World Bank Provides US$500 Million to Strengthen Major Safety Net Programs to Help 18 Million Poorest People

Stocks and Financial Services Press Releases Thursday June 27, 2013 09:02
WASHINGTON--27 Jun--World Bank

WASHINGTON, June 26, 2013 -- The World Bank today approved a US$500 million concessional credit to Bangladesh to improve the equity, efficiency and transparency of Bangladesh's major social safety net programs. The Safety Net Systems for the Poorest (SNSP) Project aims to benefit four million households, comprising 18 million poor people, by co-financing a portion of expenditures of major safety net programs while strengthening their effectiveness.

Despite Bangladesh's remarkable progress of lifting 16 million people out of poverty in the past decade, poverty remains a stubborn problem, with about 47 million people living in poverty and 26 million in extreme poverty. To support the poor and vulnerable, the Government of Bangladesh implements a number of public social safety net programs that involve spending of over 2% of GDP yearly. Despite these interventions, 70 percent of poor people still do not receive any safety net support, mainly due to shortcomings in identifying poor beneficiaries and program administration.

SNSP offers a results-based financing modality, where 86% of the funds would reimburse expenditures made under safety net programs against specific performance indicators. These include allocating increased resources to the poorest, particularly poor women, and introducing an objective targeting system to better identify the poor. Further, the project will focus on expanding the provision of cash based transfers through the banking system.

"Bangladesh has made remarkable progress in poverty reduction over the last ten years, achieving a 26% decline in the number of poor people. Better use of social safety nets will help Bangladesh to continue this progress, and achieve further significant poverty reduction," said Johannes Zutt, World Bank Country Director for Bangladesh. "In a poverty assessment that the World Bank recently completed, the Bank found that improving the targeting of the existing safety net budget of the government could help to reduce the level of poverty by another 4.3 percentage points."

SNSP will introduce modern program management information systems and grievance redress mechanisms. The project will ensure stronger monitoring along with increased beneficiary access to information on rules and entitlements. The project will provide technical assistance for developing and administrating a transparent system of identifying the poor that would reduce the overall costs and errors associated with beneficiary identification.

The five safety net programs the project will support are implemented by the Ministry of Disaster Management and Relief, and include the Employment Generation Program for the Poorest (EGPP), Food for Works (FFW), Test Relief (TR), Gratuitous Relief (GR) and Vulnerable Group Feeding (VGF) programs. The project will also support the Statistics and Informatics Division for the development of a database of poor households that would facilitate better targeting for safety net service delivery and would contribute to improve the coordination among various safety nets implemented by different ministries.

"Efficient and transparent implementation of five of the largest safety net program would not only help to increase a much needed coverage of the poor in the short term, it would also help the Government of Bangladesh improve the quality of a large amount of public expenditure earmarked for social protection in the medium term," said Iffath Sharif, Task Team Leader, SNSP Project, World Bank.

The credit from the International Development Association (IDA), the World Bank's concessionary arm, has 40 years to maturity with a 10-year grace period; it carries a service charge of 0.75 percent.

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