workers who have lost their insurinsu
ance privileges as a consequence of contract termination to hold onto their insurance policies under the
voluntary scheme without losing their years of contribution for a pension and survivor’s
vivor’s benefits. Voluntary
members can move to the compulsory scheme just as easily. The programmes
program s have also been adapted for
members who have to move residences for economic reasons. The policies have been made portable such
17
We will see below that the existing voluntary social insurance product is not very enticing, which explains low membership.
12
that members can continue with
th their payments and file for claims at places other than the one of initial regre
istration.
Movement across the two schemes has real consequences in terms of benefit entitlements under the social
insurance programme.. In the voluntary scheme, members are only
only entitled to two out of the five staple
benefits under the compulsory scheme, namely, survivorship allowance and retirement pension. However,
this did not stop an estimated 30,000 members who continued with their membership under the voluntary
scheme.
Regardless of present shortfalls, what has to be noted is that the ease of movement offered to members is
a system that adapts to the nature of employment in Vietnam.
Vietnam The structure serves as a good base not only
in evolving targeted insurance packages but also
also in developing mechanisms that makes it convenient for all
segments of the informal sector to participate.
Finally, itt needs to be noted that currently there is intermixing of funds between the social insurance and the
health insurance because contributions are kept in one pool.
pool The VSS even reported that the social insurance fund cross-finances
finances health insurance claims since the latter has been experiencing an increase in
utilisation. Although this practice prevents defaults in reimbursements forr the health insurance,
insurance it actually
exposes the social insurance in the long run when claims pick up in the future. The VSS realises this risk
but do not have concrete plan on how to separate the funds.
2.4.2 Commercial Insurance
Though the private sector has experimented
experimented with microinsurance, we were not able to identify many
schemes that offer good examples of social protection. In lieu of government schemes, commercial micromicr
insurance can be a successful means of offering risk protection to the poor. Microinsurance
Microinsur
is “a means of
protecting low-income
income households against specific risks in exchange for a regular payment of premiums
whose amount is proportional to the likelihood and cost of the relevant risk.”18
The Ministry of Finance (MoF) has had the issue of the regulation of microinsurance on the table for at least
two years. In 2008, top officials from the Ministry of Finance (MOF) and Bao Viet,
Viet one of the country’s larglar
est insurers, travelled to India to learn from what has been set up by the IRDA, the Indian regulatory body
for insurance. However, there is no recent news of the status of regulating microinsurance.
Bao Viet offers a credit life product but the number of persons enrolled is small and according to the Deputy
General Manager, Health & Personal Accident
Accident Insurance Department, there is little drive within the organiorgan
zation to expand the program: top
op management has yet to be convinced of the financial interest in developdevelo
ing the micro-market.
market. Drivers have been non-financial
non
and related to CSR (Corporate Social Responsibility)
work: the importance of image and the desire to be seen involved in a social activity.
18
Micro Insurance Network. (n.d.) Microinsurance in Keywords. Retrieved 26 March 2010
http://www.microinsurancenetwork.org/keywords.php
13
However, we did find two very interesting microinsurance programs being run with the assistance of the
ILO. The ILO is supporting two insurers, ManuLife
ManuLife and Aviation, which needed assistance in strengthening
their products and outreach.
ManuLife works with the National Women’s Union to offer a credit life product. They have sought the supsu
port of the ILO to improve the product and understand the low renewal rates. In the last nine months,
ManuLlife has expanded to nine provinces. They have clarified the workflow between the insurer and the
women’s organization via defined roles that use the strengths of each entity; for example, the Women’s UnU
ion has good social marketing skills. The result has been 100.000
100
clients.
Aviation Insurance Co works with a local MFI (microfinance institution) to offer a health insurance product
which is complementary to the government scheme. The premium is very low (7.200
(7 200 VND or 0,35 US$ /
month) and the maximum benefit package is 15 million VND (729 US$) per event.. They are trying to imi
prove their communication to clients so as to boost sales.
The ILO has also devoted many resources to a capacity-building component. There
e are 18 resource traintrai
ers that can work with other mass organizations to market microinsurance. They are pushing to show micromicr
insurance as a means to address risk. The importance of financial education has been demonstrated.
As a best practice, the ILO hass shown the benefits of the partner-agent
partner agent model with clear roles in the work
flow (processes conform to commercial insurance standards) and the use of the social marketing skills of
mass organizations to offer viable risk protection to the poor. Capacity building
uilding is also a necessary element.
Moreover, with private insurance absorbing the risk, the system is more financially viable.
Nonetheless,, total outreach remains low, especially outside credit life, a product that is designed to protect
a loan more than an individual. As a long-term
long term solution to offering social protection, commercial insurance
seems less viable than the government schemes.
2.4.3 Non-profit Organisations
In addition to non-profit
profit organisations working with commercial insurers to offer microinsurance,
microinsu
there are a
few examples in Vietnam of these entities developing their own form of social insurance. These organizaorganiz
tions have no third-party
party risk transfer and generally contend with the issue of financial viability. We identified
different types of schemes from three organizations. Several interesting practices need to be noted.
Community Finance Resource Centre
The Community Finance Resource Centre (CFRC) provides TA to 15 microfinance institutions (MFIs), with
a total membership of 30.000.. The MFIs provide mainly savings and loan products to women (99% of MFI
membership),
bership), who are mostly middle-aged
middle
and long-standing
standing members (for about 15 years); they are prepr
dominantly engaged in agriculture. The TA provided focuses on the design of the operation systems,
sys
the
capacity building of staff and the education of clients. CFRC also supports the transformation into formal
micro-finance institutions.
14
More recently, CFRC has begun managing a mutual benefit fund which supports 16.000
16
contributors by
providing credit
edit life and basic life protection. The life product has a premium of 3.000
3 000 VND (0,15 US$) /
month for a pay-out
out that varies with time of membership. The product has the following features:
Return of payment for less than 6 months
VND 300.000 (14,65 US$)
$) for 6-12 months
VND 1.000.000 (48,84 US$) for more than 12 months
The policy covers spouse and two children
Hospitalization and Personal Accident benefits for members only
We were able to identify several best practices in relation to the microinsurance programme
program
in the operations of CFRC:
Client education includes basic risk management, household budgeting and insurance concepts,
ideas that are new to the rural members and essential;
Cluster meetings19 are held twice a month; meetings are used to inform clients about claims and
fund utilization;
Meetings are also venues to gather feedback from members about the benefit package;
Recognised
ed women village leaders are appointed as cluster leaders; assemblies
assembl
are held at community learning centres which further reinforces trust in the system;
Claims are processed during meetings; MFIs advance benefit payments in case of emergency;
The concept of solidarity and mutual benefit is shared among members which discourages adverse
selection and abuse (since the members can better identify fraud in the group and since members
are less likely to cheat each other);
other)
There is a strict separation of funds from microfinance and microinsurance (as required by law);
Since
ce members are in mountain areas and are usually beneficiaries of subsidies from the state, ini
surance complements benefits (health) provided by social system.
The next step planned by CFRC is to establish a mutual insurance company. They are hoping to offer
off retirement insurance and are working on a new business plan with new pricing and benefits. They will need to
raise the required capital.
TYM
Due to the lack of availability of Vietnam Women’s Union management, we were unable to meet with the
NGO. However,
r, the organization and the TYM Fund are well-known
well known examples of successful community-run
community
microinsurance.
oinsurance. TYM (which means ‘I Love
L
You’ in Vietnamese) strives to provide financial and nonnon
financial services to groups of poor women and is one of Vietnam’s largest
largest MFI. In August 2010, it received
19
A cluster is a group of self-help
help groups (SHGs)
15
its formal MFI operating license from the State Bank of Vietnam. The MFI began a Mutual Assistance Fund
in 1996. It should rightly be considered among the best practices in the non-profit
non profit as a pioneer in much of
sociall insurance, for which reason we cite the name.
Social Risk Fund
The GIZ Vietnam Poverty Reduction Project supports the piloting of a Social Risk Fund, a community-based
community
model of risk protection. The fund is managed by local authorities in four communes and
an today there are
2.000 members.
The households contribute based on the number of members: up to five members costs 30.000
30
VND (1,46
US$) per household per year (or 36.000
36
VND/ 1,75 US$ if paid in two instalments). Households above five
members pay 40.000 VND (1,94 US$) per household per year (or 44,000 VND/ 2,14 US$ if paid in two instalments).20
The commune also contributes based on the numbers of households in the commune. Communes with less
than 1.000
000 households pay 10 million VND (486,15 US$) and communes
nes with less than 1.500
1
households
contribute 15 million VND (729.22 US$).
US$)
Benefits include 1 million VND (48,61 US$) for the death of a family member earning substantial revenue.
Other benefits and best practices have been identified:
Fund is managed locally
cally in line with decentralization;
Family shocks which are covered include those most likely to move families into poverty and debt
(death of breadwinner, health problems);
The scheme is voluntary – families must understand the product (and by extension
extensio risk management) in order to be convinced to enrol;
The commune also supports the fund financially via the local People’s Committee budget;
The health protection is complementary to the government scheme.
2.5
Conclusion and Recommendations for Improved Social Protection in Vietnam
Social protection for the informal sector remains very limited in Vietnam. However, the government
schemes offer potential to scale up operations and reach a larger percentage of the population. Best PracPra
tices from the other providers
oviders offer ideas for the national programme:
program
Focus on capacity building;
Use of local networks for efficiency and trust (cf. 2.5.4 below);
Use of local governments to support roll-out
roll
and possibly subsidize (as done with the Social Risk
Fund).
20
The prices in Euros are approximately 1.05 / 1.25 and 1.40 / 1.50 Euros.
16
We have chosen to focus our five recommendations on the government social protection schemes. In our
opinion, it would be most beneficial to the informal sector to be able to access the national programme
program
–
voluntary or compulsory. The schemes are relatively new but there is real potential for moving toward uniun
versal coverage. However, to make the schemes more beneficial to the informal sector, we suggest the folfo
lowing five areas of action:
Focus energy on formalising the informal sector;
Develop a targeted approach
ach to integrating the informal market;
Improve the social insurance product in the voluntary scheme;
Assist the VSS in product distribution and data management; and,
Improve risk management skills (and secure financial viability).
2.5.1 Focus Energy on Formalising
ising the Informal Sector
The most efficient and cost-effective
effective social protection scheme is the compulsory version. However, what
makes it of interest is that a large proportion of the cost is paid by the employer. In the case of the poor, the
health insurance
ance is subsidized by the state (100% for the very poor; 50% for the near poor). The informal
sector, the majority of the population, falls between the cracks.
What in fact the government could start doing is to ‘squeeze’ the informal sector from both sides
sid so that
those in this category are slowly but surely moved to either the formal sector or to assistance from the govgo
ernment.. As illustrated below, it would mean approaching the coverage of the informal sector at two ends:
enforced registration of employment,
ment, which gives the government leverage to impose provision of insurance
benefits under the compulsory scheme, and offering subsidies, which offers incentive for individuals to enrol
under the voluntary system.
Figure 2: ‘Squeezing’ the Informal Sector with Compulsory and Voluntary Schemes
Compulsory
System
Formalise
through
registration
Voluntary
System
Small
entrepreneurs
Contractual
workers
Uninsured
Seasonal
workers
Street vendors
Employees of
small businesses
Subsidise
insurance
premiums
Small farmers
Farmers
Informal
Sector
There are a number of reasons why this approach might be appropriate for Vietnam. First, the formal secse
tor: registration has been a common practice from the national down to the level of the communes. AccordAccor
ing to a representative of the World Bank, the government is discussing the use of a national ID, perhaps in
the form of a tax ID. Thus, there would be an existing platform, which could be optimised and used to idenide
tify and classify
assify the informal sector and divide them between compulsory and voluntary schemes.
17
Research21 has shown that there is a high number of workers in formal settings who do not benefit from the
compulsory scheme as required by law. Workers are reticent to speak
speak up for fear of losing their jobs.
MoLISA acknowledged that the lack of compliance by companies is a problem for the ministry because
there is no clear body to enforce payment to the VSS.
To date, the government has failed to impose a strict adherence to
to the scheme. According to Oxfam, this
could be due to a fear of a return to the financial crisis or the decision of foreign companies to buy products
elsewhere. However, according to ILLSA, foreign companies comply at almost 100%. The non-compliance
non
is among
ong Vietnamese companies (who might export and fear the higher costs would lower their competicompet
tiveness).
out pocket payment is in efe
Secondly, subsidizing the poor informal sector is more distributive since full out-of-pocket
fect required from the segment of the informal
info
sector that has a lower ability to pay. The national health ini
surance program has already started with this approach and it is proving successful. A targeted approach to
subsidizing the poor for the voluntary scheme in social insurance could be set up.
up It would be in the govgo
ernment’s interest to promote self--financing
financing of pensions (even when partially subsidized) rather than be exe
pected to pay all pensions 20 years down the road.
If targeting of eligible beneficiaries for premium subsidy is done properly,
properly, workers in insecure employment
contracts and those with seasonal employment would be able to sustain their insurance coverage without
the burden of taking on the employer’s counterpart.22 Similarly, premium sharing makes participation in the
insurance programs
ograms financially accessible to individuals engaged in micro-enterprises
micro enterprises such as street venve
dors and small retailers. Already, the government is extending partial to full subsidies (for health insurance
coverage) to the so-called near-poor,
poor, which is presumably
presumably the segment of the population vulnerable to falfa
ling into poverty when faced with financial strain. Financing options are being looked at to broaden subsisubs
dies so that this could be carried over to the social insurance program and also extended to include
inclu low income entrepreneurs and irregular wage earners.
Finally, not the entire informal sector is poor. In a study by Tran, et al.23 that profiled individuals in the inforinfo
mal sector who are uninsured, it was found that 80% of them have an income (at very much varying levels).
A targeted approach, developed below, would separate those who are in need of subsidy and those who
can be ‘motivated’ to join.
Needless to say, incentives will have to be given accordingly to enterprises for registering their employees
employe
and providing counterpart payments to insurance premiums to motivate compliance. Likewise, financial ini
centives will be needed to push the informal workers to enrol. However, the benefits, if not immediate, are
tangible. The use of a voluntary scheme is riddled with problems related to adverse selection. Only those
who need protection actually choose to join – as a result of which the program is less likely to be viable.
21
“Quality of Private Enterprises in Vietnam”,
Vietna
Le Duy Binh, UNDP – Government Taskforce for the Implementation of the EnterEnte
prise Law, December 2009
22
Since the employer contributes to the compulsory scheme, the formal worker only pays a small percentage. In the voluntary
scheme, workers pay the entire
ire premium.
23
Tran Mai Oanh, et al. ‘The Case of the Workers of the Informal Sector.’ UNDP Policy Research Study. December 2010.
18
According to VSS, this is already an issue for the health insurance scheme: there are
are presently three million
people in the voluntary health scheme but they use more than they pay. To balance the adverse selection,
the percentage of healthy enrolees must rise. This will also be the case for pensions if the informal sector
expects the government to cover
er their pension in the future – they must be pushed to fund their own retireretir
ment needs.
The more successful the government is in attaining these ends, the better able it is to ‘squeeze’ the number
of uninsured individuals in the informal sector.
sector. Understandably, the limiting factors for these would be the
viability of local enterprises, on the one hand, and the government’s fiscal space, on the other. Concerted
support from the donor sector could be of real assistance.
2.5.2 Develop a Targeted Approach
Approa to Integrating the Informal Market
To date, the government has no formal definition of the informal sector. Officially, the informal sector does
not actually exist, despite its size, and there are no policies that have been developed to address this population.. As a result, there is no structured approach to integrating the segment. The VSS uses as a reference
point “all not covered by formal sector scheme.”
Before any successful campaign can be undertaken to promote the government schemes, a segmented
approach must be set up. The informal sector covers individuals from both urban and rural setting and ini
come-wise, ranges from middle income to poor. Consequently, the means to convince the respective segment to join the voluntary scheme will need to vary. A one-size-fits-all campaign is unlikely to work.
Below, we propose a simple breakdown of the informal sector into six different categories.
Table 4: Informal Sector Segmentation
Informal Sector Segment
Small enterprise (with less
than 10 employees)
Income / Geographical
Classification
Middle income
Urban and Rural
Low-income
income to near poor
Street vendors
Urban
Potential Approach to Reach Segment
Department of Employment can strongly rer
quire businesses to register employees and
therefore obligates their enrolment; incenince
tives will be needed
Registration of all vendors (with no restricrestri
tions for migrants); subsidized premiums
Middle-income to near poor
Middle
(varies greatly)
Rural
VSS relies on resident registration at comco
munes in reaching out to farmers; targeted
subsidies based on income
Underemployed (working
part-time, redundant workers, etc.) or Unregistered
workers
Low-income
income
Aggressive enforcement of enrolment of
workers by companies; need for a specific
agency to take the lead in monitoring; tarta
geted marketing with subsidies
Seasonal workers (mainly
farmers who take employment occasionally)
Low income
*New entrants to the labour
Varies
Farmers
Urban workers
Rural migrants
To be cross-registered
registered with farmers so as to
assure that there are no double subsidies
Government implements complementary
19
Informal Sector Segment
Income / Geographical
Classification
force
Urban
Potential Approach to Reach Segment
programs to provide employment to new
graduates (e.g. skills training, job placement,
etc.); insurance is not available until the time
that new graduates find work
The informal sector is too large and too heterogeneous, both geographically and financially to be targeted
with a single approach.
