Targeted welfare 

One very important aspect of the COVID-19 battle is ensuring that low income groups are assisted, as their livelihoods have been badly hit by measures taken to contain the virus. It is therefore commendable that the Government has earmarked an estimated Rs. 20 billion to give Rs. 10,000 per family as an interest-free loan, which they can repay over 18 months after a six-month grace period. 

The two million families that will benefit from this measure are those who are part of the Samurdhi program. But there has long been a need to relook at and revamp the Samurdhi program to ensure that the most vulnerable are included and welfare funds are targeted as efficiently as possible. Many analysts, and even politicians themselves, have admitted that the selection process for the program has been less than ideal, with many families that are not below the poverty line competing to receive Samurdhi funds.  

The politicisation of Samurdhi is also helped by the fact that poorer families also find it difficult to access loans from conventional banks. Since their financial inclusion is poor, Samurdhi recipients are more likely to turn to the Samurdhi Bank, which would provide them capital at moderate interest rates, an easy and better alternative to loan sharks. 

On paper, this plan does not seem to be as bad as some of the other ideas the Government has had over the years. However, the problem with increasing Samurdhi recipients is that unless allocations are also raised proportionately, the impact of the funds is reduced. In addition, leakage of funds could also increase, straining an already difficult public finance situation.  

The World Bank, in a 2016 benchmarking exercise, found Samurdhi has had a minor and decreasing impact on poverty reduction. Samurdhi transfers are too small to make a large impact on poor households’ budgets, as they contributed only 1.7% to household consumption of the poorest 20% of the population in 2012/13. 

On the basis of this data, it could be argued the time has come for the Government to decide whether Samurdhi is a poverty alleviation program or an entrepreneurship drive. If it is the former, then Samurdhi should be reformed so only genuinely poor families are identified and are given a higher amount of funds that can have tangible impact. The Government should also regularly gather data on these families to track how many of them emerge from poverty and link Samurdhi to healthcare, education, housing, and other projects to ensure the most vulnerable are assisted properly. 

If on the other hand the Government decides Samurdhi is an entrepreneurship program, then it should reform the Samurdhi Bank and link it to other complimentary programs that give support to people seeking to start new businesses. Failing to have clear policies with well-defined targets has been the fault of successive governments. 

There is no doubt that these people need to be helped and COVID-19 has placed massive pressure on the Samurdhi system. Pressure, one could argue, it is less-capable of handling because it has been politicised and deprived of the support it should have received earlier. 

Targeting welfare is important because it will encourage poverty alleviation to have transparent, efficient, and achievable policies that do not overlap. It would support public funding to be done with oversight and the people who need the most help get the best that can be given by this State mechanism.