Financial inclusion and need for Social Safety Nets today and tomorrow
What I share with you is my own journey on financial inclusion, women economic empowerment, and economic inclusion as Minister Social Protection Pakistan on which I have also written a book. (www.marvimemonllc.com/publications/)
The financial architecture of the model and core elements of what a social safety net ought to deliver are basic and standard with many add-ons. What follows is the core architecture for today and future generations. It can piggy back many solutions of the SOTF, and the common agenda; leading to success on Agenda 2030. It is what I received my two international awards for. Namely the UK House of Commons Speakers Inaugural Democracy Award and the French Officier du Merite Presidential award. However, the most important element of it are the spin offs for many SDGs that we accomplished through it.
I identify the architecture with the hope that it is used for SOTF…
My personal journey on this subject technically started when I was asked by Prime Minister of Pakistan Nawaz Sharif to join his cabinet and head the largest social safety net of Asia and of Pakistan, namely the famous Benazir Income Support Programme (BISP). I ran it as Chairperson and Minister from February 2015 to June 2018. When the PM asked me to take on this responsibility, I was told it would suit my past political endeavors and I would get the prayers of the most vulnerable. It certainly did both and I am grateful for that opportunity. It was and remains the single largest Pakistani program which by inducting the poorest women into a social safety net, accomplishes financial and economic inclusion.
I suppose the exposure of my past political years from 2008 to 2015 was relevant for this job description. I was a reserved seat member of parliament. Important to note here how relevant reserved seats are to the gender equality movement and how its merits cannot be taken for granted. I had been selected by my party to represent women in the National Assembly for two terms (10 years) as a reserved seat MNA. Reserved seats have been a great political tool for helping women empowerment by advancing their entry into the political sphere not through direct elections but by selection of their political parties to bridge the gap of gender inequality in parliaments.
My political journey was unique since I had seen the horrors of gender inequalities and poverty from very close up, due to my vast travels of the villages of Pakistan. I can easily claim to this day that I was and remain the most well-travelled member of parliament in all the constituencies of Pakistan. I had made it my business to reach and highlight any woes of the vulnerable as was my duty to my political leader Bhittai (The Sufi Saint). This had brought me into the grassroot fold of a vast majority of the geographical and ethnic divides of rural and urban Pakistan; thus, giving me a detailed sense of the lay of the land. Helping me identify how the gender inequalities impacted the economic woes of the poorest women of the land.
My travels had exposed me to the haves and have nots of the gender world. Wherever, women had been financially included, their gender inequalities fared better. And wherever they had not been included in the economy their gender woes fared worse. I had seen in the rural areas and urban slums of Pakistan a sense of overall empowerment of women wherever they had been given financial empowerment. And there is no doubt that BISP was that one big ticket item that became a role model for other countries to emulate for giving poor women economic inclusion. In my opposition bench parliamentary days, I remember often criticizing BISP for making ‘women dependent on dole’. BISP was a safety net which gave the poorest women cash handouts quarterly in order to alleviate their poverty. However, as I matured politically and as I saw as Minister what BISP was actually doing on ground for the poorest women households I felt it was the biggest movement anyone could bring to help the poor. I later acknowledged PPP (the political party in power from 2008-2013) and whose opposition I did with all my strength that BISP as an organization was revolutionary. Hats off to the man I criticized the most President Asif Zardari for having launched it as a tribute to his late wife’s (Benazir Bhutto) political vision.
In short, any social safety net of the developing world had to give the poorest beneficiaries basic bottom-line financial support. And frankly that financial net factor was in effect a dependance on the state for not slipping into abject poverty. In development lingo, the unconditional cash transfer was exactly that. It gave women a chance to get quarterly cash grants from the state which gave them cash which they often used on the following: taking care of their family’s food, education and health needs. It is important to note that Universal Cash Transfer (UCT) Programs give the poor a choice in how to use their funds versus dictating how they could use it. This financial freedom resulted in women empowerment and better poverty indicators. Choice of spending lay in the hands of the women versus men or the state. It was a significant booster.
In this financial inclusion journey model that we are creating it is critical for women to lead on the choice element, since it gives women empowerment within the families. They become single-handedly responsible for saving their families from falling into a debt trap. It also serves as a social insurance factor for families. It brings in cash flows into poor families at the time of crisis. UCT have gained international traction and serve financial inclusion well. The importance in any UCT program is that it should be timed well and be regular for the poor to really benefit. The poor need a sense of predictability. Whilst in my days as Minister, we did quarterly payments I would recommend that UCTs be given monthly. That’s a way of ensuring the poor don’t fall into a debt trap and ensure predictability.