2.5.3 Improve the Social Insurance Product
The government is set to make the voluntary system the platform for individuals who do not have
h
legal entitlements for social protection under employment contracts. However, even if the informal market is segse
mented, it will still be difficult to promote the existing social insurance product. There are several product
characteristics that require a second look:
Benefits
The voluntary scheme does not offer the same protection as the compulsory scheme as only pension and
survivorship are benefits. The compulsory scheme offers work-related
work related coverage such as illness, disability
and maternity (salary losss is covered).
covered) The lack of short-term benefits (e.g. coverage of salary loss during
illness and maternity) will make it hard to convince people of the interest of buying into the scheme.
Price – Benefits Ratio
Under the Labour Code and Social Insurance Law,
Law, insurance premiums of individuals who are gainfully
employed will be split between employers and employees on a set percentage. None such entitlement exe
ists with the voluntary scheme, where membership premiums are, in principle, borne by enrolees. To illusil
trate, a registered worker on minimum wage will only need to pay 6% of his salary for social insurance and
1,5%
5% for health insurance. With voluntary enrolment, a minimum wage earner has to shoulder the full
amount of 18% for social insurance and 4,5%
4
for health insurance.
Pricing
Since the premium for the voluntary schemes is computed on the basis of the national minimum wage, the
same amount is imposed on voluntary members regardless of income (131.400 VND or 6,41 US$ /month
for social insurance and 32,850
,850 VND or 1,60 US$ /month for health insurance). For those whose income is
lower than minimum wage, the price becomes demotivating.
Admittedly, VSS believes that the benefit package, particularly for the social insurance, could be made
more responsive to the needs of the informal sector. With its current offer, the benefits of the social
so
insurance package are too far in the future for individuals to see the value. Revision of the insurance package
should be attractive enough that members participating in the compulsory scheme view uninterrupted
membership even in the voluntary scheme as a sensible financial decision.
decision
20
2.5.4 Assist the VSS in Product Distribution and Data Management
To tackle the above points, efforts will need to be made at VSS to be able to carry
carry out the recommendarecommend
tions. We have identified at least four areas that need be addressed:
Strengthened administration to improve public image and trust
Among the agencies interviewed from both government and development partner agencies, there is a conco
sensus that the insurance programmes
program s suffer from a lack of public trust. Specifically, they claim that the
public is anxious about the government’s capacity to deliver services when it becomes necessary. The VSS
therefore has to contend with its public image
image of inefficiency, which is an unfortunate legacy of government
institutions in Vietnam. Moreover, there are apparently concerns about the government’s credibility in manma
aging the programmes’ funds.
VSS claims to be undertaking measures to have its processes
proces
more client-oriented.
oriented. One concrete measure
is to extend its office time until Saturday to accommodate the programmes’
program s’ claim load. The World Bank is
assisting the VSS in digitising its database and computerising
computerising business operations with the aim of speedspee
ing-up
up process times and insulating the system from errors and fraud. Although the results of these measmea
ures are still far from influencing a change in public perception, it is a step in the right direction when programmes’
s’ process modifications focus on improving
improving client satisfaction. What will be further needed are opo
erational targets that have been consensually set and committed to by VSS’ departments.
Improved use of grassroots agents
VSS reportss to have a staff network of 16.000
16.
people, which is dispersed
ed to the districts and even some
communes. This allows clients to have first-person
first person contact with the VSS, which is especially valued in vilvi
lage settings. The VSS also reports to using community leaders as its agents (paid on an incentive basis).
basis)
According to the VSS, tapping
apping grassroots social networks has proven
prove effective in building public trust ala
though this often relies (sometimes precariously) on personal reputation. Membership uptake is usually obo
served to be high when endorsement of insurance programmes
program s is done by reputable village leaders. It is
not known though if VSS capitalizes sufficiently on its network of staff and agents for programme
program
promotion
and marketing. It is one of VSS’ available resources which could be optimised
ed to expand programme
program
coverage, benefitting mainly groups in the informal sector.
Involvement of community organizations
Community insurance schemes are often associated with local mass organisations,
ations, such as women’s unu
ions.24 This makes for another reason why community schemes are
are successful in drawing in considerable
percentage
e of the population in an area.25 Approaching mass organizations, like women’s union, cooperacooper
tives, farmers’ union, as well as associations of street vendors, taxi drivers and the like has merit because it
is an efficient way of marketing with sizeable return and it shields the insurance system from adverse selecsele
24
25
Mass organisations are usually well-organised
organised and structured entities that the target a specific membership (women, youth,
farmers). Although not formally a government body, they are paid by the government and support government policies.
The present disadvantage of how mass organizations are being used is related to the limited use of their capacity: commercial
insurers have not expanded operations and the VSS has not exploited all of the potential. A a result, numbers are still small.
small
21
tion. It would also be a means of working at the household level to build awareness and stimulate buy-in. It
would be of interest for VSS to look at how
how community insurance schemes engage with mass organizations,
specifically what roles are agreed with them that count as intermediation.
Another meaningful way for other community organisations
organis
(NGOs, MFIs, civil society organisations) to
contribute to the
e expansion of the social protection schemes is with their knowledge of financial education.
Studies on microinsurance point to financial literacy as one of the determinants of membership uptake. This
underscores the need for insurance education to encourage
encoura
participation. Among the organisations
organis
interviewed that support community schemes, insurance education is said to be an essential activity. In fact,
they have dedicated staff equipped with learning modules and materials who are mobilised to train intermeinterm
diaries once they decide on expanding their programme
program
to include insurance products. These schemes
have good enrolment rates even when their clients are mostly from the low-income
low income bracket;
bracket for example,
ManuLife has over 100,000 clients.
clients
The education programme
me includes the familiarisation
familiarisation of clients with the principles of risk-pooling
risk
and often
builds on the concept of social solidarity. With high value placed on solidarity, communities are more likely
to subscribe to a formalised
ed form of risk-sharing
risk
thatt protects them from financial shocks during personal
catastrophes. We were told that in educating groups about insurance processes, trainers highlight the imi
portance of guarding against breach in mutual trust and responsibility. By and large, these schemes
scheme are
mutual associations that count heavily on existing societal bonds and controls.
Although their operations could be mostly considered parochial,, community schemes offer practical lessons
in educating members about insurance and, in a way, improving financial
financial literacy using popular media. It is
to be expected that instructional materials used by community organizations are in a language that is unu
derstood and in the context that resonates with ordinary Vietnamese.
Vietnamese. Furthermore, these organisations
organis
are
in a better position to give recommendations about a suitable media that would have substantial reach.
Considering that the national programmes
program s have to take on social marketing at some point, VSS should start
by looking at communication strategies
ategies employed by
b mass organisations.
An improved communications scheme
As just seen, the promotion of voluntary enrolment in insurance programmes
program s is a considerable marketing
exercise. It is important to note that when Vietnam established the voluntary insurance systems, there apa
pears to have been no accompanying marketing campaign to encourage participation. This failure might be
due to VSS’ limited capacity to launch extensive marketing campaigns.
campaign
MOLISA recognises the need to increase use of media as a way to communicate the schemes. As seen
with the market differentiation proposed above, the campaign should be adapted to key characteristics of
the target groups.
Any marketing scheme would need to emphasise
emphasi both product characteristics and enrolment/claims
enrolment
procedures. The programme would need a simple deal to sign up without any of the usual bureaucratic strucstru
tures. Financial transactions should be made easy and transparent. Enrolment should come to the villages
22
and be clearly understandable
able to all. The reason to enrol should focus as much on the individual’s advanadva
tages as on the national benefits.
2.5.5
Improve Risk Management Skills
The concept of “risk” is new to the discussion in Vietnam where to date the focus has been on building ini
frastructure. The National Communist Party’s next 10-year
year plan makes no mention of risk and, for example,
only slightly addresses climate change. MultiMulti and/or bilateral
lateral organizations will need to assist the governgover
ment in integrating risk management into its expansion
e
of social protection.
Currently, according
ccording to the World Bank interview,
interview, there are no basic safety nets in place that can kick in in
times of shock (although the Government regularly intervenes with stimulus packages in times of crises).
crises) In
other words, there are currently no financial instruments available to help poor households respond to cricr
ses such as price increases and lay-offs.
lay offs. Moreover, the risk management culture remains undeveloped.
The voluntary scheme, especially if revamped with more short-term
term benefits, would begin to fill this gap for
safety nets. But promoting social and health insurance will require an exposure to risk management and its
importance in planning for the future (saving for retirement, having protection in case of illness,
illn
theft, crop
failure, etc.).
2.6
Final Thoughts
MoLISA
LISA spoke of future plans for the voluntary scheme and it foresees a revision of the product in the next
five years as well as a revision of its implementation. In the opinion of the Director General of Social
So
Insurance, an evaluation of the scheme (both policy and implementation) is needed as is the need for conducting
market surveys (the last time was 10 years ago). However appropriate these steps are, in our opinion, the
work should begin sooner rather than
han later. Any campaigns to promote the scheme should be with the best
possible products and targeted campaign.
VSS is interested in increasing coverage to the informal sector and recognizes the need for a good commucomm
nication program. More importantly, the director of VSS acknowledges that as VSS goes forward there is a
need to work like a company and not like bureaucrats. This would integrate most of the recommendations
from above.
Finally, we would need to note that the programmes, as they stand, are gender-blind
gende blind and do not segregate
women beneficiaries both in terms of target and keeping track of their participation. It is generally accepted
that direct interventions that target women do well in contributing to some gains in poverty reduction. AdmitAdmi
tedly, the voluntary schemes intend to target small vendors, who are traditionally women. But this initiative
is lumped with all the others as the general approach to promote the voluntary programmes. This need to
be considered in planning by the MoLISA.
23
3 Case Study II:: Kyrgyzstan
3.1
Country Background
Kyrgyzstan, a former Republic
public of the Soviet Union, became independent on August 31, 1991. It is a landlan
locked country in central Asia and has a continental climate that is characterized by extreme winters and
summers. The population is 5.508
508.626 with a density of 28,7 people
ple per square kilometre.
kilometre Bishkek, being
the capital, is the commercial centre and the largest city. It has a population of 837.000.
000. 36,6%
36
of the population lives in urban areas. Kyrgyzstan
yzstan is officially
officiall bilingual with 64,7%
7% of the population speaking Kyrgyz
and 12,5% of them speak Russian.
Kyrgyzstan is ranked 120 of 182 in the 2009 UNDP HDI. Poverty is widespread: 51,9%
51
of the population
living on less than 2 US$ a day, the per capita income is 872 US$ (IMF estimate for 2009). Life expectancy
in Kyrgyzstan is 69,7 years; the infant mortality rate is 30,3
30 per 1.000 live births; and the maternal mortality
rate is 150 per 100.000
000 live births.
births Kyrgyzstan has a young population with 29,4%
4% under the age of 15
years.
The Kyrgyz economy was severely affected by the collapse of the Soviet Union and the resulting loss of
o its
vast market. Before 1990, a hefty 98% of Kyrgyz exports were going to parts of the Soviet
So
Union. As factories and state farms collapsed with the disappearance of traditional markets in the former Soviet Union,
Union
Kyrgyzstan's
's economic performance in the early 1990s was worse than any other former Soviet republic
except war-torn
torn Armenia, Azerbaijan and Tajikistan.
Tajiki
Poverty is especially pronounced among rural populations (almost three-quarters
three quarters of the poor live in the rural
and mountainous regions) and is aggravated by ineffective governance and corruption. Moreover, access to
basic public services such as running water, public sewerage, health and education
education has deteriorated over
ov
the past decade (European Training Foundation, 2009). While economic performance has improved conco
siderably in the last few years, and particularly since 1998, difficulties remain in securing adequate fiscal
revenues and providing
iding an adequate
adequa social safety net.
Following the global economic crisis in 2008, the country
ntry received external aid, which is unprecedented in
the country’s history in terms of scale. Support came in the form of grants and soft loans from the UN, IMF,
WB,
B, ADB, the EC and Russia. In 2009,
2009 Kyrgyzstan received more than 100 million US$ from the IMF, 150
million US$ from Russia for budget support,
sup
and soft loans totalling to 300 million US$ for economic development. The volume of the Kyrgyz external debt has skyrocketed, exceeding 2,5
5 billion
billi US$ at the end of
2009.
3.2
3.2.1 The Social Protection Strategy for 2006-2008
2006
In 2006, the Kyrgyz government adopted the Social Protection Strategy for 2006-2008
2008. The strategy paper
lays out specific short- and medium-term
medium term reform objectives that emphasize effectiveness in providing social
protection to the vulnerable population. It intends to refine targeting of beneficiaries, put a stop to monetisamonetis
24
tion of utility benefits and handing out of privileges, reinforce labour market policies to promote entrepreentrepr
neurship and independent job creation and expand the scope of social services for the elderly, disabled and
children and families at risk (WB, 2009).
3.2.2 The Country Development Strategy/Poverty
Strategy/Poverty Reduction Strategy Paper (CDS/PRSP) 2007-2010
2007
Meanwhile, the priority within the CDS/PRSP 2007-2010
2007
for the period up to 2010 aimed at providing social
protection to people in need, who are identified as the poor, children and families in crisis
cri
situation, invalids,
living alone and elderly people. The CDS was updated in 2009 (CDS Update 2009-2011)
2011) to adjust national
policies and outline an ‘action plan’ to improve social protection as well as labour market problems. It aims
at increasing the size of state pensions and allowances; improving targeting of the state support; reforming
and development of the system of social service; and ensuring financial sustainability of the pension system
that assumes improvement of insurance payments collection,
collection, optimization of insurance tariffs, improvement
of insurance coverage of labour migrants, introduction of funded elements in the pension system.
3.2.3 The New Social Policy
A new social policy is being developed. Chaired by the Ministry of Social Protection
Protection,26 a working group has
been established, consisting of all relevant ministries, development partners
partners,27 civil society. It is expected
that the draft policy will be ready by October 2011.
3.3
The informal economy in Kyrgyz Republic in 2004/05 was estimated to be between 40 and 53.6% of GDP.
According to ILO sources, 77% of all employment is in the informal sector.
Literature provides a diverse array of definitions and categories of the informal economy. In this report, we
focus
cus on those sectors that were raised during the interviews. In general, informal
informal can refer to those not
registered or registered but under--reporting
reporting profits. The informal sector are said to be engaged in the followfollo
ing economic activities.
Agriculture
Farmers
ers make up approximately 55% of the population and one third of the registered contributors (to the
Pension Fund). Their contributions, however, make up less than 1% of the beneficiary population and aba
sorb close to 60% of the pension expenditures (WB, 2009)
20
Farmers are registered, based on the land they possess (land tax), as they became landholders after indeind
pendence. Tax tariff is very low (60 Som
S
or 1,33 US$/year),
/year), yet even this is difficult to collect. The annual
Social Insurance fund (SIF) revenue should
sh
have been 250 million Som
om (5,52 million US$),
US$) but only half of
that amount is collected,, of which only 1% of all social insurance contributions are from farmers (source:
SIF).
26
Until
ntil 2010, social welfare was under the Ministry of Labour, but then became an independent ministry. Early 2010, in a reshufreshu
fle of the government, the Ministry of Social Welfare was ‘degraded’ to ‘State Agency. In January 2011, it was re-instated
re
as
‘Ministry of Social Protection.
27
GIZ, through its social protection programme headed by Mr. Alfredas Zabieta,, is member of this working group.
25
Most farmers are ‘self-employed’,
employed’, but cooperatives exist. For cooperatives the contribution rate is set 27%,
of total payroll, but this will be reduced to 15% in the near future. Also more simplified procedures are
planned in order to allow farmers to get easier access to loans and technical assistance from the government.
Farmerss get lowest pension in the country – the idea behind is that they pay less, thus receive less. Plans
exist to increase the social insurance contribution, in order to get them a higher pension.
Textile industry
The textile sector is important, but very heterogeneous. It ranges from single households to large enterente
prises, but overall, most pay no or few taxes or social security contributions, making it one of the ‘biggest’
informal economies in Kyrgyzstan.
Until 5 years ago an estimated 100-300.000
100
people were active in the textile sector, but current estimates
are lower: about 100.000 people in total, of which 60,000 are female sewers and 40.000 are involved in the
supply system (source: tax consultant).
The Tax Office recently conducted survey on SMEs, including
including street markets, textile entrepreneurs and taxi
drivers. It revealed that, in the textile sector, 90% of the enterprises with 15-50
15 50 employees are not registered. Hence, these companies do not pay taxes and social contributions28.
