Economy

Cash Transfer Scheme Neglects Nation’s Urban and Service Workers

A cash scheme that offered much-needed funds to Cambodia’s poorest during the pandemic has been praised by the International Monetary Fund. However, its report notes urban and service sector workers missed out, plunging many into poverty.
Rice sellers in Phnom Penh. Picture: Sam
Rice sellers in Phnom Penh. Picture: Sam

The Cambodian cash transfer scheme did “very well” in tackling forms of extreme poverty that predated the Covid-19 pandemic by targeting the poorest households, according to the International Monetary Fund. However, many urban and service sector workers are likely to be left out of social protection and constitute a growing ‘missing middle’.

In 2020, the Cambodian government used a mechanism called “Identification of Poor Households” (IDPoor) to identify potential recipients for maternal and disability support, as well as scholarship programs following the pandemic.

The IDPoor’s scope was expanded as the government used it to target households eligible for the new Cash Transfer Program for Poor and Vulnerable Households. The program aimed at tackling extreme poverty in response to the pandemic and had an initial budget of $300 million for its first year in 2020.

“In conclusion, the cash transfer scheme did very well in tackling the forms of extreme poverty which pre-dated the pandemic, by targeting households in the bottom deciles of the income distribution. However, many of these households tend to be rural and living out of subsistence farming, while income losses arising from the pandemic are likely to have been concentrated on urban and service sector workers,” the IMF said in its working paper, ‘Household Vulnerability to Income Shocks in Emerging and Developing Asia’.

“Many of these workers are likely to be left out of social protection and constitute a ‘missing middle’. As recent income losses are unlikely to be fully recorded in real time and urban households tend to hold higher levels of illiquid wealth, service sector workers living in cities may have found themselves ineligible for IDPoor cash transfers,” added the paper.

The IMF said most of these workers tend to be self-employed and are not eligible for furlough schemes. Urban workers may constitute a new pocket of poverty, more likely to draw down on savings and borrow extensively in the aftermath of the pandemic.

About 710,000 households, or 2.8 million people, received the cash transfer in 2020. These households received monthly subsidies worth $45, on average, the IMF said.

Without the cash transfer, 17.3 percent of households would have seen their income fall below $1.90 per worker/day, the IMF’s paper said. The share of households living below the international poverty line is estimated to be only 12.6 percent, or a 2.6 percentage points increase from the pre-pandemic baseline.

“Furthermore, the cash transfer may have been able to lift 164,000 households out of income poverty, compared to the pre-pandemic baseline,” the IMF said. It added that the percentage of households reporting some degree of food insecurity declined from 67 percent to 36 percent between August and October, 2020. Most of the transfers were spent on food and other necessities.

The IMF said not all households affected by the pandemic are supported by the cash transfer scheme. As many as 260,000 Cambodian households may have fallen below the $1.90 threshold in 2020 but find themselves outside the spectrum of coverage of the cash transfer scheme.

These ‘new poor’ households, which are typically urban and work in services, constitute more than half of those estimated to be living below the poverty line in the aftermath of the pandemic (459,000), the IMF said.

It noted cash transfer recipients are less likely to live in urban areas, compared to the general population, and are significantly less likely to be employed in the hospitality sector.

“On the other hand, households who fall into poverty as a direct result of the pandemic and remain excluded from the cash transfer are disproportionately more likely to be living in cities and to be employed in services,” it said.