Key Messages ◊ This policy note1 discusses specific design factors of the Philippines’ Pantawid Pamilyang Pilipino Program (4Ps) and identifies areas for potential adjustments. Drawing from technical reviews and evidence, it offers policy recommendations to enhance the 4Ps’ effectiveness in addressing the country’s poverty and human capital challenges. ◊ To sustain the program’s growth and success, continuous enhancement of core program functions is needed. 4Ps is the country’s major conditional cash transfer program, which has contributed to poverty reduction and crisis response in the past 15 years. Ensuring its sustainability requires enhancements in several areas including targeting (enrollment and graduation decisions), payment mechanisms, and adjustments of benefit amounts. ◊ The targeting system for social protection programs such as 4Ps, should be significantly improved to achieve the intended outcomes. Although the social registry, Listahanan, was recognized for its objective targeting and excellent performance in identifying the poorest and most vulnerable when introduced, the lack of mechanisms to make data more up-to-date has led to challenges. Most notably, early intervention has become challenging with the inability to capture pregnant women and young children in poverty. Three actions can be taken to address the situation: 1 The note was supported under the Social Protection Advisory Services and Analytics of the World Bank – Australian Government Department of Foreign Affairs and Trade (DFAT) and prepared as part of the Philippines Human Capital Review carried out in collaboration with the National Economic and Development Authority. Authors of this note are Camilo Gudmalin, Yoonyoung Cho, Ruth Rodriguez, and Laarni Revilla from the World Bank. STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 2 » Expedite beneficiary revalidation using the latest database to facilitate the entry of new households and exit of relatively better-off ones. » Continue to collaborate with other agencies in shifting from a census-based static registry to a dynamic social registry that utilizes advances in digital technologies. » Adopt and utilize the national ID (PhilSys) across multiple databases and systems, facilitating their interoperability, to help accurate data updates. ◊ The benefits provided to 4Ps households should be adjusted. The value of 4Ps grants has eroded significantly over time without inflation adjustments. Some supplemental benefits, including rice subsidies, were added, and the 4Ps Act in 2019 increased the benefits. Nonetheless, the level remains low, with the real value of 4Ps grants in 2022 estimate to have fallen by 20 percent since 2019. This note proposes two actions: » Introduce a mechanism to adjust the benefit amount for inflation and other shocks and assess the adequacy of benefits more frequently. » Consider reallocating benefits between different age groups of children, depending on their needs and the program objectives. ◊ 4Ps can provide proactive case management support to beneficiaries. This is especially needed given that a maximum of seven years was set by the 4Ps Act in 2019 but its implications are yet unclear. Whether the maximum duration is sufficient to help a poor household escape poverty is debatable. The establishment of 4Ps’ Kilos Unlad seven-year framework for case management to facilitate the graduation of households within the maximum period is a positive development, which the following actions can complement: » Continue the proactive and intensive case management support to beneficiaries to ensure the program’s effectiveness even within a shorter intervention period. » Ensure coordination with other agencies to support families graduating from the program. ◊ 4Ps made steady progress in digital payments, but the program needs to invest in raising beneficiaries’ awareness and financial literacy. As of December 2023,2 around 94 percent of active households received grants digitally, of whom most (91%) can access financial transactions through basic deposit accounts. The actual use of transaction accounts beyond receiving benefits can be promoted: » Raise beneficiaries’ awareness and financial literacy through Family Development Sessions. » Consider policy options allowing beneficiaries to choose from multiple payment service providers. 2 Monthly Report on Pantawid Pamilyang Pilipino Program Implementation, December 2023 STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 3 INTRODUCTION The Pantawid Pamilyang Pilipino Program (4Ps) is a conditional cash transfer (CCT) program that provides cash to beneficiary households subject to their compliance with program conditionalities. Through the national household targeting system, Listahanan, the program identifies poor and near-poor households with children aged 0-18 or with pregnant members at registration. 