Because of the volume,
me, the textile industry is one of the economic sectors targeted by the government. A
new regulation for the textile sector is being discussed in the Parliament. The new regulation will temporarily
decrease the current contribution rate of 27% to 5,25%
5
- to be increased again to 27%
% by 2020. Hence, the
following nine years are a sort of ‘grace period’ to allow textile workers to be officially registered at lower
rates.
Essential is to set up a campaign to inform people about the new law. Plans to do so exist,
exis in cooperation
with the Association of Textile Workers, the Tax State Committee, and the Social Insurance fund (SIF).
(
Migrant workers
Migration is a very prominent face of Kyrgyzstan’s informal labour economy,, both international and national.
International migration: According
ccording to the Kyrgyz government, 12% of the population works overseas –
often in Russia and Kazakhstan. According to Russia's Uralsib investment bank, around 800.000
800
Kyrgyz
migrant workers are in Russia, making up 40% of the Central Asian state's GDP. While other estimates are
lower (e.g. SIF: puts the figure at 400.000 people in labour migration, mostly in Russia and Kazakhstan),
there is no doubt that the Kyrgyz Republic is among the world’s most remittance-dependent
remittance
countries
(HelpAge International, 2010).
28
According to the SIF, only 2.500 pay SI contribution.
26
According to the survey from HelpAge International,
on average, remittances from migrants
mi
constituted
less than 5 % of total household income. This eviev
dence supported earlier findings by HelpAge in
Moldova and the Kyrgyz Republic on the irregularity
and low value of remittances received by the poorest
households. Migrants from the poorest households
typically have the lowest levels of skills, which makes
it hard to earn enough money to send home. In other
words, while the national remittance flow is substansubsta
tial, benefits from migration are not distributed to the
poorest population, even when they have family
Extent of labourr immigrants
A survey from HelpAge International (2009) on
informal sector and vulnerability revealed that
each of the 90 households participating in the
survey had at least one family member workwor
ing in Russia or Kazakhstan.
khstan.
All of these migrants were working without regre
istration, and all the households in question
received the remittances in cash, rather than
through a recorded system such as a bank.
While these remittances have the potential to
contribute to wider development,
velopment, they can ofo
ten add another level of uncertainty to poor
people’s lives
members in diaspora. (HelpAge, 2009).
Labour migration in the Commonwealth of Independent States (CIS)
(
is characterised by a very high proportion of irregular migrants. The ILO estimates that 80% of the Kyrgyz migrants in Russia are irregular and
therefore without protection or records. In practice, this
this means that data on migration refers to the minority
of migrants who tend to be more income secure. The data is therefore inadequate in understanding the patpa
terns of actual movement.
Internal migration: Internal migration is also a reason of the growth of
of the informal sector, especially in the
capital Bishkek, where the number of migrants makes
make more than a quarter of the city population of 1 million.
Hardly any of the new comers to enlist in the city register and therefore they cannot be legally employed
(HelpAge International, 2010).
3.4
Best Practice on Social Protection for the Informal Sector
The Government is well aware of the magnitude of the problem of providing social protection to the informal
sector. However, there is an amazing lack of political willingness
wil
to tackle
le this, despite global consensus on
its benefits at the political, economic and social level. This is in part because the Government views that
the informal sector has negative effects to the economy. To quote the PRSP/CDS (2007-2010):
(2007
“specific
attention will be paid to legalisation
ation of informal sector of economy, which accounts for 45-50%
45
to GDP.
Shadow economy negatively affects tax and social basis and leads to vicious circle of mutual increase of
the tax burden and shadow sector. Shadow
Shadow economy causes unfair competition for registered enterprises
and distorts official statistics, which leads to inefficient policy decisions”.
decisions
In 2007, a government decree was signed introducing the ‘Programme
‘Programme of legalisation of shadow economy
in Kyrgyz Republic for 2007-2010.. A special committee was established to oversee the implementation of
this programme (HelpAge International, 2010).
2010) 29
29
Six main directions were identified: (1) national information
information campaign, (2) simplification of tax procedures and reducing tax
burden, (3) improvements in business environments, (4) optimisation of labour contracts, (5) review of the patent taxation
system, and (6) reduction of smuggling and fight with corruption
27
Generally, a Kyrgyz citizen would have access to the centrally-administered
centrally administered social protection system. The
current system of social protection includes both contributory (social insurance) and non-contributory
non
(social
assistance) benefits that are weaved together with a patchwork of ‘old-style’
‘old style’ categorical benefits30 and subsidies (privileges) and two new targeted benefits (WB, 2009). However, participation in state social protecprote
tion system is an entitlement given to either the formal workers, who are provided this privilege when they
are registered, or the poor, who are provided social assistance as a form of mitigation. As could be seen in
the later discussion, the informal sector workers would often ‘fall in to the crack’ so to say, if they are unable
to pay for a private insurance.
3.4.1 Social Insurance
Old-age
age related risks are addressed by the current pension system which is being shaped as a result of an
ongoing reform since 1997, and basically consists of (WB, 2009):
a.
a basic pension component,
component, which combines elements of a contributory and a social pension (the
basic pension is not earnings-related
earnings
meaning that everyone with
th the minimum contribution history
of 25/20 years is entitled to a flat-rate
flat rate of basic pension set at 12% of the average wage.31 On the
other hand a shorrter length of service results in proportional reductions to the basic pension.
b.
a transition component,
c.
a notionally-defined
defined contributions component with individualised accounts which notionally accrue
contributions and are credited with a notional interest equal to 75% of wage growth. The scheme is
pay-as-you-go
go financed and contributions are used to pay concurrent
concurrent benefits, therefore the NDC
scheme only accrues notional capital to be translated into annuities at retirement.
d.
a mandatory defined contribution scheme (2% channelled
channelled to individual accounts); and,
e.
a pension contribution,, which is 27% of the payroll
payroll of regular workers, of which 17% is provided by
the employer (for individual entrepreneurs without registering as legal entity, contribution is 9,25%,
of which 8% goes as pension fund).
All contributions go to the Social Insurance Fund (SIF or SF).
There
e has been considerable increase in older people who do not participate in the contributory pension
scheme, as more people are employed in the informal economy. This number will further increase in the
near future and result in increasing incidence of poverty
pove among the elderly. One solution is to include inforinfo
mally employed people in a contributory pension scheme. However, there must be discussions on how ini
centives and proceduress could be adjusted to do this (GIZ,
(GI 2010).
Social insurance further consists of
o sickness, maternity and work injury benefits.
30
The state provides 37 types of benefits to 30 categories of the population
31
For 2010, average wage was 8.041 Som (177.66 US$) in Bishkek and 6.140 Som (135.66 US$) in the rest of the country.
Minimum age for the old-age
age pension is 63 for men with at least 25 years of covered employment and 58 for women with at
least 20 years of covered employment.(see ISSA)..
28
An interesting development that would have some implications to the informal sector is the initiative of the
Tax Committee at the Ministry
inistry of Economic Regulation. The Tax Committee had carried out studies that
involved main informal sectors (street
street markets, textile, taxi drivers). Based on their findings
fin
they will start a
pilot project in one bazaar that would include the installation of cash machines that allow sellers to pay the
patent (registration) and at the same time make
mak social contributions. This will circumvent the notoriously
not
corrupt tax collectors. The pilot is at the planning stage and at
a this point, is far too early to assess potential
benefits.
3.4.2 Health Insurance
The health reform programme known as ‘Manas’
and launched in 1996, was a fundamental response
to the deteriorating situation in the country, followfollo
Quick facts on Health Insurance (January
2011 data)
ing independence and an ‘extreme fiscal contraccontra
Health insurance coverage as percent of the
population
tion in the first half of the 1990s’ (Kutzin et al,
Total officially insured: 77,7%
2009). The collapse of the economy also had neganeg
1. Paying contributions:
Working population: 22,8%
Farmers: 6,7%
Self insured military: 0.03% (not VHI certificertif
cates)
Enrolled refugees paid by UNCHR: 0.09%
tive consequences for the ability of the government
to spend on health, aggravated by the rising costs
of the inherited health system that heavily relied on
physical infrastructure and specialisation.
The government announced a law to introduce the
new mandatory health insurance fund (MHIF).
Rather than an attempt to fully fund a comprehencomprehe
2. Supported through the State budget
Pensioners: 9,8%
Children < 16y.o.: 32,6%
Children at 16-18y.o.:
18y.o.: 4,4,%
Recipients of social benefits: 1,4%
sive insurance package for the insured population, it was decided that the MHIF would instead top up the
existing budget flows to public hospitals. This means that the MHIF covers the gap between actual expendie
tures and government funding of hospitals. Manas also envisaged introduction of a purchaser-provider
purchaser
split
and contracting between the MHIF and health providers under a single-payer
single payer system (WB 2005). Since
2009, the MHIF is independent from the MoH.
The ‘State
State Guaranteed Benefits Package’
Package (SGBP) improved access by making primary care free for the
whole population
lation while displacing out-of-pocket payments with formal co-payments for secondary care with
exemptions for expectant mothers, children under 16, pensioners and other socially vulnerable groups. This
was perhaps the most remarkable
ble success in financing reform i.e. the formalisation of informal payments
and improved foreknowledge of the amount to be paid for care. These measures, combined with the fact
f
that hospitals were allowed to retain fee revenues and use them to improve service delivery, resulted not
only in reduced out-of-pocket
pocket spending by patients but also removed other deterrents to improved access,
e.g. the fact that patients no longer had to bring food, bedding and other provisions for hospital stays (WB,
2005)
Initially the insured population included employees, pensioners and those in receipt of social benefits (ap(a
proximately
oximately 30% of the population in 1999). In 2000, children aged less than
an 16 were added to the insured
29
category, funded by a direct transfer from the central state budget, increasing the insured population to
about 70% (Kutzin et al , 2009). This number has not substantially increased over the last 10 years.
years 32
Table 5: Main Features
Features of the National Health Insurance Schemes
Mandatory Health Insurance
No. of Insurees
77% of population
Voluntary Health Insurance
• 14,500 cards have been issued since
the start; only valid 1 year; ‘preva‘prev
lence’ is much lower
• Individual membership
Outreach
Urban - rural
Some efforts to involve informal sector;
military; refugees
Elgibility
Employees (contributions)
Open to all
Pensioners,
ensioners, social benefits recipients
and children < 16 yrs (state support)
Premium
2% of gross salary (paid by employer)
7 EUR / annum
Benefit package
State Guaranteed Benefit Package
Same benefits as under State GuaranGuara
teed Benefit Package
(free PHC) + reduced co-payment
co
for
referral care
The contribution however remains very restrictive. Only 30% of the population do pay contributions (regular
workers and farmers).. The fixed contributions are 2% of the gross salary (paid by the employer), which is
very low. The MHIF is now trying to increase this to 3% (to be paid by the employer), which willl
will require an
amendment to the law (4% would be better, but is politically not acceptable). Contributions from farmers
vary. For farmer associations that are registered as legal entity, contribution rate is 2%. ‘Individual’
‘Individual farmers
(not registered as legal entity) pay contributions based on the land tax (7,4%).
In addition to the mandatory insurance,
insurance a ‘voluntary health insurance’ exist. People who are not regularly
contributing can ‘buy’ an insurance certificate/card
certificate/
for 400 Som (8,84 US$) per year.
year This gives the same
benefits as under the SGBP. The card is individual and valid for one year. Special arrangements exist for
military (150 Som/ 3,32 US$,, with reduced benefit package) and refugees (400 som/
som 8,84 US$, paid by
UNHCR).
32
Currently 76,9% of the Kyrgyz population are covered by the HIF. This includes refuges, employees, farmers, children, penpe
sioners and other vulnerable
ble groups. The latter are covered under the State Guarantees Programme that pays contributions
for those who are uninsured. Other categories, like the unemployed, are still excluded (GIZ, 2009)
30
Since the start of the voluntary insurance, 14.500
14.
cards have been issued, including
uding 2.600 for the military,
2.000 for refugees and 7.000
000 for the informal sector (the latter, on average, 400 – 500 cards per year).
year Last
year the MHIF went to the bazaars to promote the card
car and as a result more cards were
ere issued.
Potentially the system of VHI,
I, set up by the MHIF, could be used for inclusion of informally employed perpe
sons in social security systems or the establishment of specific social security systems for this group. However, the system of VHI, as it is currently organised, is not viable and the MHIF is
is very reluctant to expand
the system.
stem. For example, for military personnel, figures from 2010 showed that contributions/co-payments
contributions/co
covered only 11% of all medical expenses. More promotion for the VHI card (to the informal sector) would
mean more cost for MHIF which they cannot afford. On the other hand, a more expensive card would deter
many potential candidates in the informal sector. In order to qualify as ‘good practice’ a number of conditions need to be fulfilled. The system must be financially viable and to do so, coverage must be expanded,
risk pooling and cross-subsidisation
subsidisation guaranteed, contribution rates increased, etc. Possibly, with the review
of the VHI system laterr this year, an inclusive approach, similar to other countries like Vietnam, can be conco
sidered.
An important technical achievement is the establishment of a good information system. A single hospital
information system has been developed (Kutzin et al, 2009).
20
Recently the three main databases (MHI –
900.000 entries, VHI – 14.500;
500; and drugs management) database have been linked.
3.4.3 Social Assistance Programmes
While social insurance benefits account for just below 6% of GDP (figures 2008),, the country spends annua
ally between 1 and 1,5%
5% of GDP on social assistance benefits and services in the 2000s. After 2005,
spending on social assistance benefits and services has been declining in relative terms, and in 2009 fell
below 1% of GDP (WB, 2009).
In 2007, the total number of recipients of welfare payments exceeded 10% of the total population of the
country. In addition, the state provides various types of benefits to about a quarter of the population (CDS,
2009-2011).
Two targeted cash transfer programmes were introduced
introduced after independence in 1991. These include the
Unified Monthly Benefit (UMB – introduced via Presidential Decree in 1995 and regulated in the law on
State Benefits in 1998) and the Monthly Social Benefit (MSB - also established by the Law on State BeneBen
fits), which together account for 0,,74% of GDP in 2007 and 0,64%
64% of GDP in 2008. Spending on UMB and
MSB has also going down to less than 0,5%
0
of GDP in 2009.33
3.4.4 Private Sector
A small market exists for the private sector. They target the better-off
better
and/or bigger companies/international
organisations. An example is ‘Zdorovie
Zdorovie’,
’, a Kyrgyz private insurance company, founded in 1993. Zdorovie
offers two types of voluntary medical insurance programmes: (i) the ‘Special,’ which offers reimbursement
33
For more details see the World Bank report “Social Safety Net in the Kyrgyz Republic: capitalising on achievements and ada
dressing new challenges”, 2009
31
of medical expenses
ses against an insurance fee and (ii) the Fund in which the insuree deposits a sum that
later is used for medical expenses. When the sum of the insured is exhausted, the insured can replenish it.
The cost of the insurance policy is rather high and will deter
deter the poor and other vulnerable groups. The
‘Fund’ can be used for family members,but the ‘Special’ is individual.
Also international insurance companies are establishing branches in Kyrgyzstan.
Reportedly a private pension fund exist, but different sources
sources estimate the number of contributors at less
than 1.500.
3.4.5 Other Social Protection Schemes
For sake of completeness, two other initiatives are mentioned. There
re are decided on a case-by-case basis
and have no potential for rolling out. Coverage is limited to a small circle and scope of benefits is at the disdi
cretion of the community/employer
employer – hence it is more about charity than a systematic safety net. Parts of
the information that we cite here were from the focus group discussion done with ‘Prima
‘Pri
Vera,’ a private
company which employs sewers. Discussions were done separately with the employees and management.
Informal community-level
level initiatives34 (e.g. duck/black cash), pooling of funds, to be distributed to
those in need. According to MoSP, this
thi can include micro-credits. In the focus group discussion,
the employees mentioned a ‘black budget,’ which they contribute in to on a schedule and take turns
getting. The ‘black budget’ is often used to buy merchandise (refrigerator, television, etc.). Membership in the scheme is selective and done very prudently because the scheme works on trust and
is rarely backed by anything written or recorded. This makes it not stable and a very dangerous ini
vestment, in the words of our informants.
Some employers do take care of their employees and provide additional benefits such as medical
care, mortuary benefits and extended sick or maternity leave. With Prima Vera, additional maternity
compensation is given on top of the maternity benefit provided by the government
govern
for adequate
augmentation. The company even takes hold of a portion of the salaries of some employees as
savings by request.
These initiatives are, however, purely on a voluntary basis and solely at the
discretion of the employer.
Anecdotal evidence exists of initiatives within the informal sector. One example is the case of taxi
drivers organising themselves in a district outside of Bishkek. Reportedly they pool contributions,
which can then be used in case of catastrophic costs for one of the members.
members. It was also reported,
however, that one of the main drivers behind this organisation is ‘economic protection’ and monopmono
oly of the sector.
