Strengthening public safety nets: can the informal sector show the way?
2001
J. Murduch | M. Sharma
Development practioners and policymakers have increasingly turned to the issue of vulnerability as both a symptom and a source of poverty. The authors of this paper argue that reducing vulnerability poses a variety of challenges to public policy makers in many developing countries with the most immediate public policy challenge being to determine the most appropriate role for public action in reducing vulnerability.Main points of the paper include:the methods by which communities and extended families cope with vulnerability in the absence of government intervention, is a good starting point in tackling vulnerabilityhouseholds have many informal mechanisms to address vulnerability risks, but many carry large costs, not always immediate or easily identifiablecoping mechanisms between communities and extended families include the informal exchange of transfers and loans between familiesthe most important coping mechanisms that families have developed is to accumulate assets in times of relative surplus and then draw them down in times of needThe paper makes the following points in relation to the development of public policy: vulnerability policy needs to carefully evaluate the potential of crowding out private enterprise by public action, thus reducing the potential scope of private enterprise in reducing vulnerabilitythe widespread public crowding out of private enterprise can be desirable when public policy programmes are proven to be more efficient at reducing vulnerabilitythe commercial sector has a potentially valuable role to play in providing insurance to low-income households, particularly life insurance.[adapted from author]
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