Social Protection

Frequently Asked Questions

• What is ADB’s social protection strategy?
• Why is social protection needed?
• What are the major benefits of social protection?
• Can DMCs afford social protection?
• What are the weaknesses and constraints of existing social protection programs in the region?
• Who should benefit from social protection programs?
• How does social protection support ADB's agenda on inclusive growth?
• What is ADB's comparative advantage in social protection?

Social protection is an integral dimension of poverty reduction aimed at making the poor less vulnerable to risks and more able to participate in equitable economic growth. Social protection helps foster inclusive social development, one of the three pillars of the ADB's Poverty Reduction Strategy.

ADB defines social protection as the set of policies and programs designed to reduce poverty and vulnerability by promoting efficient labor markets, diminishing people's exposure to risks, and enhancing their capacity to protect themselves against or cope with hazards and interruption or loss of income. Social protection consists of five major elements:

1. labor markets
2. social insurance
3. social assistance and welfare service programs
4. micro-and area-based schemes
5. child protection

The first three elements - labor markets, social insurance and social assistance are included in any social security system throughout the world. The remaining two respond to the specific needs and priorities of the poor in the informal sector and those in the rural areas. Structured social insurance, labor market policies and universal child protection programs will reach households in the formal sector. Those in the informal sector are more likely to be reached by other labor market policies, social assistance, child protection, microinsurance, social funds, and other community-based programs.

ADB's Social Protection Strategy identifies common issues to be addressed in the region, but recognizes that individual countries have specific needs. Country initiatives are developed based on the (i) country's needs; (ii) available resources; (iii) feasible institutional arrangements; (iv) political economy of reforms.

Selected social protection interventions include: (i) providing adequate coverage; (ii) targeting vulnerable groups and gender issues; (iii) ensuring sustainability and good governance; and (iv) having an integrated approach.

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Economic growth has been the driving force in reducing poverty in the region. To reduce poverty, this requires that more people become economically productive citizens and share in a society's growing wellbeing. While a sustainable economic growth will create and expand economic opportunities, it is important that a broader access to these opportunities be ensured so members of the society can participate and benefit from growth. Without additional measures, the advantages of the market economy may be limited to a part of society only, namely those who are educated, own productive assets, and have participated in successful economic activities.

Social protection benefits the poor and non-poor since both are exposed to risks such as crop failures, illnesses, accidents, disability or death of the breadwinner, or simply getting old and not able to work. Moreover, there are larger risks at the macro level, including natural disasters and economic downturns that force households to slip into poverty or sink deeper into it. Various shocks that have rocked the region affecting the poor and other vulnerable groups include (i) the 1997 Asian crisis, (ii) the 2004 tsunami (that devastated South and Southeast Asia), (iii) 2008 fuel and food crisis, and (iv) the 2008 global economic crisis.

The impact of the 2008 global economic crisis to Asia and the Pacific is likely to worsen as major industrial economies contract further and world trade growth slows sharply resulting to a weak demand for Asia’s products and a slowdown in its economic growth. Economic slowdown in industrialized countries decreases their demand for foreign workers, causing a large drop in remittances and an increase in unemployment. In 2008, unemployment for Asia and the Pacific stood at about 84 million people. With the impact of the global financial crisis taken into consideration, ILO estimates that unemployment may increase in 2009 by as much as 27 million for the Asia and Pacific region from its 2007 unemployment level (ILO. Global Employment Trends. January 2009).

The effects of the current crisis on the region’s poor and vulnerable groups reinforce the need for Asian and Pacific countries to review and adjust their safety nets and social protection programs.

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Five reasons why investments in social protection matter:

1. Social protection prevents poverty. Investments in social protection reduce risks for the whole population, not only for the poor, of falling into, sliding back or remaining in poverty. In countries without social protection, people constantly worry about the health of family members or become indebted to cope with catastrophic and life cycle events, such as bad crops, disability, and natural disasters. Social protection can reduce the impacts of these risks, and allow people to fully concentrate on their livelihood and economic activities.
2. Social protection improves quality of human capital. Investments in education and skills development increase the competitiveness of the labor force, allow the development and adoption of new technologies, and increase productivity. Studies also show that workers in households receiving social grants are better able to improve their productivity and as a result earn higher wage increases.
3. Social protection generates growth by raising domestic demand. Poverty and social exclusion make domestic markets limited to upper or middle income groups. There is no sustainable economic development without a stable and growing domestic demand. Social protection contributes to a stable demand and helps achieve stable economic growth.
4. Social protection increases social cohesion. Social protection initiatives may include legal and judicial reform, budgetary analysis and reform, the legislative process, policy review and monitoring, and social and behavioral/attitudinal change which address social exclusion and marginalization. Investments in these areas contribute to social peace and pave the way for social and economic stability. Social cohesion, peace, and security are crucial environmental factors for economic development and growth.
5. Social protection programs can help countries achieve their MDGs related to poverty reduction and improving the provision of health care and education; it can also provide assistance to vulnerable groups not explicitly incorporated into the MDGs, such as the elderly, the unemployed, and the disabled. This is demonstrated not only by the inclusion of social protection objectives and policies in national development strategies but by the multiplicity of social protection programs currently operating in Asia and the Pacific, together with the marked expansions to social protection activities in several countries in recent years.