34
Jamoats in Tajikistan and Aiyl Okmets in Kyrgyzstan, are the lowest level of local government and form distinct administrative,
legal and political entities. Each of these sub district units contain between 2-6
2 6 settlements which while forming separate
communities will usually have some common social ties based
based on ethnicity, geographic location and ecosystem resource
use. Confusingly the term Jamoat is used in Kyrgyzstan to refer to a common interest group of households with potentially
one or more Jamoats within an individual settlement (http://www.ehs.unu.edu/palm/file/get/3478)
(http://www.ehs.unu.e
32
3.5
3.5.1
Conclusion and Recommendations for Improved Social Protection in Kyrgyzstan
The impact of the informal sector
s
to social protection in Kyrgyzstan
When we asked the Ministry of Social Protection how the government addresses the informal sector, the
question was taken as an inquiry why the informal sector was not a direct beneficiary of social assistance.
The reply was that current priorities are the other categories such as children,
dren, orphans, disabled and elderly.
The government seems to regard that the informal workers abuse the system (“they
(“they don’t pay contributions,
so they can’t expect benefits”).
”). Nevertheless, it is acknowledged that informal sector and poverty often go
hand-in-hand.35 Quoting the PRSP: “Legalisation
ation of shadow economy will allow reducing poverty and can
effectively generate new jobs, innovations, income and growth”.
growth Therefore a special commission has been
established under the Ministry of Finance with involvement of government and public organizations to ded
velop and enforce reforms aimed at legalisation
legali
of shadow economy” (PRSP 2007-2010).
2010).
Equally important is that the informal sector doesn’t contribute
contribute to taxes and social insurance, making the
revenue basis for social insurance and social assistance extremely small. As was explained by the MoSP,
the few who pay taxes/contributions have to finance all other categories (poor, pensioners, unemployed).
The SIF pointed out that, at this moment,
moment an equivalent of 1 ½ months of pension cannot be paid.
This will
ill constitute a significant problem in the future,
notable for social security for the elderly. The situation
Migration vis-à-vis
vis Social Protection
of migrants – an estimated quarter of the working popupop
As most migrants work in the informal secse
tor, they do not contribute to any social ses
curity system.
lation – is an important factor in this. According to
HelpAge (2010): “Hundreds
Hundreds of thousands
thousand of people will
return to the Kyrgyz Republic with no access to social
s
security in old age; the
he lack of bilateral agreements prepr
vents the portability of social insurance such as the oldold
age pension, but also of health insurance, even if the
individual has been a regular migrant and has contribcontri
uted to the system in Russia or Kazakhstan.
Kazakhstan 36”
Furthermore,, HelpAge International revealed that with
regard to accessing social assistance, the participating
The current lack of any non-contributory
non
oldage pension, coupled with an official unemune
ployment rate of 11%, means that the numnu
ber of vulnerable people reaching retirement
age with no access to social security in the
Kyrgyz Republic is increasing rapidly.
On the bases of these
se official statistics for
unemployment, informal labour and migramigr
tion figures, in the next 10-15
10
years up to 1
million Kyrgyz citizens will be without a
complete official labour record, and will
therefore be without any pension or health
insurance.
households reported that having a migrant in the family
often
en resulted in external assumptions of wealth. In some cases, families were refused the UMB because
they had a member working abroad.
35
Empirical evidence has shown that the informal sector as a whole is not synonymous with poverty. It is found to be a heteroheter
geneous group: while some are engaged in subsistence economic activities, others run very profitable enterprises.
enterpr
In many
cases those in the latter accrue incomes well above the minimum wage in the formal sector of the economy (ILO, 2002).
36
According to the SIF, the government
ment is currently
cur ently negotiating regularisation of the international migrant workers and portability
port
of their contributions for social security.
33
3.5.2
Gaps in Social Protection
Other than the barrier for informal workers to access mainstream programmes of the government, as
a explained above, these mainstream programmes themselves have some design flaws. While economic performance has improved considerably in the last few years, difficulties remain in Kyrgyzstan in securing adequate fiscal revenues and consequently providing an adequate
e social protection system. We summarise
the following gaps below.
Limited risk mitigation
The main issue is the insufficient level of social benefits and pensions and their inadequate impact on imi
provement of living standards of recipients (CDS, 2009-2011). In
n view of many recipients of social paypa
ments and limited resources in sustaining the state budget, the size of these payments is small and its imi
pact on improving the standard of living is insignificant. Average size of UMB and social allowance
allow
in 2005
made up only 19% and 76% respectively of the extreme poverty line (PRSP, p. 65)37. This had even gone
down in 2007 when the average amount of UMB and social benefits made only 14,1% and 58,6% of the
poverty line (CDS. p. 110).
A study from HelpAge International (2009) demonstrated the minimal impact of the current social assistance
programme on older people’s lives, particularly for multigenerational households consisting of older people
and young children.
Pension benefits are particularly low for farmers who make up approximately
appr
55% of the population and one
third of the registered contributors (WB, 2009).
Inaccurate targeting of beneficiaries
According to a WB study, the social safety net (UMB) strategies are fairly effective. In terms of targeting
accuracy, the WB report claims that the poorest 40% of the population receives 81% of total benefits paid
out. Still, leakages to the non-poor
poor are notable.. 19% of benefits go to those in the top three quintiles.
Other sources,
ces, however, are less convincing and depend on how figures are interpreted. Less than 1/3 of
the poorest 20% of the population have access to the UMB.
UMB One of the scheme’s major challenges is to
assess the family’s income, especially ‘invisible’ income from agricultural activity
activit (since farmers pay taxes
and social contributions based on land tax and not on real income),
income), remittances and wages from migrant
family members that are difficult to trace (GTZ, 2010).
2010). This is explained in the next section.
Communities perceive that the targeting of social assistance programmes had been inadequate as was revealed by the study of HelpAge International. Inadequate targeting of the social assistance is particularly
true for the system of privileges (CDS, 2009-2011).
2009
During the interviews, the
e Ministry of Social Protection
likewise admitted to the unfairness in the system. They argue that some benefit users get more than those
37
The value of extreme poverty is defined as the costs needed to cover a minimum of 2.100 kcal per individual per day. The
absolute poverty line includes an allowance for non-food
non
goods and services deemed
d necessary to cover basic needs. Both
poverty lines were calculated in 2003 by the National Statistics Committee and have since been updated annualy using the
consumer price index (WB, 2009).
34
who have contributed.. To some extent, this explains why the government is reluctant to focus on the inforinfo
mal sector, who they perceive as profiteers.
The introduction of the ‘Social
Social Passport’ may be a powerful instrument to improve targeting and monitoring
processes. The social passport not only reaches out to the extreme poor who receive ‘passive’ assistance
in the form of social transfers but also to those who are physically unable to engage in productive activities
(GIZ, 2009).
Low contribution rate
Perhaps the most acute challenge for the low level of pensions and benefits is the great number of their
recipients that does not match limited resources of the state budget and Social Fund (PRSP, 2007-2010).
2007
Only about 15% of the working age population is accruing any pension rights, due to low labour force parpa
ticipation rate (44 - 45%) and low compliance.
complianc Out of 2,4 million
n people in the labour force in 2008,
2008 only an
estimated 800.000 (WB) to 1 million are registered as contributors to the social fund.
fund Some categories in
the labour force, who are not necessarily poor,
poor are exempted or pay very little contributions, like military,
etc..
Farmers make up approximately 55% of the population but only comprise one third of the registered conco
tributors. Their contributions make up less than 1% of total contribution revenues.
revenues At the same time, retired
farmers represent approximately 65% of the beneficiary population and absorb close to 60% of the pension
expenditures (WB, 2009).
Others
A number of other problems related to social protection are mentioned in the updated CDS,
CDS which are listed
below.
Poor
oor quality and high cost of social services in boarding houses and other specialized institutions
for children – orphans, elderly persons, people with limited physical ability;
Insufficient
nsufficient development of the social services system for
for vulnerable categories of the population
delivered at the community-based
community based level, therefore, many needy people, and particularly children
from groups at risk, who need social benefits, remain without due support;
There
here is an acute shortage of experts capable
cap
to render these services;
There
here is lack of interest in their development by local authorities and
nd local self-government
self
bodies.
3.5.3 Government response to addressing need of the informal workers for social security
In the section 3.4, we refer to several schemes
schemes as best practices, although categorically they fall short of
what would be considered effective approaches in reaching and providing social protection to the informal
workers. The seeming lack of best practice in this aspect is more a matter of economic
economic principle for KyrKy
gyzstan than the lack of ingenuity in designing schemes. None of the persons interviewed could point at a
single policy/strategy that targets the informal sector (in relation to social protection).
protection After almost 20 years
of independence,
ce, the attempts were insignificant and unfruitful (HelpAge International, 2010). A discrepancy
exists between policy papers and implementation.
35
Most significant is the fact that no ministry assumes responsibility for the cross-links
cross links between informal work
and social protection. According to the MoSP it is responsibility of the Ministry of Labour. The latter, howho
ever, states that their responsibility
ponsibility is (un)employment. All seem to agree though that better coordination
among different ministries is needed. Perhaps
Perhaps there is an opportunity to do so when developing the new
social policy.
Labour legislation is not the main issue, however, enforcement of compliance
As reported by the Ministry of Labour,
is. An important role is attributed to the State Labour Inspection
Inspection,38. which looks, inter alia, at occupational
health and safety (OHS) issues. However, their impact is very limited: they need to announce their visit in
advance and can conduct control visits only once a year. According to ILO, the current government is even
considering abolishing this inspectorate.
Tax collectors play a major role in forcing the economy underground as they often insist on using traditional
taxation system based on accounting (ignoring governmental decrees on the patent system), which de facto
fact
means giving bribes to them (HelpAge International, 2010).
Most important perhaps is that the government loses trust of its citizens (and as a result threatens the politipolit
cal stability of the country because it involves both corrupt government and criminal
criminal structures at all levels).
Lack of trust was mentioned by several interviewees (both private sector and government officials) as a mam
jor concern.
rn. It leads to a vicious cycle where people are reluctant to pay contributions because ‘they don’t
see any benefit from it’, whilst services remain poor (amongst others) because of the limited resources.
Solving this dilemma requires indeed awareness raising, public campaigns, but also a ‘clean government
and improved services.
For the international migrant workers, however, negotiations
negotiations with Russia and Kazakhstan have been initiinit
ated to discuss payment and portability of social security contributions. According to the SIF, a special webwe
site has been set up so that labourers can pay contributions
contributio online. Reportedly,
tedly, about 16.000
16.
people have
made use of this since its initiation in 2008.
3.6
Final Thoughts
In the debate on ‘improving social safety net’, the focus is on the poor, or for that matter, on better targeting
(e.g. systems of means-testing)
testing) and less on specific
specific categorisation of groups (e.g. informal sector).
The informal sector can be approached from different angles (economic, political, social), but it requires a
multi-sectoral
sectoral approach, strong coordination and leadership, which is currently lacking. In the
t whole discussion on social protection, the informal sector is not mentioned specifically (see for example the Bishkek conco
ference on social protection). Surprisingly, none of the government stakeholders interviewed mention that
the informal sector was a priority.39
38
According to the PRSP “The bodies of the State labor inspection
inspection conduct supervisory and control functions on protection of
labor rights, lives and health of working people. Some 1 800 inspections of enterprises and organizations are carried out ana
nually, during which some 8 000 violations are disclosed”
39
Ministry of Finance and Ministry of Economic Regulation were not interviewed.
36
Lack of trust in government (and social services) is prominent. A commonly heard complaint is ‘why
‘
to pay
more contribution if we don’t’ get anything in return’.
return’. This is particularly true for the informal sector.
It should be mentioned that because of their design, the social protection schemes of the national governgover
ment, and potentially commercial providers as well, might actually be deterring women from participating.
The national social insurance and the MHIP are meant for individual enrolment
enrolment of registered workers, who
are traditionally men. The children and elderly meanwhile participate in the schemes through subsidised
contributions or through social assistance. Women, or for that matter, those who are left to care for the
household, are left without social protection coverage if the schemes do not allow enrolment as family units.
Moreover, in Kyrgyzstan, we do not see any targeted programmes for women, unlike in other countries.
Thus, it could well be that a good portion of those without protection are women. There is no solid evidence
to back this, to date, since data available are not segregated by category. This therefore deserves further
investigation.
The new ‘Social Policy’ that is currently being prepared provides a good opportunity
opportunity for all stakeholders to
focus more explicitly on the informal sector. Since all relevant ministries are part of the working group (WG),
cross-cutting
cutting issues can be easily addressed. Moreover, GIZ is member of the WG and as such is in an
ideal position to put its mark on the policy.
37
4 Case Study III:: Pakistan
4.1
Country Background
Pakistan is a country of approximately 173 million people. Estimates of those who are poor range between
30 - 35% of the population living below the poverty line,40 with general acceptance
eptance that the numbers are
rising. Various measures have been used to determine poverty levels in Pakistan but all of them have limilim
tations,
tions, not least because they do not take account of the very diverse terrain,
terrain which makes up Pakistan,
the ethnic and political
olitical instabilities and tensions in the country, the acknowledged corruption, and the diffidiff
culties relating to the physical mapping of the country41. The recent devolution of responsibilities to provpro
inces for most social protection issues does not help in
in making an educated assessment of the total numnu
bers of those who face social protection risks.
Given that all of the poor are in the informal sector (but not all in the informal sector are poor) the governgover
ment has categorised the poor into a range of levels,
leve as follows
Table 6: Categories of poverty vis-à-vis
vis
income levels42
Poverty category
Extremely poor
Income level
50% of poverty line or less
Ultra poor
50 – 75%
Poor
75 – 100%
Vulnerable
100 – 125%
Quasi non-poor
125 – 200%
Difficulties with some of the poverty measurements used are in their relevance to the different circumcircu
stances – rural/urban, mountain/desert, agricultural/production etc.
et
Due to the relative inaccessibility of
much of the country for systematic surveying, all of the surveys undertaken
und
thus far – and indeed including
the current huge survey - use yes/no answers to questions. This makes objective assessment of social propr
tection risk difficult and highlights the issue of having to assess social protection risk on a regional basis
rather than a national basis.
The World Bank estimates that about 56% of households could be classified as vulnerable in Pakistan. In a
study commissioned in 2007, an astonishing two thirds of the households surveyed reported to have sufsu
fered from one or more major shocks in the past three years. More than half of all shocks (about 60%)
40
Official poverty line in 2005/06 was set at 944.47 PKR (11 US$) for a household per day (cf.
http://siteresources.worldbank.org/PAKISTANEXTN/Resources/Poverty
http://siteresources.worldbank.org/PAKISTANEXTN/Resources/Poverty-Assessment/3613611216396471531/PAK_OPL.pdf)
41
During the data collection phase in the current survey, whole villages are being excluded from assessment because they
don’t appear on the maps being used, which date from the early 1990s and do not take account of the many settlements
which have been established since then.
42
Source: Brief overview on social protection in Pakistan, Markus Ruck, ILO, 2010
38
were brought about by individual specific factors i.e. health, sickness and disability. The remaining ones
are external, including droughts, economic shocks, etc. It was established that the non-poor
non
households
deal with shocks by using asset-based
based strategies (e.g. sale of physical assets, cutting down on savings).
Among the poor, meanwhile, their coping strategies are mainly behavioural, for example, reduction of conco
sumption
ption or longer labour hours. The effects of these shocks are known to be catastrophic for the poor. But
considering that private health expenditure is 70% of total health expenditure and 81,5% of this is out-ofout
pocket, even the lower segments of the non-poor
non oor could be vulnerable to financial ruin if there are no safety
nets in place for services such as health care.
4.2
There is no single national social protection policy and, according to a number of key figures in the field
‘there is no appetite’ to develop one. There is a real disconnect in Pakistan at national level about who is
responsible for social protection (and the organisations and groups, therefore, which may benefit from ini
coming financial and technical
al assistance on the subject). The recently appointed government originally
intended to assign responsibility for it to the Ministry of Social Welfare, but those opposed to this argued
that it was unconstitutional to do so (the term ‘social protection’ does
does not feature in the constitution), so
there is no Ministry with specific responsibility for social protection. This means there is no specific coherent
policy for social protection which leaves the field wide open for fragmentation and duplication of effort.
effo
Possibly more worrying is the recent change to the constitution which resulted in all ‘service’ Ministries beb
ing disbanded at national level and responsibilities devolved to provincial levels. These include health, lal
bour, social welfare and education,
education, the Ministries which would normally address directly issues of social
protection and with whom the international development partners would engage. All of these Ministries have
now been devolved to provincial responsibility. In terms of social protection provision, each of the provincial
ministries has some responsibilities but these are not prioritised in any way. Central legislation, of which a
number are discussed below, does not necessarily translate to specific ministries. Inevitably, the demarcademarc
tion lines between ministries get drawn at provincial level and there is little co-operation
co operation between them or
consolidated activity.
There are a number of key policy documents and a number of key legislations, which address social protecprote
tion issues. It is important
ortant to remember that most of these documents specifically address poverty reducredu
tion rather than social protection issues per se but their relevance to social protection is clear.
4.2.1 Relevant Legislation
The oldest Act which relates to social protection is the Societies Registration Act of 1860 which provides
provi
for
the establishment of non-profit
profit organisations in the country. Various philanthropic organisations (mostly
NGOs) including national, regional, rural support programmes are established under this Act, most of which
are working for social protection or social risk interventions.
