Enhanced Social Safety Nets for Moldova’s Poorest Households
Better protection of the most vulnerable through targeted cash benefit transfers
April 15, 2014
Moldova spends generously on social assistance programs compared to countries at the same level of development. Yet, the overall effectiveness of the social safety net is weak, and the program is fragmented into multiple categorical benefits that have only a small impact on poverty. Before the reforms, only 22 percent of all social assistance transfers were received by the poorest 10 percent of the population, with only 54 percent in that group receiving some type of assistance. The need for reforms in the targeting and management of social assistance for an efficient and effective protection of the poor was clear.
The Moldovan Government launched policy reforms aimed at integrating the overall social safety net around the platform provided by its targeted Ajutor Social program. Pursuing a results-based financing (RBF) approach, the US$37 million International Development Association (IDA) credit cofinances the expansion of this program, including the consolidation of the poorly targeted categorical benefits (nominative compensation). As an RBF project, the credit funds are released once specific targets are met, such as an increased number of beneficiaries of cash transfers, less money spent on ineffectively targeted categorical benefits, and the establishment of the Social Inspectorate to better combat benefits fraud and error. The project also invests in improving the administrative efficiency of the social safety net through the use of a modern management information system, as well as strengthening institutional roles and capacities, operating processes and systems, and communications activities to generate support for reforms.
The project has supported the fiscally sustainable expansion and strengthening of the Ajutor Social program to improve the efficiency and equity of Moldova’s social safety net. It generated the following results between 2010 and 2012:
- As a result of the substantial expansion of Ajutor Social benefits, the monthly number of beneficiary households reached 50,000 in 2012 (up from 30,000 in 2010). Overall, the program’s coverage of the population from the lowest quintile increased to 19 percent in 2012, up from 14 percent in 2010.
- The benefits demonstrated good targeting accuracy. Between 2010 and 2012, the share of transfers going to the poorest 20 percent of the population consistently exceeded 70 percent, indicating that targeting did not deteriorate but in fact improved compared to 2011, during the expansion phase.
- A portion of the more costly categorical benefits, such as the nominative compensations, were discontinued to secure fiscal space for the expansion of the targeted transfers and to preserve the sustainability of the overall social safety net.
Bank Group Contribution
An IDA credit in the amount of US$37 million cofinances the scaling up of the targeted Ajutor Social program and supports the consolidation and downsizing of other category-based benefit programs. The project disbursements are linked to the achievement of specific results aligned with the social assistance reform objectives. In addition, the project supports investments to strengthen the institutions responsible for the design and administration of the social safety net, with a focus on the Ajutor Social benefits.
The project provides a platform for partnership and cooperation between various donors working on social assistance issues in Moldova and draws on the partners’ preparatory work. Since 2010, the World Bank has taken the lead in supporting reforms in the social assistance system. The technical assistance provided by Department for International Development of the United Kingdom (DfID), the Swedish International Development Cooperation Agency (SIDA), and the European Union (EU) helped design and launch the Ajutor Social program.
The Ajutor Social program is still relatively new and its expansion is in its infancy. Over the next two years, the project will continue supporting the scale-up of targeted cash transfers. For this expansion to be fiscally sustainable, support is being given to the Government to develop benefit consolidation policies, strengthen the benefit delivery model, and improve the public perception of the program.
The Robus are raising 11 children in the poor and largely rural Orhei District of Moldova. For many years, the family ate mostly what they grew. Children were cautioned not to play too hard lest they rip their clothes, which would be needed by younger siblings. Reaching down to the grassroots to families like the Robus is part of a new social safety net program in Moldova that bases state contributions on beneficiary incomes instead of category of population. “It’s important help for us. The money we receive helps us pay for food, school supplies and buy clothes,” says Sergiu Robu.
- Joint Vietnam-World Bank Group Study Will Seek Path for Higher Economic Growth
- World Bank Group ready to provide financial support worth $15-18 billion over the next three years
- World Bank Group President Jim Yong Kim to visit India
- Indonesia Economic Quarterly, July 2014: Hard Choices
- India: Skilled Jobs Help Rural Youth Fulfil Long-cherished Dreams