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Bangladesh approves, in principle, its National Social Security Strategy

05/05/2015

Children in Bangladesh

In early April 2015, the Cabinet of the Government of Bangladesh approved in principle its new National Social Security Strategy (NSSS), subject to some changes. Since independence, Bangladesh has instituted a range of social security schemes although the level of investment in conventional cash-based schemes has remained relatively low, at no more than 0.7% of GDP, while overall spending on social protection – once civil service pensions and food transfers are included – is over 2% of GDP).

Research by Development Pathways has indicated that the impact of the current social security system is minimal, reducing the poverty rate by a mere 4.5%. The Government of Bangladesh has also been concerned about inefficiencies in the system as well as a proliferation of small schemes across a wide range of Ministries (often promoted and financed by development partners). The NSSS is an attempt by the government to bring coherence to the national social security system while also developing a long-term vision for a more modern and comprehensive system. Development Pathways – in collaboration with the Policy Research Institute (PRI) and SANEM – were contracted to support the Planning Commission in developing the Strategy.

As with all modern social security systems, the NSSS adopts a lifecycle approach, which focuses on addressing risks that people face throughout their lives. It sets out commitments to provide and/or expand benefits to older people, people with disabilities, vulnerable women and children. A range of schemes are proposed, with a strong focus on social transfers financed from general government finances. Flagship schemes include a Citizens’ Pension for those aged over 60 years, a Child Grant to support efforts to tackle undernutrition, a Disability Benefit and an allowance for vulnerable women of working age. The Strategy also includes a commitment to develop a national system of contributory old age and disability pensions, which would – in combination with the Citizens’ Pension and Disability Benefit – deliver a comprehensive Pension system. Social security schemes are complemented by active labour market programmes – such as childcare and training – and there are a number of innovative programmes proposed, such as maternity insurance, unemployment insurance and measures to ensure maintenance payments from parents who abandon their children.

The NSSS will commit the government to a significant increase in the value of transfers. Bangladesh’s current social security system provides some of the smallest transfers in the world, which is one reason for its minimal impact. For example, the Citizens’ Pension will provide a transfer of US$10.50 per month compared to the current US$4 per month offered by the Senior Citizens’ Allowance, with most other transfers set at a similar level. Coverage will also increase significantly, with most schemes reaching 50% of the population within the chosen category. Although the poverty rate in Bangladesh is around 31%, the NSSS recognises that many families move in and out of poverty and measures need to be put in place to support these vulnerable families.

There has been strong opposition to the NSSS – in particular from neo-liberals – which meant that the Planning Commission had to make compromises. The World Bank lobbied hard to reduce the coverage of schemes, so as to limit the overall cost of the proposed system. As a result, innovative options to provide universal pension coverage and affluence test the Child Benefit had to be modified, which will undoubtedly reduce the effectiveness of the system: reducing coverage will necessarily increase the exclusion of many families that are highly vulnerable to falling into poverty (see “Rethinking Targeting” for a further explanation). Furthermore, given that over 80% of the population of Bangladesh lives on less than US$2 per day, the ideological imperative of neoliberals to target the ‘poor’ and save costs seems out of place. The World Bank also managed to persuade the Government of Bangladesh to use a proxy means test for selecting beneficiaries, despite the mechanism’s well-known weaknesses, high levels of inaccuracy and propensity to weaken social cohesion (see Kidd and Wylde 2011 for more information).

Simulations undertaken using the national household survey indicate that the proposed system will reduce the national poverty rate by 14% and the poverty gap by 35%. As Figure 1 indicates, the vast majority of the poorest households in Bangladesh will receive support – almost everyone in the poorest decile – in contrast to the current system in which the majority miss out. Furthermore, many of those struggling on less than US$2 per day will also benefit. However, the limitations of the proxy means test are likely to lead to some additional exclusion of many of the most vulnerable individuals from particular schemes.

Figure 1: Coverage of the proposed system of social transfers across consumption deciles

Coverage of the proposed system of social transfers across consumption deciles

One significant advantage of the lifecycle approach adopted by Bangladesh is that many vulnerable families will be able to receive multiple benefits, which will significantly enhance their security. So, an older person caring for 2 young children would be able to receive the Citizens’ Pension and two child benefits, transforming their lives.

Bangladesh has, therefore, joined the growing number of developing countries that are embracing a more progressive and inclusive lifecycle approach to social security, in line with the direction taken by developed countries. It follows Lesotho’s adoption of a similar lifecycle approach and is evidence that the neoliberal promotion of ineffective poor relief schemes targeting poor households can be challenged by robust evidence and analysis. We hope that the changes to be made by the Cabinet will make the Strategy more progressive and more able to deliver shared prosperity for everyone in Bangladesh.

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