The West Pakistan Employees Social Security Ordinance, 1965 (and its different versions in four other
provinces)
inces) provides legal cover for the establishment of social protection institutions for formal sector eme
ployees.
39
The Employees Old Age Benefits
enefits (EOB) Act, 1976 (amended in September
September 2002) provides for a benefit
package for insured employees over age 55 (for men) and 50 (for women). Under EOB scheme, insured perpe
sons are entitled to an old-age
age pension (on the event of retirement), invalidity pension (in case of permanent disdi
ability), old-age
age grant (for an insured person who reached retirement age, but did not reach the15-year
the15
payment
requirement) and survivor's pension (in case an insured person has expired). Contributions are shared between
the employer and employee with 5% of the minimum wage provided by the former and 1% from the latter. This is
only available for those formally employed.
The Zakat and Usher Ordinance of 1980
0 provides the legal basis to establish a Zakat fund. Zakat is an IsI
lamic tax of 2.5% of the income during an Islamic calendar year, which is deducted at source from deposits
in commercial banks from all eligible people (according to Islamic Law) and it is disbursed to different parts
of the country to provide assistance to needy Muslims, based on the assessment of local Zakat CommitCommi
tees. In addition it also supports institutions such as hospitals and universities to meet the cost incurred by
poor and needy Muslims. There is no restriction on applicants: they could be from the formal or informal
sectors. The Ordinance was previously used as the legal basis for the Zakat and Usher Directorate in the
Federal Ministry of Zakat, Usher and Religious Affairs, which
which no longer exists, with all functions now ded
volved to provincial areas.
Mal Act of 1992 has a very broad spectrum target population, providing assistance to oro
phans and widows, stipends for educational activities, medical care, rehabilitation
rehabilitation from job related accidents
and injuries, and disbursements to disabled people. Any Pakistani citizen is eligible to apply for assistance.
The system still operates and, after a number of recent scandals about misuse and misappropriation of
funds, has now been put under new management and is focusing attention primarily on orphanages.
The Home Based Workers Social Protection Act of 2008 is based on a social protection strategy of 2007
and a labour policy of 2006, which are no longer in play. The Act however,
however, is still in force. It aims to estabesta
lish a Social Protection Commission Fund for home based workers to provide basic benefits to the workers
and their families, specifically those working in industrial, commercial and agricultural areas: eligibility exe
cludes ‘government servants and those earning more than rs.7000 per month. Though much of the work
carried out under this legislation relates to documenting the numbers of people involved in home based
working, and advocacy of rights and networking, but provision
provision of financial benefits to mitigate economic
risks is not provided. With funding and better organisation the potential for creating a social protection risk
pool of home workers could be achieved. It,
It however, hasn’t yet been developed.
The most recent
cent piece of legislation affecting social protection was introduced by the current government.
government
The pre-election
election intention was to have one group, outside of the ministries, responsible to provide assisassi
tance to the poor and needy. The legal cover required to
to operate was created through the enactment of the
Benazir Income Support Act of 2010. The Act assigns powers similar to other social welfare organisations
such as Bait-ul-Mal
Mal and Zakat. Benazir Income Support has now been established as a social safety net
ne
organisation, with poverty alleviation as its primary goal. The Board of Directors (of which an MP is Chair)
determines eligibility criteria and disbursement methods using direct grant funds from government.
govern
We identified this scheme as one of the best practices,
practices, which we discussed at length in the later section of this rer
port.
40
4.2.2 Poverty Reduction Strategy Paper (PRSP II)
The Poverty Reduction Strategy Paper (PRSP II) draws on the acknowledgement of the growing gap beb
tween the rich and the poor by addressing
addressing potential projects to alleviate and reduce poverty. A wide variety
of public sector investments are considered as measures to reduce poverty such as health, education, sos
cial security, irrigation, rural development, water and sanitation and others. PRSP
PRSP II is a continuation of the
first PRSP which was developed in early 2000. All public sector expenditure is seen as an effort to reduce
poverty and the paper calls for better targeting, based on an assessment of the potential for sustainable
development. PRSP focuses on macro-economic
macro economic stability while protecting the poor and vulnerable from
major economic and social protection risks.43
4.2.3 Policy Coherence in Social Protection
Pakistan’s Social Policy and Development Centre produced an appraisal of literature on social protection in
May 2010, A Profile of Social Protection in Pakistan: an appraisal of empirical literature.
literature This provides a
useful analysis of policies and documents which have been produced by, mostly, international development
partners and highlights the difficulties encountered through not having a cohesive social protection strategy
and adopting ad hoc and political responses to problems. The report relates that most of the schemes have
weak institutional structures, their funding is limited
limited and uncertain, their targeting inefficient and their covercove
age small. The combined coverage of all of the schemes is low. The report argues for the need for a policy
and research capacity for social protection,
protection which could be located in one or two existing
existi academic institutions.. It argues for the development of social protection schemes,
schemes which people themselves want and perpe
ceive as necessary, to which they can contribute, which will protect against interruptions to earnings and
income.
The study undertaken
en by the Social Policy and Research Centre in 2010 itemised the flaws in current polipol
cies and programmes thus:
43
•
Lack of coordination among executing authorities
•
Design fault in various schemes
•
Corruption and embezzlement
•
Inadequate cash or in-kind
kind assistance
•
Low coverage
•
High administrative costs
•
Programme overlap and duplication
•
Poor or no targeting mechanism
•
Political interference and bureaucratic malfeasance
http://finance.gov.prsp_report.html
41
•
Lack of monitoring and supervision
An unpublished ILO Brief Overview of Social Protection in 2010 reiterates the views of the Social Policy and
Development Centre, while also commenting on the failure to act on a number of social protection internaintern
tional agreements despite being signed and ratified by Pakistan.
Two brief GTZ/GIZ Pakistan papers
papers also support the positions of the Social Policy and Development CenCe
tre. The Social Assistance Mapping of 2010 argues that the lack of a holistic strategy means that individual
programmes remain ad hoc, reactive and fragmented.
fragmented The paper Support to the development of a social
health protection strategy argues that while other low and middle income countries have now managed to
put in place policies, which at least aim to provide complete coverage for health care, Pakistan has not. The
argument is made forr sensitisation and design of a national social health insurance scheme, based on rer
ports that out of pocket payments for health care are the key tipping point of a family into poverty and are
also key to keeping families in poverty over prolonged periods.
There is a real disconnect in Pakistan at national level about who is responsible for social protection. The
government originally intended to assign responsibility for it to the Ministry of Social Welfare. But since
there was no mention of social protection
protection in the constitution, it failed to have legal basis. Instead, the government devolved all responsibilities for ‘service’ ministries, such as education, health, labour and social
welfare. There is reportedly very limited capacity at provincial level for undertaking these responsibilities.
The government established a de facto ministry in the form of the Benazir Income Support Programme
(BISP), which has a national mandate and has become the focus of all international development partners
as it addresses issues
ssues of the poorest in society. Funding for BISP comes directly from government and from
loans and grants from development partners.
4.3
Despite there being no cohesive national social protection policy all activities in relation to those in the ini
formal sector and to the poor seem to be labelled under the ‘social protection’ banner in most literature reviewed.. It is difficult to assess the relevance to national policy and many of the programmes do not have
clear targets
ts but are reactive, ad hoc, responding to those who come to look for help and responding to the
not infrequent natural disasters which beset Pakistan. None of the schemes in operation which were rer
viewed has a target number of beneficiaries or a clear assessment
assessment mechanism to determine eligibility, makma
ing it impossible to gauge the efficacy of the scheme in reaching those who need the assistance on offer.
A huge survey, costing US$ 36 million, is currently being undertaken across the country by Benazir Income
Inco
Support Programme (BISP). Resources are coming from a World Bank loan. The data will be processed
using a ‘proxy means testing’ approach.44 It is intended that the results of the survey will be made available
– for a fee – to bilateral organisations and others, once it is completed by the end of 2011. While this is the
biggest survey undertaken to date it has many limitations: it is recognised that the methodology will not
catch people living in the bottom two rungs of the poverty scale; the survey is a one-off
o off survey and there are
44
According the World Bank documents, in an evaluation of the different measures available, proxy means testing has a ‘high
margin of error’.
42
no plans (or earmarked resources) for it to be repeated; the physical size of the country and the establishestablis
ment of settlements in remote areas makes it extremely difficult to get a clear picture of living conditions and
risk; there
ere are very different risks associated with living in the mountains than in living in desert – distinctions such as these are not accommodated in the survey.
Within the international community (including the Banks) there is also fragmentation (and a good degree of
frustration with the difficulties in finding responsible national counterparts). While all activities appear to
come under the labels of social protection or poverty alleviation it is difficult to locate individuals with rer
sponsibility for social protection in the key international agencies, which all have their own agendas. It is
hoped that the establishment of the UN Coalition on the Social Protection Floor, which has explicit support
and participation from key bilateral partners and as well as the ADB and World Bank, may help to galvanise
the government into assigning responsibility for social protection to a named Ministry at the national level.
The National Planning Commission of Pakistan has indicated serious concerns about the current governgover
ment approach to social protection and poverty alleviation, saying that it has adopted a purely political
mechanism and has excluded involvement of all ministries and national agencies while focusing all attention
on the BISP. There are serious concerns about
about sustainability of the approach if/when this government loses
power.
4.4
Best Practice on Social Protection for the Informal Sector
Three schemes are described in detail in this section: they each offer ‘life cycle support’ to the poorest two
groups (extremely poor and ultra--poor)
poor) though none of them have clearly defined eligibility criteria, target
groups or poverty assessment mechanisms in place when providing that support, relying instead on percepperce
tions of those who seek the assistance. Each of the schemes
schemes has limitations which are described, but they
do address social protection risks of some of the poorest in society. While none of them would warrant ‘best
practice’ status under normal circumstances they are included here as examples of the best practices
practice found
in Pakistan.
4.4.1 Bait-ul -Mal
Pakistan Bait-ul-Mal (PBM) is a state funded organisation providing a wide range of services including: EsE
tablishment and running of ‘Pakistan Sweet Homes’ for orphans, child support, national centres for rehabilirehabil
tation of child labour, vocational training centres, provision of wheelchairs, white sticks and hearing aids,
institutional rehabilitation for disabled (through NGOs) and relief assistance to those affected by floods. The
organisation was established to mitigate a wider range of risks than it currently covers. Those covered curcu
rently include age, disability, permanent incapacity to work, economic shocks, major health costs, and natunat
ral disasters. Each of the services provided is described in more detail below.
Funds for Bait-ul-Mal
Mal come directly from government and from private contributions, though have been rer
duced under the current government (re-directed
(re directed to BISP) and have also been reduced due to financial difdi
ficulties in the organisation (lack of transparency) under previous management as well as due to the financial resource challenges of the previous government. Funds are not invested but are disbursed and aca
counted for each year. Assistance is provided mostly in kind; where it is provided as a cash transfer an
a as-
43
sessment is made for individuals who are seeking assistance, to ascertain if they establish whether or not
they can afford to make a contribution towards the item or service they are requesting.
The programme aims to cover all of those living below the poverty line. But because funds are very restricted and have been previously committed to other budget items, the programme’s outreach
out
has become
limited.
The Pakistan Sweet Home programme has established 13 orphanages in 13 districts
distric for 900 children. A
total of 48.001.467 PKR (560.045 US$) has been spent on this up to June 2010. The Child support propr
gramme offers food subsidies in 11 of 144 districts nationwide. The National Centre for Rehabilitation of
Child Labour focuses on education to completion of primary level. It is currently operational
ational in 158 centres,
with 19.372
372 students. Most of the students are former child soldiers. The vocational training programme
provides free training to widows, orphans and the poor at 157 centres, with a total
total of 6.453
6.
people currently
availing of the training programmes.
Individual financial assistance is the only cash transfer available through Bait-ul-Mal.
Bait Mal. It is provided to pay for
tuition fees,, catastrophic health expenditure and rehabilitation in case of accident
accide orr injury. The programme
works through direct cash handouts and not through an insurance scheme for beneficiaries. It was previously the core activity of the Pakistan Bait-ul-Mal
Bait
and offices around the country to act as agents for the
programme. Funding for the individual
ndividual financial assistance is currently
cur
2 billion PKR/ 23,362 million US$
(down from 8 billion PKR/ 93,447 US$ in 2008-2009). To date fewer than 100.000
000 people have benefited
from financial disbursements under the scheme.
Eligibility for a cash transfer is determined by officers in the Bait-ul-Mal
Bait Mal offices around the country on the
basis of findings at interview, when an assessment is made if the applicant could make some contribution
themselves to the amount requested.
The programme guidelines require that assistance be provided to
“needy individuals’ having no support or source of income in following order of priority:
a.
Individual with major ailments/ disability
b.
Widow with dependent children
c.
Invalid with dependent children
d.
Infirm (senior citizenss above 65)
e.
Poorest of the poor to be reviewed
f.
periodically for rehabilitation
g.
Orphans
h.
Destitute
i.
Victims of unpredictable circumstances”
A ceiling of 300.000 PKR (3.054 US$) is available to disburse to any single individual or family. With limited
funds, the
he demands for services from Bait-ul-Mal
Bait Mal significantly outweigh capacity to provide support.
44
The Bait-ul-Mal
Mal programme provides a last-resort
last
safety net for the ultra-poor
poor and extremely poor but in a
very limited way. Their institutional services have a broader
broader scope. There is no critical assessment of the
target population, in terms of numbers of location.
4.4.2 National Rural Support Programme / Adamjee Insurance
The National Rural Support Programme (NRSP) was established nearly 50 years ago with a policy of rural
ru
development through social mobilisation, specifically at village level. Products available include micromicro
finance loans and rehabilitation services for people disabled through work accidents. Direct investments is
also made in infrastructure
nfrastructure development,
development, specifically link roads from villages to main roads to facilitate
bringing
ing produce and goods to market.
mar
The National Rural Support Programme is funded by government
and considers itself the state’s principal agent in providing mitigation against social risks.
isks. It does so through
300.000
000 local organisations which liaise with the central office in Islamabad.
Grants are provided to those in the 0-9
0 level of the poverty
scale, with micro-finance
finance products45 available to anyone
who is assessed as ‘rural poor’.
r’. The programme uses its
network of offices to provide information on voters’ rights,
civil rights and responsibilities and health education.
On the basis of evidence from their clients who fell into
extreme poverty through the costs of ill health, NRSP initiated a secondary scheme with Adamjee Insurance ComCo
pany to develop a health insurance scheme targeted only
for the poor. NRSP initially offered the health insurance on
a voluntary basis to all those applying for loans, but realrea
ised very quickly that it was easier and a lot more effective
to make the health insurance component compulsory,
which they did by adding 100 PKR (1,17 US$) to the loan
NRSP’s Poverty Scorecard
NRSP uses its own ‘Poverty Scorecard’
developed by Mark Shreiner. The scorescor
card is a simplified eligibility tool which
uses 10 indicators, which are translated
to 10 questions. The one-page
one
tool asks
the household respondents about their
province of residence, number of children
under 13 years old, school attendance of
the children, type of employment, highest
educational attainment of the female
spouse, source of drinking water, type of
toilet and possession of refrigerator, teletel
vision and vehicles. Answers to quesque
tions have equivalent scores, which add
up to a value from 0 to 100. Households
fall in to 6 levels depending
dependi
on their
scores: (i) 0 to 9, (ii) 10 to 24, (iii) 25 to
34, (iv) 35 to 49,(v) 50 to 69 and (vi) 70 to
100.
processing fee. Now everyone who takes out a micromicro
finance loan pays the additional premium which provides on-going
on ing health cover through a private insurer,
for the duration of the loan. With an average of 700.000
7 000 clients per annum the health insurance was a way
of mitigating NRSP’s losses due to defaulting on loan repayments (which made the family or individual ini
eligible
igible for any further loans) and also provided social protection for their clients in
in the face of a major risk.
Adamjee Insurance Company is a private commercial insurer. As an organisation they offer a range of
products including life assurance, health insurance,
insurance, accident and disability insurance, old age pension
plans, and marriage and child education savings plans. Under their in-house
in house insurance product plans all
premiums are paid by the insured person.
person The compulsory health insurance for borrowers that Adamjee
offers in joint venture with the National Rural Support Programme has a flat rate payment for everyone, irreirr
45
NRSP's micro-finance productss consist of micro-credit,
micro credit, savings, and hospitalization and accidental death insurance. Credit is
disbursed through the Micro-finance
finance and Enterprise Development Programme and through the Urban Poverty Alleviation
Programme (UPAP).
45
spective of pre-existing
existing conditions, or the amount of the loan. Insurance benefits cover hospitalisation up to
15.000 PKR (175,19 US$) each for the loanee and spouse and accidental death/ disability benefit up to
15.000 PKR (175,19 US$) for the loanee only. In addition to this, another 15.000 PKR (175,19 US$) is
given in case of natural death to pay up for loan balance and funeral charges. Since
Since July 2008, child birth is
also covered with a ceiling of 7.500 PKR (87,60 US$).