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Almost all developing countries in Asia and the Pacific can afford basic social protection like financing health care, cash transfers to the poor, and elderly and child protection. This is one of the most striking results of the newly developed Social Protection Index (SPI) created by the ADB and its partners. The index shows that the ability to provide appropriate social protection to a nation’s citizens is not only a question of the country’s wealth.

Virtually every country has a formal social insurance system, though in most cases, is limited to the government and formal employment sectors. Similarly, almost every country has some traditional social welfare programs targeted at vulnerable groups, e.g., the poor, the elderly, the disabled, single and abused women, widows, etc. In general, beneficiaries of these groups are limited to the poorest of the poor. Many countries also have targeted programs to improve educational attendance, e.g., free or subsidized uniforms/textbooks. Several countries, especially those without comprehensive directly-funded health systems or health insurance schemes, have various programs to improve access to health services of the poor. Most countries also have some labor market programs which include subsidies to employers, direct unemployment benefits, employment services, loans to small businesses and food for work programs. While they may not be formally called “social protection,” most countries have been implementing many of the types of social protection programs mostly targeted at vulnerable groups.

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The majority of countries in Asia and the Pacific have some form of institutionalized social protection system, however, the effectiveness of the SP programs is affected by:

• limited coverage (serving only a portion of the formal sector)
• insufficient funds, incorrectly distributed among programs
• unsustainable and obsolete social protection schemes
• inadequate and poorly-designed instruments, often copied from developed, industrial countries but not appropriate to serve specific in-country needs
• factors restricting access to statutory social protection schemes, such as legal restrictions, administrative bottlenecks, and problems with compliance.

Different kinds of reforms and policies are needed in different economies. Where social protection systems have become too expensive and are no longer appropriate to serve a country’s vulnerable populations, they need to be restructured and consolidated. Where these systems are inadequate to deal with the major risks faced by rural and urban populations, social protection needs to be extended and expanded.

After the 1997/98 Asian crisis, inadequate and underdeveloped social protection (or social security) systems in Asia exposed their working populations to excessive risk, increased the incidence of poverty, and threatened longer term human capital investment efforts.

International and domestic organizations, governments, and NGOs explored the need to invest more in social security or social protection, and find out what specific investments might be needed in the Asia and Pacific region. Existing social security systems have to be reformed and made more effective. Extending protection to the majority of citizens is a critical priority in the region.

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Different social protection schemes are designed for different target groups:

• Labor market programs address workers and focus on employment and working conditions.
• The sick, elderly, widowed, disabled, pregnant, and unemployed, with sufficient economic capacity are eligible for insurance schemes.
• Social assistance (also known as welfare services or safety nets) target the most vulnerable: the mentally and physically disabled, ethnic minorities, substance abusers, orphans, single-parent households, refugees, victims of natural disasters or civil conflicts, the sick, the elderly, the widowed, the disabled, pregnant women, and the unemployed ineligible for insurance schemes.
• Micro-and area-based schemes address vulnerable and marginalized rural or urban communities.
• Child protection serves the needs of children and youth to ensure their health and productive development.

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ADB’s long-term strategic framework for 2008–2020 (Strategy 2020) reaffirms ADB's mission to reduce poverty and improve living conditions and quality of life in the Asia and Pacific. To achieve this, ADB supports three complementary development agendas including inclusive growth. ADB’s efforts towards inclusive growth include the promotion of greater access to opportunities by expanding human capacities, especially for the disadvantaged, through investments in education, health, and basic social protections. Social safety nets must also be strengthened to prevent extreme deprivation of the poor and vulnerable.

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Social protection supports ADB’s overarching objective to reduce poverty because it is through social protection programs that the benefits of economic growth reaches the poor and the vulnerable. ADB has provided social protection interventions over the years through loans, grants, capacity building, knowledge products and technical assistance. From 1996-2008, ADB’s social protection loans amounted to about $2,295 billion, of which 45% were in social assistance,21% in social insurance, 17% in child protection, 14% in labor market, and 3% in micro and area-based schemes to protect communities.

ADB also assisted affected countries through provision of projects on emergency relief and rehabilitation. In 2008, projects were approved to cushion the impacts of the food crisis. ADB has over 35 years of experience in the region and combines competence in many development areas with specific regional orientation. Apart from the regular business of managing funds and lending, ADB provides services that address the specific need of developing member countries. These services include:

• Financial products tailored according to the economic capacity of the client countries.
• Long experience in managing projects in many areas crucial to development. This includes detailed project preparation, planning, implementation, monitoring and evaluation.
• An elaborate system of balances and checks within ADB and in the client country to assure project quality and effectiveness.
• A pool of specialists, experts and consultants, who provide the know-how for successful project implementation.
• Access to sources of cofinancing. Many donors know about the quality and soundness of ADB projects and are willing to support these.
• Links to other development agencies. ADB has a long history of cooperating with other agencies like the World Bank, ILO, UNICEF, UNESCAP, ASEAN, and bilateral donors to ensure successful project implementation.
• A unique combination of commitment to poverty reduction, economic growth and welfare orientation, and professionalism.
• A decentralized service structure with country offices in many member countries.
• A world-wide reputation as a development partner that facilitates access to financial support, technical support, and know-how.
• Many of the ADB products and services are cost free.