As the world reels from the impact of the COVID-19 pandemic, a key lesson it has taught us is the universality of our vulnerability. While most countries have adopted various measures to curb the pandemic, many of their citizens are threatened not just by the virus itself but are increasingly finding it difficult to earn a living even as the economy opens up as shown in this blog. Businesses have been brought to their knees amid massive closures, job losses, pay cuts and unexpected unpaid leave, and others have adopted a ‘wait and see’ approach.
Any country’s capacity to weather the COVID-19 storm will to a great extent depend its level of preparedness and the inclusiveness of its social protection systems. Indeed, several countries have either deployed new cash transfer initiatives or expanded existing ones as an efficient and transparent way of delivering support to citizens. Notably, this is more evident for many low-income and middle-income countries where the scale of these payments is unprecedented.
Unfortunately, the COVID-19 crisis has starkly revealed gaps in social safety nets. It has notably disclosed that limited interventions are available to provide income support to citizens living in poor urban settlements and to informal sector workers. Subsequently, policymakers around the world are facing unprecedented pressure to rapidly provide support and assistance to these segments, hitherto left out by existing safety nets. On the flip side, the pandemic has also created novel ways on how the use of technology and private sector participation can be leveraged to rapidly expand cash transfers.
Social safety nets—Kenya’s perspective
Kenya has had a long history in social protection, engrained in the country’s 2010 constitution as a human right and a tool to achieve inclusive growth and socio-economic development. Over time, Kenya has made significant and sustained efforts to build a comprehensive social protection system and to provide a wide range of social assistance schemes to its citizens. These include the Hunger Safety Net Programme (HSNP), the Cash Transfer for Orphans and Vulnerable Children (CT-OVC), the Cash Transfer for Persons with Severe Disabilities (PWSD), and the Older Persons Cash Transfer (OPCT). The country’s cash transfers interventions can be traced back to 2004 with only 500 households receiving cash. This has currently scaled up to over 1.2 million recipients accessing the benefits across the country through mainstream banking.
The Ministry of Labour and Social Protection has been instrumental in the successful implementation of the programme dubbed ‘Inua Jamii’ and has transformed its payment delivery mechanism from a manual system to a fully digital solution that offers choice, convenience and greater dignity to the recipients. This aligns with the wider government’s quest to digitise all Government to Persons (G2P) payments. A total of KShs. 13 billion (US$ 130 million) has so far been disbursed to cover January to June 2020 payments, cushioning recipients from COVID-19-shocks.
Effectiveness of cash transfers during the COVID-19 pandemic
Global experiences from past pandemics and economic crises have shown that cash transfers can be effective in shielding vulnerable households, including those in the informal sector, from its adverse effects. Understandably, cash gives recipients the dignity and independence to choose what they need, where and how to purchase their food preferences while stimulating the markets and keeping supply chains ‘alive,’ with the attendant economic multiplier effects.
Inevitably, leveraging the existing cash transfer delivery systems presents a good opportunity to scale fast and enhance the ability to deliver and spend this cash digitally. Furthermore, the shift from in-kind support to cash-based interventions in times of crisis could further accelerate the adoption of mobile money by this segment of the population. In the long run, it will potentially expand the use of digital transactions across the economy in a way that offers greater efficiency, convenience, less leaky and secure money transfers to recipients.
Amidst this crisis, governments are administering a raft of interventions and measures to fight the pandemic, from distributing cash and food to waiving the cost of digital transactions. Argentina is providing $160 to its informal workers, Indonesia $14 per month to low-income households, and Namibia is providing $41 one-off cash transfer to people who lose their jobs. On its part, Mauritania initiated cash transfers targeting 30,000 households dependent on women, the elderly and people with disabilities.
In Kenya, at the onset of the pandemic, the Central Bank of Kenya (CBK) announced some measures that saw banks and mobile money operators waive fees on transactions below KShs1,000 ($10) to encourage the use of cashless modes of payment. Whereas this was seen as an immediate response to minimise the risk of transmission of the virus through cash handling, it is also expected to lessen the use of hard cash in the long run. Banks also announced the restructuring of loans for longer repayment terms for individuals, SMEs and corporates affected by the crisis.
Kenya’s private sector, financial institutions, non-state actors and philanthropists have additionally pooled resources to complement Government efforts to fight the virus. The donor community has also been at hand to augment the country’s initiatives largely centred around cash transfers and health support. However, as the impact of COVID-19 continues to unfold, a well-coordinated, coherent approach is imperative. There is a need for greater fiscal space in the short term to boost health expenditure, contain the spread of the pandemic, and cushion the hardest-hit economic sectors, all with an eye on stimulating domestic consumption. Consequently, to enhance the coordination of different initiatives from multiple stakeholders and ensure effective management and accountability of the various resources, the Government has set up a COVID-19 emergency response fund board.
The table below presents a sample of initiatives offered by various stakeholders in response to COVID-19 pandemic.
Whereas varied modes of interventions are experimented and deployed in response to COVID-19, there is a need to recognise that in an emergency like this, determining the level of vulnerability is a fluid undertaking. Furthermore, identifying whom to give cash transfers remains a challenge, considering for instance that those previously considered stable are now rendered vulnerable by the fact of losing their jobs and main sources of livelihood.
Recommendations and policy implications
- With diverse targeting and data sources administered by various agencies in response to the current crisis, it is crucial to harness data from the ‘new’ COVID-19 recipients and existing recipients for future programming of safety nets.
- Harness the use of Kenya’s Single Registry for Social protection to facilitate the validation of data and to minimise double registrations whilst observing recipient data security.
- Harmonise targeting across implementing agencies to minimise errors of inclusion or exclusion.
- Lobby for supportive regulations that address minimal Know Your Customer (KYC) requirements to serve vulnerable groups, particularly in times of social distancing.
- Strengthen continuous collaboration with Financial Service Providers (FSPs) to develop products and services that deepen financial access, usage, and digital literacy across the country.
- Urban women who are employed as domestic workers are worst hit with COVID-19 crisis as employers minimise contacts with these persons now considered ‘external,’ hence a cash transfer modelling this segment presents an opportunity.
Dr. Milkah Chebii is Government Social Payments Specialist at FSD Kenya.
Plounne Oyunge is Project Manager, government to person payments (G2P), at FSD Kenya.