Following the relative success of the compulsory insurance for the NRSP clients, Adamjee now offers simisim
lar insurance in three districts of Sindh province: the insurance is provided through the Government of
Sindh. Currently the additional schemes
sche
provide health cover for 75.000
000 households in these three districts.
Similar arrangements have also recently been established with Thardeep and Sarhad Rural Support propr
grammes in Khyber
hyber Pukhtoonjwawa Province. The scheme provides cover to population groups with a poverty score of 20 or lower. The cover provided includes selected health services such as inpatient care,
pregnancy and delivery, accident and disability. More recently, transportation
transportation costs to health facilities can
also be claimed under the scheme. The maximum ceiling of reimbursement is 25.000
000 PKR (292 US$), although the premium is a lot more higher than the compulsory (250 PKR/ 2,92 US$)
The contribution rate for each of the schemes is determined in tandem with whichever organisation AdamAda
jee is working (BISP, Sindh government etc). Because the contributions are taken out from loans issued by
the NGO or the government organisation, the contribution
contribution payments are guaranteed. The products are only
offered to rural populations, with service providers in locations close to the insured population groups. While
the health services available are very limited, Adamjee, in conjunction with their partners,
partn
have set standards of care based
ased on Agha Khan health services in Pakistan.
The micro-health insurance package for NRSP is based on a card system which is presented at the point of
service delivery for pre-designated
designated service providers. The cards provide
de details of the members’ benefit
entitlements.
NRSP’s report for March 2011 placed claims from the insurance to be less than the ceiling of 15.000 PKR
(175,19 US$), which gives the scheme a very good support ratio. This fact though loses its spark when put
p
alongside the figure that only 0,3% of private health spending are from private health insurance. This means
that although the micro-health
health insurance of NRSP provides considerable shield against catastrophic health
shocks for its members, its outreach is
is still small to have an effect on a national scale. In should be considconsi
ered, however, that the programme is for the rural poor, which is just a segment of the population and that
health costs are much higher among urban residents.
One of the reasons for Adamjee’s
damjee’s continued involvement in the programme is the low claims ratio which is
currently lower than 50% (less than one percent for March 2011).
2011) The reason for this is not explained in any
of NRSP’s reports and deserves further investigation. Nevertheless,
Nevertheless the
he low claims ratio would indicate that
there is limited understanding about entitlements. Because the micro-finance
finance scheme is offered to people
living below a certain income threshold, it is safe to assume that the clients are either illiterate or have very
low levels of education. One should also not discount that, since the micro-health
micro health insurance is compulsory,
it is getting a good client mix and keeping adverse selection at bay. This is in contrast with voluntary health
insurance, which naturally attracts
racts potential users of the programme.
46
Adamjee got involved in the programme at the request of government but accepts that it continues only beb
cause they still see a marginal profit from the various schemes. As long as that remains the case, the comco
pany can
an continue with the scheme and use it as a public relations exercise to reflect the organisation’s
ethos of social responsibility.. This does not guarantee that they would continue with their involvement once
financial returns go unfavourable.
4.4.3 Benazir Income
me Support Programme
This programme is currently the keynote social protection programme in the country for the poorest populapopul
tion groups. Initiated by the current government, it has become the focus of almost all government attention
and much of the attention
tion of donors and development partners.
BISP was formed by law (Benazir Income Support Act of 2010) after the election of the government to
power.46 It reports to the Board of BISP, the Office of the President and the Central Office for Management
and Governance
rnance and Policy. It has a central office in Islamabad and has provincial offices in all provinces.
Beneficiaries could get hold of applications from the local offices of their MPs, with every MP being given
multiple application forms for collection and distribution
distribution in their constituencies. The applications are asa
sessed by BISP centrally. The BISP uses its own poverty scorecard, this time with 13 indicators. The syssy
tem of establishing eligibility is the same, with each household having an aggregate score as a sum of their
scores per indicator. Given the attention it has been receiving, it was able to launch a survey of households
in almost every country with the intention of going nationwide. With this database, BISP is able to crosscross
check applications with
ith their own record of the applicants’ poverty scores. Aside from their poverty score,
applicants have to pass the following pre-qualifications:
pre qualifications: (i) possession of a national identification card, and
(ii) monthly family income of 6.000 PKR (70 US$). They also have to be in at least one of the following circi
cumstances: (i) widowed/
idowed/ divorced women, without adult male members
members in the family, (ii) having physically
or mentally retarded
tarded person(s) in the family, and (v) any
any family member suffering from a chronic disease.
The target beneficiaries are primarily women, in the lowest categories of poverty and are almost universally
illiterate. This latter fact calls into question
que
the efficacy of providing the loan money direct to bank accounts,
which BISP indicates is an key feature of their scheme and demonstrates transparency. BISP opens aca
counts on behalf of the clients and are also moving towards ‘smart card’ disbursements to clients.
Services provided under the scheme include long term (15 years) of micro-finance
micro
loans, technical training
for one family member and life assurance of 100.000
100
PKR (1.166 US$) for the family breadwinner. Loans
are provided only after a family member has undergone employment related training. The available prodpro
ucts were determined by the government and the BISP Board of Directors. The mechanisms are known as
the ‘graduation path’ to get people out of poverty. The target population is ‘the poorest of the poor’, with a
focus on women.
46
General elections were held on February 2008, the current government was formed in March 2008 with the appointment of
the Prime Minister. The President was installed in September 2008.
47
In addition to these mechanisms BISP is currently planning
planning the introduction of ‘social health insurance’ for
the poorest of the poor, with
ith a BISP contribution of 1.000
1.
PKR (11.66 US$) per family per annum and a pop
tential benefit of up to 25.000 PKR (291,51 US$) per annum worth of health care in--kind. It seems though
that the insurance fund would not be from clients and would be from subsidies as no contributions are
planned. Neither is there any link planned to other health insurance schemes. BISP plans to implement the
scheme through a state insurance company with private partners. Delivery of services would also be
through private providers. BISP plans to pay the providers direct, rather than having an entitlement card or
a reimbursement system. No risk assessment has been undertaken by BISP (or development partners
pa
supporting the plans). There were also no discussions yet about the benefit package and the claims process.
There appears to be some confusion in understanding the basic concepts of social health insurance but
BISP is confident of their approach, having
having got a full time World Bank consultant helping them to prepare
the detailed plans for implementation.
The organisation has ‘a government mandate to support 5-7
5 7 million families’, but do not have specific tarta
gets yet. Due to the limitations of targeting,
targeting, the numbers of those supported are currently being measured
on the basis of numbers of families reached for the various products (though BISP was unable to provide
total numbers of clients or families supported thus far). A major baseline poverty survey is currently conducted across the country to determine poor population groups and levels of poverty. BISP has a budget in
this financial year (2010 – 2011) of 1 billion PKR (11.66 million US$),, with funds coming from government
subsidy, part grant, part loan
oan from World Bank, ADB, DFID and USAID. Reserves are not invested and no
premiums are paid by beneficiaries. The risks covered include life (including health) and economic risks,
with an emphasis on assisting people to learn useful skills to encourage uptake of employment.
BISP was conceived during the time of Benazir Bhutto as a way of targeting the ultraultra-poor or extreme poor,
to try to improve their lives. After the death of Benazir Bhutto and the election success of her party, the non
tion was adopted and
d implemented as a key government action. Having dismantled the central ‘service’
Ministries, which would normally be the focus of social protection initiatives (education, health, labour and
social welfare), the government established BISP almost as a quasi-Ministry,
qua Ministry, with authority to negotiate and
deal directly with external and internal donors and development partners. The organisational vision is
clearly personified through the Chairperson, who acts as de facto CEO of BISP. BISP is in receipt of 1 bilbi
lion
on rupees in this financial year of government funds, some of which come through WB and ADB grants
and loans (some of which are earmarked by WB and ADB specifically for BISP). Technical assistance has
also been provided to BISP for the ‘health insurance’ programme
programme planned to come into effect this year.
BISP has cross party support, with the new law being passed unanimously in Parliament. Nevertheless,
there were initial concerns about ethnic/ provincial bias in the selection of beneficiaries but this might have
been addressed by a more objective poverty score card system. Still, this deserves investigation.
4.4.4 The Bacha Khan Income Support Programme
The Bacha Khan Income Support Programme
Program
is being planned in Khyber Pukhtoonkhawa province. The
name is taken from
om the late Bach Khan who was a freedom fighter and headed the political party that is curcu
rently part of the coalition government in the province. The programme
program
is in the planning stages and will
48
follow a similar approach to previous relief programmes of being
b
province-specific
specific and without clear-cut
clear
guidelines for disbursement of funds.
4.5
Conclusion
In Pakistan many social protection schemes have been started, both formally and informally and this has
resulted in a high degree of fragmentation and duplication.
duplication. While the number of schemes increases, no rar
tionalisation of existing schemes has been done, to improve coverage or efficiency or to consolidate the
resources or the risk pool. The four major schemes discussed above, namely PBM, BISP, Zakat and NRSP
health
lth insurance model cannot be simply advocated as models for extension and funding. The political viv
ability and organisational limitations of each of these are diverse. Against the backdrop of the Pakistan
socio-economic
economic and political culture and the inevitable
inevi
changes in policies and government structures, the
schemes that are mentioned above seem to continue, with different names and different mandates in the
provinces.
BISP has been provided legislative cover by an act of Parliament. Its major flaw is that
that financial relief is not
adjusted according to family size.
Pakistan Bait-ul Mal has a well-defined
defined corporate governance structure and is covered by legislation. It has
had continuous state funding since its inception. It is based on the concept of the Islamic
Islamic Welfare State and
traditional values of society. It has been maintained for two decades during various political upheavals.
However its mandate is broadening and its ability to address the risks it purports to address is limited: the
most obvious flaw
aw in the functioning of PBM is the discretionary nature of identifying those who are entitled
to relief and, possibly more importantly, the process of prioritization of the applicants.
Zakat has an eligibility issue (since it targets Muslims only) for donors’
donors’ technical and financial support. It has
an administrative structure up to union council (the smallest administrative unit of the Government of PakiPak
stan). After decentralisation of Ministries it is likely that provincial governments will increase funding
fund
due to
large share they are now receiving from the federal government through the 7th National Finance commiscommi
sion award 2010.
The NRSP health insurance model is relying on the organizational structure of the micro-finance
micro
network. It
is contracting with
h a private insurance company to provide services. Thus the future extension of the
scheme will depend on the commitment of the private sector to its corporate social responsibility rather than
to profit making, which makes it unlikely to be tenable long-term.
long
What is gleaming in the Pakistan case is the sophistication of the above schemes’ targeting methodologies.
The schemes target beneficiaries are clearly defined to benefit the poor. For this reason, they have come
up with very precise eligibility criteria and developed innovative yet practical
practical instruments to accurately idenide
tify them. Although this does not directly benefit the informal sector per se, the resulting database, if this
would be expanded nationwide, could be used to identify the informal workers and profile them. Should the
national
tional government choose to service this sector, then this information would be useful in planning and
formulating policies, a luxury that not all countries have.
49
While all the above schemes provide some lessons for the international audience they are disparate,
dis
overlapping in nature, and highly selective in coverage. The future of alleviating social protection risks is more
likely to lie in exploring the possibility of integrating these schemes to create mutual benefit and to signifisignif
cantly increase the risk-pool
pool and consolidate funding streams, while consolidating benefit packages. In ada
dition,
tion, the government should acknowledge the function and effectiveness of cross subsidisation and sense
of ownership by the participants rather that approaching social protection
protection from a ‘charity’ perspective.
4.6
Final Thoughts
The social safety nets that Pakistan has put in place significantly focus on women. This reverse gender-bias
gender
seems to be deliberate for all the schemes that were investigated. It resonates the internationally
internati
recognised fact that most of poor are women and capacitating women is one of the most effective approaches to
achieving the MDGs.
50
5 Cross-Country
Country Comparison of Best Practices for the Informal
Sector
There is a lot that set Kyrgyzstan, Pakistan and Vietnam
Vietnam apart that finding the common ground for which to
base cross-country
country comparison of best practices poses difficulty. The three countries have such divergent
historical trajectories that they have little in common in their current socio-political
socio political systems.
syste
The countries
though have been responsive to the international call for social protection being advocated within the United
Nations and championed particularly by the ILO. Although poles apart, the three countries could be said to
find common ground with
ith the issue on social protection. The translation of that value i.e. provision universal
protection especially to disadvantaged groups, is expressed in different ways that one is presented with
various configurations of social protection systems as could
could be seen in the cases above.
As a starting point of comparison, we subscribe to the definition of the BMZ of social protection:
“Systems of social protection support individuals or households in risk prevention, mitigation or in coping
with the following aims:
(i) to secure a certain absolute minimum level of socioeconomic livelihood for all individuals and
households, especially for people who are physically unable to work due to age, disability, or rer
duced potential to help themselves caused by poverty or other
ot
factors;
(ii) to ensure that individuals or households not suffering from poverty do not experience a strong relarel
tive deterioration in their socio-economic
socio
situation or a decline into poverty;
(iii) to encourage poor and non--poor individuals and households to invest
est in education, health and propr
ductive real capital, to secure their own capability for employment and thereby improve their sociosoci
economic situation through their own efforts.
To us, the BMZ definition gives a useful basis in reviewing government policies
policies with regard to social protecprote
tion. Using this definition, we could determine how adequate a government’s response is to risk prevention
and mitigation by assessing whether its socioeconomic programmes benefit the disenfranchised, the assisassi
tance it provides
es during economic shocks and the mechanisms it institutes to enable households to improve
their lives. We have used this definition therefore to evaluate the policy frameworks of the three countries.
Furthermore, we tried to assess how the three countries
countries perform in terms of actualising their policies on sos
cial protection in relation to the informal sector. In doing this we find useful GIZ’s three dimensions of uniun
versal coverage, which was shown in Figure 1. Coverage of the informal sector depends on how
h
well the
system identifies and responds to needs of the informal sector. We noted that a country’s regard of its ini
formal sector’s role in economic development explains the attention given to providing targeted services. It
deserves to mention the approach
ach employed to reach the informal sector and the depth and breadth of serse
vices that are made available for them.
5.1
Policy Framework
A coherent policy framework for a social protection system implies guaranteeing a set of services that insulates the household from economic blows that would cause it to spiral down poverty. These services are
broad-range
range from vocational training and job placement to provision of insurance coverage and basic health
51
care among others.. The initial step for a country
country is to identify crucial protection gaps and determine a suitsui
able configuration of services that would facilitate closing these gaps. It means therefore that every country
would have its own set of social protection services and products according to what
what it sees as priority risks
of its vulnerable population. This said,
said the countries of Kyrgyzstan, Pakistan and Vietnam have their unique
policy framework in supplementing a rationale for the services it chose to implement. We show below the
different legall instruments used by these countries that make up their social protection system.
Table 7:: Configuration of social protection system in three countries: Vietnam, Pakistan, Kyrgyzstan
Social protection
services
Vietnam
Pakistan
Kyrgyzstan
State pension, 1992
Unified Monthly Benefit
(Presidential Decree
1995)
Law on State Benefits,
1998
Insurance of formal
workers
Labor code, 1998
Law on social insurinsu
ance, 2006
Law on social health
insurance, 2009
West Pakistan employees social security ordinance of 1965
Employees old age
benefits act of 1976
Insurance of informal
workers
Provision on voluntary
participation in Law on
social insurance, 2006
Voluntary contribution
provision in Law on
social health insurance,
2009
Home-based workers
social protection act,
2008
Social assistance for
specific target beneficiaries
Decrees directing propr
vision of social assisassi
tance to poor and
households with severe
disabilities
Program No. 134 which
supports house buildbuil
ing and land production
for ethnic minority
groups
Zakat and Usher ordinance (1980) provides
financial assistance to
needy Muslims
Bait-ul-Mal Act (1992)
provides assistance to
orphans and widows,
stipends for educational activities, medical care, rehabilitation
from job-related accidents and injuries and
disbursements to disabled people
Benazir Income Support Act (2010) which
provides life assurance
package for eligible
poor
Support entry to labor market
Master Plan on VocaVoc
tional Training and
Employment Creation
for youth in 2008 –
2015
Master Plan on VocaVo
tional Training for Rural
Labour by 2020
Several decrees crecr
Benazir Income Support Act (2010) which
provides micro-finance
after employment related traiing
52
Social protection
services
Vietnam
Pakistan
Kyrgyzstan
ated the labour ded
mand-suppy
suppy matching
service and the eme
ployment introduction
centers
Decision No.
33/2007/Q
33/2007/Qð-TTg
creates support structures
for migration and setse
tlement of ethnic minormino
ity people
peopl
Ordinance on Disabled
People issued, 1998
created employment
funds for disabled peope
ple
It is evident in the table above that Vietnam is far advanced out of the three countries in laying the legal bab
sis for its social protection system. The three countries have national policies that set out targets and interinte
ventions to institutionalize social protection mechanisms. A step more progressive
progressive than the rest, Vietnam
places importance not just on provision of social security through insurance and social transfers but also
economic security through employment opportunities. Needless to say, the three countries have their rer
spective Poverty Reduction
uction Strategy that ensures
ensure provision of essential services to the poor.