4Ps is the backbone of the country’s safety nets and is one of the cash transfer programs globally recognized with the highest number of beneficiaries. Started in 2007 with less than 5,000 households, the program grew to over 4 million households in 2014-15, and since then, has remained at around 4.4 million households.3 With the passage of the 4Ps Act or Republic Act 11310 in 2019, 4Ps became the country’s flagship safety net program and one of the “tried and tested” strategies4 that contributed to the significant reduction of poverty incidence (World Bank 2018). There are design features that 4Ps adopted from global good practices. First, beneficiary households are objectively selected based on a Listahanan database, leaving little room for personal or political favoritism. Second, cash transfers are conditional on households’ investment in human capital such as health, nutrition, and education. Third, monthly family development sessions promote human capital investment and behavioral changes that reinforce efforts toward poverty reduction. Fourth, robust monitoring and evaluation are embedded in the program. Numerous studies, especially the early evaluations, have shown strong evidence of 4Ps’ impact. With the high compliance rates on program conditions, the 4Ps have contributed to greater use of health, nutrition, and education services such as children’s immunization, pre-and post-natal care, and school attendance.5 The 3rd wave impact evaluation of 4Ps, conducted by the Philippine Institute for Development Studies (PIDS), indicates that the program sustained its positive impact on children’s access to health care services. The program increased deworming for children 6 to 14 years old, vitamin A supplementation and growth monitoring for children 0 to 5 years old. Program impact in education is more pronounced for older children, but education outcomes for elementary school age group remain at satisfactory rates (PIDS 2020). Having a flagship program like 4Ps also helped with shock response. Studies found that 4Ps protected affected households from falling into extreme poverty after super typhoon Haiyan in 2013 (Pfutze 2023), and it helped beneficiaries maintain better food security during the COVID-19 pandemic (Cho et al. 2021). 3 The basis of the 4Ps annual target of 4.4 million beneficiaries was the previous Philippine Development Plan (PDP) 2017-2022. As the new PDP (2023-2028) does not mention the 4.4 million target indicator, program upscaling is now flexible but remains contingent to the yearly budget allocated to the program. 4 National Economic Development Authority. 2023. Philippine Development Plan (2023-2028). 5 For instance, based on the impact evaluation in 2011, severe stunting of young children (6-36 months old) among beneficiaries was lower by 10 percentage points compared with non-beneficiaries’ baseline of 24%. Similarly, school attendance in Pantawid areas was close to 90% among 12- 14 years old whereas it was 84% in non-Pantawid areas. STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 4 Despite the impressive growth and success of the program, the sustainability of strong and positive impacts of 4Ps cannot be ensured unless core program functions are continuously enhanced for efficient access and delivery of benefits to beneficiary households. In light of the program’s 15th year of implementation, the 4Ps Act’s 5th year of effectivity, and the ongoing updating of beneficiary households based on the latest Listahanan, questions have been raised about how to ensure that the program continues to support the most vulnerable and disadvantaged families6; how to adjust the range of conditionalities to include, for example, monitoring the health services accessed by 0-5 year old children and their mothers during the First 1000 days of Life (F1KD); how the program effectively facilitates the graduation of families out of poverty, and how to make payments more accessible to beneficiaries. Focusing on these critical issues, the note reviews the 4Ps Act and other relevant policy guidelines along four areas of inquiry, namely: (1) targeting, (2) benefit level and conditionalities, (3) program duration, and (4) payment modality. It then assesses the implementation progress and discusses the areas for further strengthening. KEY ISSUES Targeting The most commonly used rationale for targeting is that for a given budget, a