Kenya

Discussion paper on transfer values in Kenya’s national social security system - Final report

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Executive summary

This paper has been commissioned by the World Food Programme (WFP) and United Nations Children’s Fund (UNICEF) to support the Government of Kenya in its policy development. It seeks to examine the current transfer values of Kenya’s tax-financed social security schemes and assess whether they are set at an appropriate level.
In most countries, debates on the value of transfers are a normal feature of policy-making, with proponents usually on both sides of the argument, some arguing that they are too low and others that they are too high. The debates indicate that there is no “right” answer and no agreed approach to determining transfer values. Indeed, there is a range of issues to consider when determining the value of transfers including: the purposes of social security schemes; the cost of a minimum standard of living; potential work (dis-) incentives; costs imposed on beneficiaries for complying with any conditions; and the overall cost and fiscal sustainability of the programme.
A key consideration for governments is how to achieve a balance between two objectives that are in tension: how to set the value of the transfer at a level that helps realise the right to an adequate standard of living; and, how to set the value low enough so that it remains fiscally affordable and reaches the priority target population, thereby offering as many people as possible the right to access social security.
Kenya has five main cash transfer programmes: the Cash Transfer for Orphans and Vulnerable Children (CT-OVC); the Older Persons Cash Transfer (OPCT); the Cash Transfer for Persons with Severe Disabilities (PwSD-CT); the Hunger Safety Net Programme (HSNP); and the Cash for Assets (CFA) programme. The CT-OVC, OPCT, PwSD and CFA programmes all offer a similar transfer value of Ksh 2,000 per month per beneficiary household, while the HSNP has a higher value of Ksh 2,700.
Currently, all schemes operate as household benefits – rather than individual entitlements – offering a fixed amount regardless of household size or composition. The result is that the system as a whole does not respond to differences in vulnerability between households. So, a household with a single older person and five children could only receive the OPCT, and not receive sufficient support to address effectively the additional needs of the children; indeed, it could receive the same level of benefit as a household with an older person and only one child. Therefore, the effectiveness of the system as a whole is reduced as a result of household transfers.
The paper compares Kenya’s transfer values with a range of national and international benchmarks, including the household consumption and the food poverty line; the Social Security (Minimum Standards) Convention (No. 102) of the International Labour Organisation; legislated minimum wages; and benefit levels of similar programmes in other countries in Africa and the rest of the world. It also examines to what extent transfer values have kept up with inflation.
Overall, transfer values in the country are modest, representing 29% to 40% of what is required to buy a minimum healthy food basket (MHFB) in arid and semi-arid lands or just over half (55%) of the average amount of resources required to close the national food poverty gap. At the same time, transfer values provided in Kenya are in line with or somewhat higher than those offered in other countries when taking into account the size of the economy and thus the financial capacity to fund social protection.
The paper develops several options to adjust transfer values to account for differences in household size and composition, including: varying the values of the household transfers; moving to a system of family transfers; or transforming existing programmes into a harmonised set of individual entitlements. It also presents results from a microsimulation model that compares the cost, coverage, and impact of a poverty- targeted system of household benefits with a lifecycle social security system.
The main recommendations are as follows: ▪ Convert the CT-OVC from a household benefit into a child benefit, so that an eligible household with multiple children would receive a benefit for every child. The proposed value for the child benefit would be Ksh 500 per child per month. This would be the equivalent of 4% of Kenya’s GDP per capita, which is in line with the value of many child benefits across the world. The proposed value is well above the recommended minimum as per the Social Security (Minimum Standards) Convention, 1952 (No. 102) of the International Labour Organisation. It would probably strike an appropriate balance between the progressive realisation of the right to an adequate standard of living, but is also low enough so that it remains fiscally affordable to expand the programme (as coverage is still very limited) and fulfil children’s right to access social security.
▪ Maintain the values of the OPCT and PwSD-CT at Ksh 2,000, but reform them into individual entitlements. The value of Ksh 2,000 is above the recommended minimum norm of the Social Security (Minimum Standards) Convention, 1952. And, the generosity of the two programmes relative to the size of the economy (and, therefore, funding capacity of the State) is already in line with what other (African) countries are providing. Moreover, in social security systems, it is normal for transfers to adults who are expected not to work – such as older people or persons with severe disabilities – to be higher than for children. Old age pensions and disability benefits are meant to replace income from employment, while a child benefit is meant to be a supplement to the income that carers generate from their own work. Having an old age pension at four times the value of a child benefit is common.
▪ The methodology to compute the CFA transfer value based on WFP’s Food Security and Outcome Monitoring could be continued. But, in the medium to long term, as part of efforts to further increase national ownership of the programme, it may be desirable to move towards using statistics produced by the KNBS. Another issue to resolve is that the transfer value of the CFA programme – during the lean months when it is active – is now similar to those of the CT-OVC, OPCT and PWSD. Yet, the CFA is a conditional benefit as participants need to fulfil certain work norms on building community assets whereas the other programmes are unconditional. This creates a certain level of inequity especially in areas where multiple programmes are active. At the same time, households enrolled on the CFA programme are also benefitting from technical assistance which, by and large, may make their assets more productive and sustainable than assets owned by non-beneficiaries.
▪ Consider bringing the value of the HSNP transfer value to bring it in line with the benefit levels of other programmes funded by the Government of Kenya. In northern Kenya, the transfer value of the HSNP is different from the payment sizes provided by the CT-OVC, OPCT and PWSD – which are increasingly active in the HSNP counties too. This creates a degree of inequity as similar households in the same communities may be receiving different benefits. The annual value of the HSNP is around 23% of GDP per capita which is high when compared to the value of similar programmes in many other countries. The value of the HSNP could be ‘frozen’ until the other programmes, after adopting an indexation mechanisms, have managed to catch up.
▪ The simplest method to adjust the value of transfers in line with annual inflation would be to use the Consumer Price Index (CPI).