In terms of institution structures, both Vietnam and Kyrgyzstan have clear lines of authority from oversight to
administration in actualizing their respective social protection policies.
policies. For both countries, national Ministries
take the lead in steering social protection structures. Pakistan has devolved much of the functions to the
provincial offices, which confuses overall supervision. The table below shows the different administrative
administrati
organizations that take on functions for the social protection system.
Table 8:: Oversight and administration of the social protection schemes
Administrative
Organisation
Vietnam
Pakistan
Kyrgyzstan
Old Age, Disability and Survivors
National oversight and
supervision
Ministry of Labor, InvaInv
lids and Social Affairs
Ministry of Labor, Manpower and Oversees
Pakistanis
Ministry of Labor and
Social Protection
Administration
Vietnam Social
Security
Employee’s Old-Age
Benefits Institution
Provincial and county
Prov
offices of the Ministry
of Labor and Social
Protection administer
the program, Social
fund administers beneben
fits
Sickness and Maternity
53
Administrative
Organisation
Vietnam
Pakistan
Kyrgyzstan
supervision
Devolved to the Provincial Labour Departments
Cash benefits:
benefits Social
Fund
Medical benefits:
benefits Ministry of health and health
departments of local
governments
Administration
Vietnam Social
Security
Provincial Employees’
Social Security Institutions administer the
program in each province. The Institutions
are managed by a tripartite governing body
and a commissioner
Cash benefits:
benefits Social
Fund administers, eme
ployers pay cash beneben
fits
Medical benefits:
benefits Ministry of Health and local
health departments
administer medical
medica
services, Mandatory
Health Insurance Fund
provides health care
benefits
supervision
Social security: Provincial Labor Department
Workmen’s compensation: Workmen’s compensation commissioners in each province
Temporary disability
benefits Social Fund
benefits:
Permanent disability
and survivor pensions:
pensions
Social Protection
Medical benefits:
benefits Ministry of Health and health
governments
Administration
Vietnam Social
Security
Provincial Employees’
Social Security Institutions in each province
Temporary disability
benefits enterprises
benefits:
and employers pay
cash benefits
Permanent disability
and survivor pensions:
pensions
Provincial county ofo
fices of the Ministry of
Labor and Social ProPr
tetion
Medical benefits:
benefits Ministry of Health and health
governments
supervision
No statutory unemployment benefits
Employment service
Administration
Vietnam Social
Security
Work Injury
Unemployment
Local employment cence
ters
Family Allowances
54
Administrative
Organisation
supervision
Vietnam
None
Pakistan
None
Administration
Kyrgyzstan
Social Protection
Local offices of the
Ministry
istry of Labor and
Social Protection
Although much is to be desired in optimising agency performance, the state structures that Vietnam has set
up reflect the coherence of its social protection policy - concentrating key functions to two agencies. InciInc
dentally, Vietnam has also set up the Institute of Labor Science and Social Affairs, which aims to support
the national agencies through research.
search.
Kyrgyzstan maintains two separate funds for its social insurance and mandatory health insurance, with two
independent agencies administering their respective programs and benefits. In terms of supervision, the
funds are overseen by two separate Ministries.
Ministries. Its reason to separate the funds maybe is in recognition of
the difference in the nature of risks being covered and how benefits are dispensed. Separation also insuins
lates the funds from each other in the event of insolvency, which makes the system more stable. However
in addition to the insurance, Kyrgyzstan has overlapping cash benefits that are awarded for the same condicond
tions, which has made the system be perceived as fragmented.
5.2
Extending
ding Social Protection to the Informal Sector
S
Among the three countries,
ountries, Kyrgyzstan leads the way in specifically addressing the informal sector. ReR
ferred to as the shadow economy, the informal sector is defined mainly as unregistered enterprises and rer
garded as causing unfair competition, distortion of statistics and tax deficit. Despite having negative connoconn
tation ascribed to the so-called
called shadow economy, Kyrgyzstan is the only country that has a particular policy
that is directed at and seeks out the informal sector.47 To no surprise, it keeps a profile of the types of economic activities the informal sector are engaged in and is interested in knowing the proportion in the statisstati
tics these sub-groups
groups comprise. Kyrgyzstan’s main approach to the informal economy is legalisation, which
is expected to help balance out the country’s fiscal position following improved tax collection. An improved
cash flow will help relieve the burden of providing social services. Estimated between 40 to 53% of the
country’s GDP, the informal economy is a big resource for the Government to tap
tap and a significant strain to
the country’s social infrastructure. Kyrgyzstan sees legalisation as a way to cut the vicious cycle of deficits
in social services as a result of badly performing tax revenue. Although it should be said that deficiency in
tax collection as well as corrupt practices could as well affect tax revenue performance.
Although the move to legalise the informal sector is primarily economic, doing so would provide the informal
workers access to mainstream programs of the government. It could be said then that part of Kyrgyzstan’s
47
Athough Vietnam purportedly instituted the voluntary schemes for the informal sector, which they consider vital to their econeco
omy, there is no mention of the sector as a group and as a priority of the government for its social protection programmes in
the policy documents reviewed. This is in contrast with Kyrgyzstan that has a clear polity standpoint on the matter.
55
intention to register the informal sector is to integrate them to government systems that include social secusec
rity. Mainstreaming of the informal sector could also be considered an approach being pursued by Vietnam.
Vietn
Like Kyrgyzstan, Vietnam has registered its farmers and is enforcing registration of casual employees and
informal enterprises. Registration allows Vietnam to insist on compulsory insurance of labourers under the
social security system of the government.
government. However, in contrast to Kyrgyzstan, Vietnam has a voluntary ini
surance scheme catered specifically for people who fall through the compulsory program. This scheme has
not been as intently campaigned as it should and is slow on membership uptake. Nevertheless,
Neverthe
the government is planning to invest in subsiding premiums of eligible beneficiaries to increase membership.
Both Vietnam and Pakistan are silent about the informal sector and have no clear policy in addressing their
needs. To match Vietnam’s voluntary
volunta scheme, Pakistan has the Home-based
based Workers Social Protection Act
of 2008. Enforcement of the act had only been documentation of workers in the informal economy and fell
short of setting up an actual fund for their protection. The act had now been repealed
repealed and was replaced with
the Benazir Income Support Program, which targets the poor and near poor. In Pakistan, the resort for ini
formal workers is to be categorised as poor to access BISP. Although, this in a way is true for Vietnam and
Kyrgyzstan as well,, both countries either offer an alternative avenue or aggressive campaign in integrating
the informal sector into the mainstream social protection system.
5.3
Comparison of Benefits and Disability Package
Vietnam has the most generous coverage among the three in terms of cash benefit (which for the informal
sector includes survivorship and pension). However, Kyrgyzstan provides a better range in terms of number
of risks covered. Pakistan’s package is meager in both breadth and depth. Kyrgyzstan uses notional defined contribution to determine eventual pension obligations. This means that the payouts are not tied to the
workers’ last salary but to how much the individual contributions earn (as explained in the previous chapter).
This makes the system financiallyy sustainable in contrast to Vietnam and Pakistan where pension payouts
are taken from current tax revenue, which makes disposable funds for payouts vulnerable to deficit. The
table below also shows pension regulations in the three countries and additional
additional assistance afforded to the
disabled. All three extend disability benefits in case of work-related
work related injuries and permanent disability, with
additional financial support as in the case of Pakistan. In Vietnam, disabled people are enrolled in vocavoc
tional trainings
inings and could access employment funds so that they are integrated into the labor force.
Table 9: Benefits and disability package in the three countries
Vietnam
Pakistan
Kyrgyzstan
Type of
program
(National)
Social Insurance including
voluntary scheme, social
assistance program
Social insurance program,
voluntary pension system
and social assistance programs (operations devolved provincially)
Social insurance, notional
defined contribution (NDC),
mandatory individual aca
count and social assistance
program
m
Benefits for
the insured
Old age pension: 45% of
the insured’s average earnear
ings for the first 15 years of
Old age pension: 2% of the
average monthly earnings
in the last 12 months multi-
Old age pension: the
monthly benefit is the sum
of several components: a
56
Permanent
disability
benefits for
insured
workers
Vietnam
Pakistan
Kyrgyzstan
contributions plus 2%
(men) or 3% (women) of
the insured’s covered ava
erage monthly earnings for
each year of contributions
exceeding 15 years is paid.
Average earnings are
based on 5 to 10 years of
contributions or the whole
contribution period, ded
pending on length of conco
tribution and wage.
The maximum pension is
75% of the insured’s averave
age earnings.
Insured persons with more
than 30 years of contribucont
tions also receive a lump
sum of 50% of their averave
age monthly earnings in
the last 5 years before the
pension is first paid for
each year of contributions
exceeding 30 years.
Early pension: The pension
is reduced by 1% of the
insured’s average earnings
for each year the pension
is taken before the ini
sured’s normal pensionable
age.
The minimum benefit is the
monthly minimum wage.
The monthly minimum
wage is 730.000 VND.
Benefit adjustment: BeneBen
fits are adjusted according
to changes in the cost-ofcost
living and economic
growth.
Old-age
age grant: A lump sum
based on the number of
years of covered employemplo
ment and average monthly
earnings is paid.
plied by the number of
years of covered employment is paid.
The minimum old-age pension is 3.000 rupees a
month.
Early pension: The pension
is reduced by 0,5% for
each month that the pension is taken before the
retirement age.
Benefit adjustment: Benefits are adjusted on an adhoc basis.
Old age grant: A lump sum
of 1 months of earnings for
each year of covered employment is paid.
basic flat-rate
flat
benefit (800
soms or 12% of the averave
age wage in the last year,
whichever is higher),
hi
a
transition component, an
NDC component and a
benefit based on the value
of the individual account
from 2010 onward.
The transition component
is calculated as average
earnings for 60 consecutive
working months multiplied
by 1% for every complete
year of insured employemplo
ment before 1996. The
NDC component is calcucalc
lated as accumulated conco
tributions (of at least 1
year) from 1996 onward
divided by 12 months and
multiplied by a coefficient.
There is no maximum penpe
sion.
The maximum average
earnings used to calculate
benefits are 23 times the
basic rate.
The basic rate is 100 soms.
Partial pension: A percentpercen
age of the full pension s
paid according to the numnu
ber of years of covered
employment.
Pension supplement: 20%
to 475% of the basic rate is
paid.
Benefit
fit adjustment: BeneBen
fits are adjusted periodiperiod
cally according to changes
in the cost of living.
Disability grant: A lump
sum is paid (not yet defined
by legislation). The old-age
old
pension is paid to certain
groups of insured persons
with an assessed disability
of at least 61%.
Disability pension: 2% of
the average monthly earnings in the last 12 months
multiplied by the number of
years of covered employment is paid.
The minimum pension is
3.000 rupees ($35.12) a
month.
Disability pension: If asa
sessed with a Group I or
Group II disability, the
monthly benefit is calcucalc
lated as the sum of several
components: a basic flat
rate benefit (800 soms or
12% off the average wage
in the last year, whichever
57
Vietnam
Pakistan
Benefit adjustment: Benefits are adjusted on an adhoc basis.
Additional
social assistance to
disabled
people
5.4
Employment funds for the
disabled; vocational traintrai
ings
Kyrgyzstan
is higher), a transition
component, and an NDC
component.
The transition component
is calculated as average
earning for consecutive
working months multiplied
by 1% for every complete
year of insured employemplo
ment before 1996. The
NDC component is calcucalc
lated as accumulated conco
tributions (of at least 1
year) from 1996 onward
divided by 12 months and
multiplied by a coefficient.
Constant
Constant-attendance
supplement: 150% of the basic
rate is paid for blind perpe
sons and 50% of the basic
rate for other categories of
disabilities.
The basic rate is 100 soms
(January 2010).
Partial pension: A percentpercen
age of the full pension is
paid according to the numnu
ber of years of covered
employment.
Pension supplement: 50%
to 475% of the basic
bas rate is
paid.
Benefit adjustment: BeneBen
fits are adjusted periodiperiod
cally according to changes
in the cost of living.
Bait-ul-Mal provides assistance, medical care, rehabilitation for job-related accidents and injuries and
also disbursement to disabled people
Contrasting the configuration of social protection mechanisms available for the ini
formal workers
Finally, we summarize below the various social protection schemes that were available for the informal secse
tor. We list down, aside from the national programmes, products offered by commmercial sector and the
non-profit
profit organizations. The discussions above have centered on Governments, which have always been
the dominant player and biggest provider of social security services. We show the table below to illustrate
58
how the other agents respond to fill in the gap left open by Governments as they trod contrasting developdevelo
ment ideals.
Table 10: Social protection
protection of the informal workers in the three countries
Vietnam
Pakistan
Kyrgyzstan
National programme
Informal workers are
able to participate
through the voluntary
scheme for both health
insurance and social
insurance. Social ini
surance uptake rer
mains low since workers have to pay for the
premiums full without
counterpart. Seasonal
workers, migrant workwor
ers and street vendors
lack access to the nan
tional programmes.
program
The voluntary health
insurance has considconsi
erable uptake although
adverse selection apa
pears to be the reason.
Poor Informal workers
could access livelihood
support and social assistance provided by
BISP, Zakat fund and
Bait-ul-Mal. There are
no government social
security programs
available for people
without formal employment.
Informal workers would
woul
only be able to access
national social security
programs if they are
registered;
voluntary
health insurance are
meant
for
informal
workers
Commercial insurance
Mainly breaking into
the micro-insurance
micro
market. MicroMicro
insurance is tied to mim
cro-credit
credit programs of
community organizaorganiz
tions. Although they
service the informal
sector, they are most
often confined to a
geographical area.
Micro-insurance products are attached to
loans which are
awarded to qualified
poor individuals.
Commercial insurance
is the only option to an
informal worker not eligible to participate in
pro-poor programs
Small and target the
high
high-end
market
Non-profit
tions
Started as micromicro
finance that now offer
insurance products.
These schemes are
local and often have
small risk
sk pools with
limited service packpac
age.
NGOs are the primary
insurance providers
and they operate in a
defined locality
organiza-
We see above that in terms of providing insurance to the informal sector, the Governments of Vietnam and
Kyrgyzstan have been the main players. Particular to Kyrgyzstan, benefits offered by the national propr
gramme are comprehensive that the only demand commercial insurances could fill is to top-up
top
the existing
package, which is what is seen in European countries. Since the commercial insurances
insur
providers are
unlikely to offer packages for the informal sector, technical support would potentially be of value in assisting
59
the government legalise and integrate the informal workers to mainstream programs. This is likewise true
for Vietnam. The government
overnment of Vietnam would benefit from developing systems to register informal workwor
ers so that they join the compulsory program or effectively target deserving individuals for subsidies under
the voluntary scheme. Assistance is also needed in marketing the
the voluntary insurance to the informal secse
tor.
Since they work with community organisations, both the commercial and the non-profit
non profit sectors in Vietnam
could be used to reach informal workers in geographically-isolated
geographically isolated areas, which are usually remote to the
national programs. Mechanisms adopted by community organisations are briefly explained in the chapter
on Vietnam.
The Government of Pakistan mostly target the poor and near-poor
near poor and generally leave out the informal secse
tor. It would not be to anyone’s surprise
surprise if the commercial providers are found to be very active in filling this
gap. Intervention would be necessary to commit commercial insurance into providing more responsive
packages for informal workers at a reasonable premium. Public-private
Public
partnership
p could yield innovative
arrangements such as government premium co-payment,
co payment, tax incentive and intermediation.
60
6 Recommendations
We have outlined our recommendations using the dimensions of universal coverage. We put forward these
recommendations with the caveat that they could not be expected to be entirely relevant to a particular setse
ting. Moreover, given that we conducted the study in a limited period, our findings are naturally not exhausexhau
tive.
mproving coverage of the informal sector
On improving
Governments have
ve to first clarify their respective policy standpoint with regard to the informal
economy. We are presented with three scenarios in the study. Workers in this sector could be
seen as detrimental to development (Kyrgyzstan), capable of providing for their
thei own needs (Pakistan) and instrumental to economic growth (Vietnam). Since all three countries commit to universal
social protection, then they would have different frameworks on providing social protection to their
informal workers, none better than the others. GIZ could facilitate this process by creating the fof
rum to discuss this. As we have noted, not every country would see as essential having a common
understanding of the sector and its needs in terms of services.
As we have seen in the three cases, governments have the main task of identifying and classifying
the informal sector. This is necessary because the informal sector itself could be segmented in difdi
ferent categories based on the nature of risks that they are particularly exposed to. We point to the
government as having this responsibility because it is the only institution that has stake in universal
coverage, while other institutions (say commercial insurance or even non-profit
non
organisations)
would tend to focus on a particular segment. GIZ could
could provide the necessary technical support to
do the informal sector (market) segmentation.