larger impact can be achieved when more resources are focused on the needier (Grosh et al., 2022). In light of this, targeting systems are typically developed and employed to help programs reach the intended population—often the poorest and most vulnerable ones—according to the eligibility criteria set by the programs. Several targeting methods can be used, including categorical, geographic, (proxy) means tests, community identification, self-selection, and a combination of multiple approaches (Azevedo & Robles 2013). No strategy is perfect, and errors in inclusion and exclusion occur frequently. However, measures are taken to reduce such errors by utilizing up-to-date household information and adopting objective and well-functioning targeting methods. The Philippines’ National Household Targeting System for Poverty Reduction (NHTS-PR), or Listahanan, was introduced in 2009 as Listahanan 1 to identify eligible 4Ps recipients. It was later adopted as a nationwide targeting mechanism for social protection programs through Executive Order 867 of 2010. From 2009 to 2015, 4Ps expanded to include more beneficiaries, utilizing Listahanan 1 for eligibility assessment. Listahanan 2 was completed in 2015, but with concerns regarding data quality and coverage, it was not fully utilized for 4Ps targeting except for small-scale household replacements.7 More recently, another census sweep was carried out to produce Listahanan 3, with the initial results released in 2022 (Figure 1). 6 Not only those poor but also indigenous people in geographically isolated areas, homeless street families, victims of catastrophic typhoons and calamities, and families in need of special protection. 7 As of June 2021, these household replacements using Listahanan 2 comprised 8.7% of beneficiaries. https://www.coa.gov.ph/reports/ performance-audit-reports/2022-2/follow-up-on-the-performance-audit-on-the-pantawid-pamilyang-pilipino-program/ STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 5 Figure 1. National Household Assessment Timelines Two - year delay Three - year delay Actual Release Target Release Actual Release Target Release Actual Release of Listahan 1 of Listahan 2 of Listahan 2 of Listahan 3 of Listahan 3 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: Department of Social Welfare and Development (DSWD) The 4Ps Act specifies that beneficiaries are to be identified through the Standardized Targeting System (STS). The STS is a system for identifying who and where poor households are by generating a socioeconomic database of poor households that national government agencies use. The STS was mandated to regularly update data to revalidate beneficiary eligibility every three (3) years. The Listahanan conducted by the Department of Social Welfare and Development (DSWD) was considered the equivalent of STS, a practice that continued until Republic Act 11315 or the Community-Based Monitoring System (CBMS) law was enacted in 2019. The CBMS law is a shift in the social protection beneficiary targeting strategy from national-led to local or community-led. CBMS involves generating data at the local level, with the data used to target households for government programs on poverty alleviation and economic development. The Philippine Statistics Authority (PSA) is mandated to implement the CBMS through local level census. Republic Act 11291 or the Act Providing for a Magna Carta of the Poor requires that the National Economic and Development Authority (NEDA) maintain and periodically review, in consultation with PSA, a single system of classification to be used for targeting beneficiaries of the government’s poverty alleviation programs and projects to ensure that such programs reach the intended beneficiaries. Moreover, DSWD, in coordination with NEDA and the National Anti-Poverty Commission (NAPC), is mandated to identify the target beneficiaries. The static approach to targeting—where data are collected every four to five years—presents risks of exclusion and inclusion errors as information becomes outdated. It is particularly disadvantageous to poor households, especially those at the far-end margin who have to wait for another set of data collection for their eligibility to be assessed and, upon registration, are required to submit more documentation to update their household data. Those who face shocks such as natural disasters and who backslide into poverty and vulnerabilities tend to be excluded as well when the shocks take place between data collection and the revalidation period. STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 6 The consequence of using the static system for targeting