Enrolment indicators of any social safety net program add value to financial inclusion. For this a robust system of enrolment is necessary to ensure that all the poor identified on the lists are getting a benefit from the state and no one is left out. In my experience, especially looking at the current inflation world wide the financial inclusion targets are best met when budgets on social safety nets are linked to inflation. That is something we achieved in my days with the UK’s development arm DFID’s help. The forms of targeting and selecting the poor for financial inclusion are critical. I continue to believe that the form chosen for BISP which was Poverty Mean test (PMT) is the best approach for financial inclusion. It generates a score for applicant households based on location and quality of household dwelling, ownership, and demographic structures.
A very important element for financial inclusion is that inclusion and exclusion errors whilst selecting the poorest of the poor be restricted. During my days at BISP we were able to take Pakistan from ranked 5 to number 1 (on World Bank ranking) by improving the PMT. A major element in this is to increase the number of questions on the household surveys to improve the selection of the poor to be financially included. In my days we managed to raise this to a maximum of 47 questions. The aspect of how a survey is conducted is of prime importance in financial inclusion. In my time we were able to move from Paper based surveys to Computer Assisted Personal interviewing which of course raised the accuracy of the entire process to another level.
Most social safety nets provide states with a basic National Socio-Economic Registry (NSER). This serves the state in financial inclusion of the poor in many ways. In simple terms the NSER is a database of the entire population. Firstly, the usage of the NSER data is important. Data sharing protocols which BISP made in my days served the country well. Data sharing protocols are key so that there is more sharing of this invaluable database within the countries different Ministries. Targeted subsidies are often given based on this data which help with financial inclusion of the poorest segments of society. The same NSER updation made in my days helped country manage the covid pandemic as well. When one knows where the poorest of the poor are located only then can they be served well. A demographic directory of the poor is crucial for financial inclusion so that more data on them can be shared for financial inclusion purposes with different organizations trying to assist them as part of their mandate.
An element critical in any social safety net program which assists the financial inclusion strategy is the payment system. In my days at BISP the Beneficiary Verification System which was electronic identification based was introduced. In fact the Special Representative to the UN Queen Maxima visited BISP and hailed that as a key element of financial inclusion. It is by far the most reliable system because it avoids the poor from having to get cash from ATMs which they often cannot do because of their lack of education. It enables them to get cash by a simple thumb verification system. Such systems help financial inclusion indicators significantly.
Servicing of the poor through call centers or local offices is often a challenge but its best administration helps financial inclusion. Better case management systems and dashboards for MIS management purposes are all part of this. On the Conditional Cash Transfers my experience was helping BISP advance its existing Education Conditional Transfer by improving its automation. It served financial inclusion best by enrolling children into schools and saving them from child labor. An element which needs highlighting is the concept of beneficiary committees within this system. Women committees as part of the education conditional cash transfer were introduced by BISP based on what they learnt from Latin American countries. Interestingly, the localized model became so popular in the development world that it was exported back to Latin America as an improved version of their original concept.
What was the women committee system which helped financial inclusion numbers so well? It was a system of dividing the entire population of poor women into smaller 25 member committees which met periodically to discuss women empowerment issues. Thus helping financial inclusion by ensuring a connectivity and social mobilization of the poorest of the poor at a large scale. In Pakistan women beneficiary committees organized 1.5 million women were connected through 65,000 committees to give an idea of the scales involved. This networking is critical element for financial inclusion.
Immunization and nutrition conditional cash transfers are also important part of a financial inclusion strategy which all countries need to emulate. And now coming to the most important element of the financial inclusion strategy is the graduation programme for a safety net. These days graduation terminology has been changed to financial inclusion. My experience in this was based on 3 systems which worked best. The first was the business incubation and asset transfer amongst poor for self-employment model. The second is the Direct Cash Transfer for start ups model. The third is the interest free payment model which worked exceptionally well in an Islamic country like Pakistan. The most effective element of financial inclusion is e-commerce. Generally due to the pandemic this has seen an upsurge. My experience on launching this for the most vulnerable led me to the conclusion that there was no faster system of financial inclusion than bringing women into e-commerce. It cut distances, time, resources and middlemen and put women into direct contact with the outside world which was the biggest market possible. In terms of financial inclusion systems, I also managed to launch limited mandate accounts for unbanked population bringing them into the formal banking system. This is the basic minimum for financial inclusion indicators.
In the final analysis what is most important in the financial inclusion strategy is the creation of a League of Social Safety Nets. This would improve financial inclusion indicators for women in midst of environmental, food, security and pandemic challenges. To date there are many running their own programs but no one platform joins them. The Partnership for Economic Inclusion Program of the World Bank is the one I am most familiar with since I am on their Advisory Committee. The World Food Program, DFID, ADB, IMF, UNDP also have social safety nets experience sharing mechanisms which are important for financial inclusion. However, it is worth considering a new system which joins them all together.
The League is the real future. The culmination of our present efforts. Leaders are encourage to use this as a model for SOTF.