In Vietnam and Kyrgyzstan, voluntary schemes were set-up
set up to draw participation of the informal
sector. Much is to be desired though in terms of marketing the product.
product. In any case, creating
these platforms whereby an informal worker has ease in enrolment is a good first step to reaching
this group. GIZ could bring its own experience in assisting countries to set up voluntary insurance
schemes.
or the informal worker especially if the premiums for the voluntary insurance are
Price is an issue for
pegged at the minimum wage. Particularly for the near-poor,
near poor, who has intermittent income, mainmai
taining premium payments would prove to be a challenge. None of the cases showed an alternative
formula to make premiums more equitable and distributive. There is definitely need for technical
assistance in this area.
On expanding depth and breadth of coverage
In all three cases, it is not demonstrated that insurance products were developed
developed on the basis of
the informal workers’ risks and demand for social protection. Doing a thorough market study would
have established what should be the appropriate coverage for this group to protect them against
economic shocks or secure their livelihoods.
livelihoods. In the voluntary insurance of Kyrgyzstan and Vietnam,
the benefits are made universal, i.e. there is a single benefit package across the board. Although
61
the bases of which could be the computation of the minimum essential services, an insurance
product
oduct could not be expected to appeal to all segments of the informal sector. As seen in VietVie
nam, informal workers are hesitant to commit their money and wait for 20 years for their old age
benefit, the reason why enrolment in the voluntary social insurance
insuran is low.
Portability seems to be an important feature that attracts the informal sector given their mobility. Proximity
of the programme to the beneficiaries and the fact that they could bring it with them when they need to
move are factors in maintaining
g participation in the scheme. A centrally administered programme makes it
feasible for this system to operate. Vietnam could offer its experience in making its benefits portable.
62
Annex 1: Methodological Considerations
Definition of Social Security
According to the “Sector Strategy on Social Protection” by BMZ, social protection is defined in the following
way:
“Systems
Systems of social protection support individuals or households in risk prevention, mitigation or in coping
with the following aims:
(iv) to secure a certain absolute minimum level of socioeconomic livelihood for all individuals and
households, especially for people who are physically unable to work due to age, disability, or rer
duced potential to help themselves caused by poverty or other factors;
facto
(v) to ensure that individuals or households not suffering from poverty do not experience a strong relarel
tive deterioration in their socio-economic
socio
situation or a decline into poverty;
(vi) to encourage poor and non-poor
non
individuals and households to invest in education,
ucation, health and propr
ductive real capital, to secure their own capability for employment and thereby improve their sociosoci
economic situation through their own efforts.
A variety of agents can be the sponsors of such social protection systems:
•
•
•
•
informal communities of mutual solidarity based on family ties, neighbourhood or friendship
whose members support each other in case of emergency;
cooperative systems based on membership which are founded upon the goal of self-help
self
(cooperatives, mutual self-help
help associations),
a
commercial enterprises (insurance companies, companies offering employer-sponsored
employer
insurance schemes);
and the state or public sector institutions (like social insurance and social assistance).
In this, the state determines the framework for the interaction of all stakeholders and is responsible for ene
suring that all systems are inclusive for the poor.”
poor. (BMZ, p. 7)
For the purpose of the best practice study we are assuming that we are focusing on the cooperative syssy
tems and state or public
ic institutions in the three countries.
Target Group
This study intends to showcase social protection systems that cater to informal sector groups. To further
scope this study, we shall subscribe to the International Labour Organisation’s (ILO) definition
defini
of informal
sector, which is “broadly characterised as comprising production units that operate on a small scale and at
a low level of organisation, with little or no division between labour and capital as factors of production, and
with the primary objective
bjective of generating income and employment for the persons concerned.” Statistically,
they are thought to comprise those household unincorporated enterprises with market production that are:
informal own account enterprises (optionally, all, or those that
that are not registered under specific forms
of national legislation);
enterprises of informal employers (optionally, all those with less than a specified level of employment
and/or not registered and/or employees not registered).
registered
Of particular interest of this study are mechanisms employed by these social protection systems that could
be categorised as best practice in targeting and covering risks among the informal sector. Since best pracpra
tice mechanisms inherently imply some form of organisation, the study
study shall examine cooperative systems
and state or public institutions. This is not to exclude other systems especially if these systems could
showcase remarkable features. In identifying best practices therefore, the study shall look at successes in
two broad criteria:
1.
Coverage ratio: number of people participating in the scheme within the target group vis-à-vis
vis
total
target population
63
2.
3.
Coverage Depth: how much financial mitigation is provided in cases of catastrophic expenditure or
when exposed to risks
Coverage Breadth:: the range of social protection products made available for clients.
Approach
The study shall employ three approaches in identifying and examining social protection best practices.
Other than to gather information, these approaches make possible cross-referencing,
referencing, data verification and
cross-validation.
•
Desk research. The review of available documents shall endeavour to provide an overall picture of
the social protection landscape in terms of legal and regulatory frameworks and the different
di
agents involved. The main objective is to list down a menu of social protection systems that are
made available to the informal sector following statutory or legal mandates. Data sources would
include governmental units e.g. departments of labour and social welfare, as well as, constituted
bodies and institutes and civil society organisations.
•
Key informant interviews. Interview of key informants shall substantiate information acquired from
desk research with the intention of deepening appreciation
appreciation of national policy and the consequent
configuration of social protection systems and their mechanisms. Interviews will also be done to
further inquire about best practices among noteworthy social protection systems.
•
Site visits. Multiple respondents
respondents will be sought for interviews during visits of selected sites to ini
quire about key operation and organisational elements of social protection systems. It is expected
that investigation of these key elements would reveal best practices that could be readily
read attributed
to successes in reaching the systems’ respective coverage targets and/or providing substantial risk
protection.
Guideline
Conduct of Desk Review. Documents review shall list down available social protection systems available
for the informal
mal sector and identify defining features of these systems for comparison. Following the BMZ,
social protection systems have the following defining classification:
1.
In terms of employed protection
rotection mechanism:
a. Risk prevention
b. Risk mitigation
c. Coping
2.
In terms of the principal agent:
gent:
a. Informal communities of mutual solidarity
b. Cooperative systems
c. Commercial enterprises
d. State or public sector institutions
3.
In terms of type
ype of risk averted
a. Life cycle risks (age, disability, permanent incapacity for work)
b. Health
th risks (illness, accidents, epidemics)
c. Economic risks (unemployment, price shocks)
d. Natural and ecological risks
Itt could further be classified in terms of its financing/financial management:
4.
Whether financing is:
a. Tax-based
b. Contributions
c. Others (donors, etc.)
5.
Whether reserves are invested
64
6.
Whether there is cross-subsidy
subsidy
To situate social protection schemes under investigation, the study will provide background information
about each of the country, which will pertain particularly to policy frameworks that govern social protection
mechanisms and coverage of the informal sector. Document review will thus further entail research on exe
ecutive orders and decrees, legislations, policy papers and strategic promulgations and directives that were
articulated att the national level on how to approach social protection of informal sector. Regulations for mim
croinsurance, mutual benefit schemes and other forms of risk mitigation for those outside employment conco
tracts would also be investigated. The intention is to illustrate the political context that provides the setting
for how these schemes should operate. Document review should answer the following research questions:
1.
2.
3.
4.
5.
6.
How is the informal sector group regarded in relation to the ILO definition? How are they identified
i
(in terms of employment arrangement, income, economic activity, etc.)?
Is ensuring social protection a national agenda? How is social protection defined and what are the
defining features of social protection schemes?
What is the approach to social
social protection of the populace? Who are the principal agents?
Is coverage of the informal sector an articulated target? Are non-state
non state providers of social security
products incentivised for reaching traditionally-considered
traditionally
non-commercial
commercial markets?
What legislations,
gislations, executive decrees and regulations impose themselves on social protection
schemes?
What do published literatures say about the status of social protection in the country, particularly on
how well is able to cover for risks affecting the informal sector?
Specific to the last question, relevant articles from reputable sources would also be reviewed.
Conduct of Key Informant Interviews. Interviews will be open-ended and face-to-face
face and shall encourage
respondents to expound on particular themes. The following are suggested themes during interviews of key
informants.
1.
2.
3.
4.
5.
6.
7.
8.
9.
The mandate/organisational vision of the social protection system, who
who formulated it and how
strongly this was communicated
How accomplishment of the vision is being measured
How intended beneficiaries/targets are being reached, eligibility drawn, and communication stratstra
egy is being implemented
How contributions are determined
determined and how to ensure take up and retention in the light of irregular
incomes
How products/packages are developed and the basis for providing them
Portability of the products offered
How claims are processed
The client/participants’ level of satisfaction
General impression of clients’ financial literacy
Selection of the key informants will be on the basis of referral from national agencies and then later through
snowballing. It is assumed here that national agencies would have knowledge of social protection
protect
mechanisms that are in operation. Key people of these national agencies would be respondents as well in interinte
views to supplement information gathered from document review. These offices include, but not limited to:
1.
2.
3.
4.
5.
National office for social welfare
National office for health services
State-run
run social security systems and health insurance
Insurance regulatory bodies
Research institutes for social security
Conduct of Site Visit.. From the above inventory of social protection schemes, sites to be visited
visit will be selected on the basis of coverage ratio and coverage depth (defined in the previous section). It is assumed
that schemes that do well on these criteria would have good practices that merit elaboration as case studstu
ies.
65
Appendix I: Document review
view checklist
1.
Documents relating to the identification of the informal sector and definition of services that provide
social protection
Title of the policy paper
1.
Description (Note here in verbatim the operational definitions used)
2.
3.
2.
National agenda on social protection of the informal sector
Title of the legislation/decree
Description (Identify here promulgations in relation to social protection
of the informal sector with reference to the research questions for
document review)
1.
2.
3.
4.
5.
6.
3.
Regulations governing social protection schemes
Title of the legislation/decree
Description (Identify here regulatory bodies created for oversight and
their mandate in terms of monitoring social protection schemes)
1.
2.
3.
66
Appendix 2: Topical Outline for Interviews of Key Informants in National Agencies
(Note: Representative of regulatory bodies should be part of key informants if particular items in the policy
paper need elaboration)
Key Informant:
Office and position:
1.
Elaboration on the policy instrument being used by the government to provide social protection and
how it ties
es to overall national agenda e.g. poverty reduction
2.
The state’s principal agent in providing social protection
3.
The mechanism used to reach the informal sector
4.
Performance targets in terms of reaching the informal sector and the degree by which they are
achieved
5.
Support given to non-state
state social protection schemes that target the informal sector
6.
Involvement of the private sector
7.
Other topic arising (Specify):
67
Appendix 3a: Social Protection Schemes Inventory
(Note: Source of data would be respondents from national agencies or research institutes; this tool shall be
used to identify schemes to be interviewed for case study)
Name of the organisation:
Address:
1.
Nature of association (please tick appropriate box)
Informal communities of mutual solidarity
Cooperative system
Commercial
State or public
2.
Products offered
3.
Types of risks covered
Life cycle risks (age, disability, permanent incapacity for work caused by pregnancy or death in the
family)
Health risks (illness, accidents, epidemics)
Economic risks (unemployment, price shocks)
Natural and ecological risks
4.
Source of financing premium
Contributions (out-of-pocket)
pocket)
Tax (government subsidy)
Donor
Others (specify):
5.
Reserves are invested?
Yes (specify):
6.
No
Premiums adjusted according to capacity to pay?
Yes
7.
8.
No
Coverage ratio (proportion of people participating in the scheme within the target group vis-à-vis
vis
total
target population)
Coverage Depth: (comment on degree of financial mitigation provided in cases of catastrophic expenexpe
diture or exposure to risks)
68
Appendix 4: Topical Outline for Interview of Key Informants in Selected Social Protection Scheme
for Case Study
Key Informant:
Organisation:
Office and Position:
1.
The mandate/organisational vision of the social protection system, who formulated it and how
strongly this was communicated
2.
How accomplishment of the vision is being measured
3.
How intended beneficiaries/targets are being reached, eligibility drawn, and communication stratstra
egy is being implemented
4.
How contributions are determined and how to ensure take up and retention in the light of irregular
incomes
5.
How products/packages are developed and the basis for providing them
6.
Portability of the products offered
7.
How claims are processed
8.
The client/participants’ level of satisfaction
9.
General impression of clients’ financial literacy
69
Annex 2: Meeting Schedule for Vietnam
DATE
INSTITUTIONS/ PERSONS
PERSON TO BE
MET
CONTACTS/ VENUE
Friday, 18
February
Meeting with Ms. Brigitte Koller,
CTA, GIZ Poverty Reduction Project
2, Dinh Le Hanoi
Meeting with ILLSA (MOLISA)
•
Dr. Ngoc, Vice Director of
ILSSA
•
Mr. Bui Xuan Du, Manager of
the Social Security Division,
ILSSA
2, Dinh Le Hanoi
9h00
Ms. Kim Dung
Interim Country Director
Oxfam Great Britain
Le Kim Dung
22 Le Dai Hanh
Ha Noi, Viet Nam
Tel: +844-3945
3945 4362; ext. 141
Fax: +844-3945 4365
Email: lkdung@oxfam.org.uk
Web: www.oxfam.org.uk
11h00
World Bank
Christian Bodewig
Senior Economist, Human DevelopDevelo
ment Sector Unit
World Bank Office in Vietnam
63 Ly Thai To, Hanoi
Tel: +84-4-3934
3934 6600 Ext. 264
Fax: +84-4-3935 0752
cbodewig@worldbank.org
10h30
Community financial resource centre
Ms. Le Lan
Director of CFRC
Căn hộ số 4 dãy
ãy A14 khu ñầm trấu,
liền kề khách sạn ðặng
ặng Anh (ñối diện
bến xe Lương Yên).
14h00
ILO Hanoi
Meeting with Ms. Loan,
Micro-insurance/
insurance/ microfinance
loan@ilo.org
50, Nguyen Thai Hoc,
Hanoi
Meeting with Social insurance departdepar
ment, Ministry of labor and Social AfA
fairs
2 Dinh Le street, Hanoi
14h00-15h00
Monday, 21
February
14h00 –
15h30
Tuesday, 22
February
Wednesday,
23 February
Thursday, 24
February
8h30
Topic of discussions: Formulation of
policy on voluntary social and health
70
DATE
INSTITUTIONS/ PERSONS
PERSON TO BE
MET
CONTACTS/ VENUE
insurance policies
10h30
Meeting with Institute for insurance
studies, Vietnam Social Security
Area of discussion: Implementation
of voluntary social and health insurance policy
61 E, De La Thanh street, Hanoi
8h30
ðỗ Hoàng
àng Phương
Ph
(Mr.)
D. General Manager of Health insurinsu
ance and Personal Accident Dept.
BaoViet Insurance Corporation
35- Hai Ba Trung Hanoi
14h00-15h15
Oxfam Belgium
Thibaut Hanquet
22 Le Dai Hanh, Hanoi
15h30-16h30
Debriefing session with the Poverty
Project
Friday, 25
February
71
Annex 3: List of People Met in Pakistan
Organisation
People met
ILO Islamabad
ILO Building, Sector G-5/2,
5/2, IslamaIslam
bad
Manzoor Khaliq Senior Programme Officer
Benazir Income Support ProPr
gramme, Islamabad
BISP Secretariat, Ataturk Avenue GG
5/2, Islamabad
+92 51 9215331
gnjamy@gmail.com
Dr. Muhammad Tahir Noor, Director, Donor CoordiCoord
nation
Gul Najam Jamy, Project Manager, Social Safety
Nets
Syed Javed Abbass, Director, Health Product
Farazana Raja, Chairperson
National Rural Support Programme,
Islamabad
46, Aga Khan Road, Sector F-6/4,
F
Islamabad
Agha Ali Javaid, General Manager
Jawad Rehmani, Senior Programme Officer
Head Office, Street No 9, Sector HH
8/4, Khayaban-e-Johar,
Johar, Islamabad
+92 51 9250461-4
info@pbm.gov.pk, md@pbm.gov.pk
Zamurrad Khan, Managing Director
Khalid Raza, Director, IT
Planning Commission
P Block, Pak Secretariat, Islamabad
Saba Gul Khattak, Member Social Sector
GIZ
Imran Masson Durrani, Senior Advisor and Head of
Social Protection
st
Adamjee Insurance, 1 Floor BusiBus
ness Center, I I Chudrigar Road,
Karachi
Captain Mehmood Sultan, Senior Program Office,
Corporate Division
72
Annex 4: List of People Met in Kyrgyzstan
Name
Joe Kutzin
Mr. Bolotbek Orokov
Position
Contact
WHO
Tel.:+34 93 241 8270
jku@euro.who.int
ILO Kyrgyzstan
215 Tynystanov Street, Room 418
Bishkek 720040
Kyrgyzstan
Tel./Fax:
+996 312 624 539
+996 312 624 539
E-mail:
orokov@ilo.org
ocus group discussion
List of participants of the focus
1.
Madina Kasmankulova
2.
Ayzada Kadikulova
3.
Gulmira Kalikova
4.
Davleta Sakieva
5.
Olga Kim – separate meeting
6.
Aleksandr KimKim separate meeting
7.
Farrukh Tyuryaev
8.
Aziz Tyuryaev
73

What works? Best practices of social protection for informal workers

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