is particularly acute in the Philippines, where the majority of beneficiaries were enrolled prior to 2015—the year when new enrollments began to decelerate (Figure 2 Panel A). The deceleration of enrollment was also caused by an order8 issued by former DSWD Secretary Taguiwalo in 2016 declaring a moratorium on the registration of new poor households. Without large-scale revalidation and eligibility assessments of beneficiaries, most of these pre-2015 beneficiaries stayed in the program except those who exited due to natural attrition (mostly due to the youngest child in a household becoming older than the eligibility age) and households achieving self-sufficiency. With the aging of grantees and children and without a major addition of new families in the program, the average share of pregnant women and young children aged 0-5 has significantly declined while the total number of 4Ps beneficiaries remains stable (Figure 2 Panel B). This indicates that 4Ps may have a declining role as a human capital investment strategy because the intended population is missed in the program. Moreover, by not capturing the changes in socioeconomic status over time, the share of the bottom 40 households in the program has been declining (Figure 2 Panel C). Figure 2. Challenges with Static Targeting A. Number of 4Ps beneficiary households by year B. Number of children aged 0-5 in 4Ps over time 9 4,377,762 Number of households in 4Ps (millions) 2.5 5 Number of pregnant women and children 4,126,318 5,000,000 4,455,116 4,394,813 3,935,394 4,178,828 4,097,585 4,424,785 2 4 Active Members 0-5 years old (millions) 4,000,000 4,409,819 4,324,680 3,121,530 3,788,151 1.5 3 3,000,000 2,345,639 1 2 2,000,000 1,035,431 0.5 1 777,505 1,000,000 337,416 4,589 0 0 2012 Q2 2012 Q4 2013 Q2 2013 Q4 2014 Q2 2014 Q4 2015 Q2 2015 Q4 2016 Q2 2016 Q4 2017 Q2 2017 Q4 2018 Q2 2018 Q4 2019 Q2 2019 Q4 2020 Q2 2020 Q4 - 2007 2009 2011 2013 2015 2017 2019 2021 2023 Year Number of pregnant women and children 0-5 years old Active Members Addition Attrition Number of households in 4Ps Source: DSWD Source: DSWD C. Share of bottom 40 households in 4Ps over time 100% 90% 80% 17% 70% 29% 60% 31% 31% 30% 26% 50% 27% 40% 75% 30% 54% 45% 46% 20% 41% 39% 35% 10% 0% 2009 2013 2015 2017 2018 2020 Q1 2020 Q2 Q1 Q2 Q3 Q4 Q5 Source: Cho and Johnson (2022) based on Family Income and Expenditure Survey and Annual Poverty Indicators Survey (APIS), various years 8 Memorandum from DSWD Secretary dated 21 November 2016. 9 More information about the distribution of children’s age groups by region is presented in Annex A. STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 7 Benefit Amount The value of 4Ps grants has been relatively low. When measured in terms of CCT benefits as a share of pre-transfer income among the bottom 20 percent households, 4Ps generosity has been lower than in other countries with similar programs (Figure 3 Panel A).10 The level of grants was raised in 2019 through the 4Ps Act, after erosion of its value over time without inflation adjustments. For instance, health grants were raised from ₱500 to 750 per month and senior high grants were also raised from ₱500 to 700 per month. However, the value set in 2019 has been eroded again without inflation adjustments (see Annex C). While the top-up benefits from the Social Amelioration Program (SAP) that were given to 4Ps beneficiaries during the pandemic comprised a substantial share of low-income household income during the crisis (Figure 3 Panel B), rapid inflation especially of food and fuel since Russia’s takeover of Ukraine in February 2022 significantly undermined the purchasing power of poor households. Increase in food prices is a major driver of inflation and disproportionately affects the poor whose share of food consumption out of total household expenditures is higher than that of richer families. The gap between headline and core inflation, which reflects the increases in food and fuel prices, has been large and persistent until early 2023 (Figure 3 Panel C). In response to food price hikes, the government introduced measures to increase food imports by lowering tariffs to address supply shortages (World Bank 2023). In addition, to protect poor and vulnerable households from price increases, a targeted cash transfer program was introduced to provide cash assistance of ₱3,000 each to the bottom 50 percent of households including 4Ps beneficiaries (₱500 per household per month for six months until December 31, 2022). In February 2023, the government extended the program, providing an additional ₱1,000 per household after headline inflation reached 8.7 percent, which