In the recent past, Sri Lanka has consistently achieved high levels of human development despite having relatively low levels of per capita GDP and periods of internal conflict. As the country has transitioned to middle income status over the past two decades, the poverty rate per the (official) national poverty line has fallen from 22.7 percent in 2002 to 4.1 percent in 2016 (World Bank, 2018). The government of Sri Lanka has played a critical role in this process by implementing social protection policies. I spent some time during my first week learning more about Sri Lanka’s welfare system, specially the Samurdhi program and their efforts to graduate people out of poverty.
The Samurdhi/Divineguma program, launched in 1995, is the primary social protection initiative in Sri Lanka and operates in all twenty-five districts. The program was introduced with several goals in mind, including poverty alleviation, social equity, food security, human capital development, and providing a social security net. Samurdhi consists of two primary components, a cash transfer program as well as an empowerment program focusing on rural infrastructure development, livelihood, social development, housing, and microfinance. There is an emphasis on the upliftment of marginalized groups including women, people with disabilities, the elderly, and those working in the informal sector.
The cash transfers program accounts for 80 percent of the Samurdhi budget. Beneficiary families receive a monthly transfer which depends on family size. However, selection criteria for this program are not clearly stated, and self-reported income appears to be the primary mechanism for eligibility. In the 1990s, individuals with monthly family income less than Rs. 1,500 were admitted to the transfer program (World Bank, 2018). A large majority of beneficiaries have been in the program since its inception, as efforts to improve the targeting process have faced political opposition (Institute of Policy Studies, 2015). Many beneficiaries remain enrolled in the program even though they may no longer satisfy the income means test.
As of 2018, around 1.5 million households were receiving transfers (World Bank, 2018). The program covered approximately 30 percent of the population, far above the national poverty headcount rate, estimated to be around 4 percent in 2016. While the cash transfers do promote redistribution of income, several reports have suggested that better targeting of beneficiaries and larger transfers would greatly enhance the distributional impact of the program.
In 2000, only 60% of household from the poorest quintile were enrolled in the program while 44% of households in the top three quintiles were also included as beneficiaries (Kabeer, 2009). In 2006, 55.7% of the poorest households were receiving cash transfers alongside 6% of households in the richest quintile (ILO, 2016). In 2002, 42 percent of all Samurdhi transfers were received by the poorest 20 percent of households, but by 2012, this had slipped to 39 percent (World Bank, 2018). As a result of these leakages, benefits were spread too thin and the transfers were insufficient to facilitate rapid graduation from poverty (World Bank, 2005).
Recognizing this, the government significantly increased the size of the monthly transfer in 2015. The total value of grants rose from Rs. 15 million to Rs. 40 million in only one year (Department of Saamurdhi Development, 2018). The Department of Samurdhi Development is also working alongside the Department of Census and Statistics (DCS) and the World Bank to review the rules that determine program eligibility (World Bank, 2016). One proposal involves moving away from targeting based on self-reported income and relying on proxy means testing (PMT) instead. PMT is an index constructed from verifiable household characteristics that are indicators of household welfare. This approach has been used to target welfare programs in several settings where reliable income data are not available. Preliminary evidence suggests that using PMT could improve the targeting performance of Samurdhi (World Bank, 2018).
Finally, the Samurdhi program happens to be an ideal setting for comparing the efficacy of small, regular cash transfers and large, one-time cash or asset transfers in facilitating poverty alleviation. Since 2001, all Samurdhi beneficiaries have been automatically enrolled in a housing lottery, and winners are randomly chosen to receive a large transfer of Rs. 150,000. Lottery funds can be used to purchase land, build or renovate a house, or for any other livelihood activity. My summer research project is centered around laying the groundwork for a study of the impacts of winning this lottery on income and living standards, and to identify the characteristics of the beneficiaries who stand to gain the most from these large transfers. I’m looking forward to diving into the literature on the welfare and poverty impacts of housing transfers and large cash transfers, focusing on the consequences for women’s earnings and labor force participation!