was higher than expected. Based on the consumer price index for the bottom 30 percent of households by income, the Philippine Institute for Development Studies (Reyes 2022) reported that the real value of 4Ps grants has fallen by 20 percent since the enactment of the 4Ps Act.11 Noting that higher transfer levels can result in bigger impacts on total household and food expenditures as well as poverty reduction (Melad, Araos, & Orbeta 2020), policymakers have proposed an increase in 4Ps grants. For example, House Bill No. 6813, or the Enhanced 4Ps Law of 2022, proposes an additional food and nutrition grant of ₱1,000 per month per household, while House Bill No. 8040 or the Pantawid at Pagkain ng Pamilyang Pilipino Program (5Ps) Law proposes the following amendments: (1) increasing the health and nutrition grant from ₱750 to 1,800 for a maximum of 12 months per year; (2) institutionalization of a rice subsidy of not lower than ₱600 per month; and (3) shortening the mandatory periodic assessment of the sufficiency of the cash grant from six years to three years, and House Bill No. 4372 proposes to increase the monthly education cash grants from ₱300 to 500 in case of daycare and elementary children, ₱500 to 700 in case of junior high school and ₱700 to 900 in case of senior high school beneficiaries. Health and nutrition grants are also proposed to be increased from ₱750 to 1,100 per month. 10 In 2017, rice subsidy was added to 4Ps benefits, which explains the slight increase in the share from 9% in 2015 to 10% in 2017. 11 Under the 4Ps Act, PIDS is responsible for reviewing the present value of cash grants using the consumer price index regularly published by the Philippine Statistics Authority. The review is to be conducted every six years and PIDS is to recommend the necessary adjustments to the 4Ps National Advisory Council. STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 8 Figure 3. Benefit Generosity and Inflation A. Share of CCT benefits as a % of pre-transfer income B. Share of 4Ps and SAP benefits as a % of of bottom 20 percent households pre-transfer income for Jan-June 2020 by income quintile 27% 40 23% 22% 20% 35 30 % of Benefit Received 12% 11% 11% 11% 10% 9% 25 20 15 10 6) 4) ) 5) ) ) ) ) ) 01 01 13 01 14 13 14 14 ) 17 15 r (2 ico (2 a (20 il (2 u (20 s (20 a (20 (20 s (20 s (20 5 o n z r e i c e e ad x ti Br a Pe pin b bli in in Ecu Me en ilip lom pu ipp ipp Arg hil hil 0 Ph Co Re P P a n 1 2 3 4 5 nic mi Per capita income quintile Do Source: Acosta & Velarde 2019 Source: World Bank staff calculation based on APIS 2020. C. Headline and core inflation rates over time 8.7 8.6 9 8.1 7.7 8.0 7.6 6.9 6.6 6.4 6.3 7 6.1 5.4 4.9 5 4.0 Percent 3.0 3.0 3 1 -1 Jan Feb Jun Jul Aug Sep Jan Feb Jun Jul Aug Sep Jan Feb May Nov May Nov Oct Oct Mar Apr Dec Mar Apr Dec Mar Apr 2021 2022 2023 Food and non-alcoholic beverages Utilities: electricity, gas, and other fuels Other non-food items Transport: fuels and lubricants for personal transport Alcoholic beverages and tobacco BSP policy rate Core inflation Headline inflation Source: World Bank 2023 Raising the overall benefits amount and shifting and adjusting benefits within the program warrants consideration. For instance, education grants for primary schools increased primary enrollment among low-income households during the early period of 4Ps implementation. However, under the current environment where primary enrollment is almost universal regardless of income level, using it as a conditionality may have little impact. The resources can be better used for an early start or secondary school level where the gaps between the poor and better-off persist; for instance, malnutrition among poor households persists, as discussed above, and secondary graduation rate for the poorest is 48 percent, which is lower than the average of 78 percent (Yee 2023). STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 9 Program Duration The 4Ps Act sets a maximum program duration of seven years, after which a beneficiary household is to exit the program, although the 4Ps National Advisory Council may extend the period under exceptional circumstances.12 Some welcome the time limit because it helps manage the expectations of beneficiaries and reduces welfare dependency. In fact, one of the most controversial welfare reform measures in the 1990s in the US was the imposition of a 60 month time limit on cash aid to welfare recipients, which later was assessed to contribute to reducing welfare reliance and increasing beneficiaries’ employment (Grogger 2003). Meanwhile, others were concerned that the rule might be implemented without considering the specific circumstances or the poverty status of beneficiaries (Hagen-Zanker 2016; Reyes et al. 2015). In particular, some children who started 4Ps early may be unable to complete secondary school under the program if the seven-year limit is strictly enforced. The common interpretation of this rule is that the start of the seven years will be counted from 2019, when the 4Ps Act was enacted. Thus, the recent reassessment and revalidation of eligibility using the Listahanan 3 did not consider the duration of the program as an eligibility criterion. In 2022, DSWD initiated Kilos-Unlad, a framework to guide case management in 4Ps operations and help beneficiaries progress towards graduation by their seventh year in the program. Under Kilos-Unlad, beneficiaries transitioning or exiting from the program are assessed and referred to local government units and other national government agencies for post-service interventions. Another pathway in preparing 4Ps households to graduate from the program within the seven-year limit is strengthening the beneficiaries’ capacities through the Family Development Sessions (FDS) and Youth Development Sessions (YDS). The FDS and YDS help beneficiaries enhance and acquire skills and knowledge to fulfill their roles and responsibilities in children’s health, nutrition, education, and psychosocial needs; promote positive family values; advocate for active citizenship; and become productive members of society. Moreover, under Sections 13 and 19 of the 4Ps Act, qualified 4Ps households shall be prioritized when availing of interventions under DSWD’s Sustainable Livelihood Program (SLP) or the programs of other agencies.13 In the Philippines, under a convergence approach, graduating 4Ps student beneficiaries can be prioritized for the government’s education and training scholarship programs, promoting longer exposure of children from poor families in social protection programs managed by other government agencies, and maximizing gains from 4Ps. Going forward, 4Ps may develop a new operating model that allows the convergence of 4Ps or referral pathways with other government programs early on so that beneficiaries are assisted in availing of government services responsive to their needs during their seven-year membership in 4Ps. 12 As part of its oversight function, the 4Ps National Advisory Council ensures that the grant amounts are sufficient to make a positive impact on the health, nutrition, and education of beneficiaries; and that they are received timely and are used by the beneficiaries themselves. 13 Global experiences (e.g., Nicaragua’s Accion a Crisis program) provide examples where complementary interventions improved beneficiaries’ protection against shocks even after they have completed the program. STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 10 Payment Modality An effective payment system should successfully distribute the right benefit amount to the right people at the right time and frequency while minimizing costs to all parties. As of December 2023, cash grants are delivered to 4Ps households, with around 94 percent of the total active households receiving their grants through cash cards, while the remaining beneficiaries (6%) claim their grants over-the-counter (OTC). Most (91%) beneficiaries with cash cards use a basic deposit account (BDA), which was converted from a single purpose to a transaction account in 2022. This shift to BDA (i.e., transaction account) is in line with Rule VII, Section 13 of the implementing rules and regulations (IRR) of the 4Ps Act, which mandates DSWD to provide qualified household- beneficiaries with direct access to cash grants that are secured via transaction accounts. Table 2 shows the distribution of cash grants based on payment modes.14 Table 1. 4Ps Payment Modality and Grant Amount, 2023 Payment Financial Percentage Education Grant Health Grant Rice Subsidy Total Amount Mode Institution (%) Land Bank of Cash the Philippines 20,139,960,800 25,868,419,500 21,487,381,400 67,505,761,700 94.33 Card (LBP) OTC LBP & conduits 1,400,742,800 1,441,604,250 1,218,283,200 4,060,630,250 5.67 Total 21,540,703,600 27,310,023,750 22,715,664,600 71,566,931,950 100 Source: DSWD While they prefer cash cards, beneficiaries also experience difficulties in using them. Common challenges15 related to payments include long queues and waiting time when many households flock to the ATMs for cash withdrawals during payouts, insufficient cash at ATMs, high transportation cost in areas far from ATM or LBP branches, cash card pawning by beneficiaries and card capture, disputes in the grant amount received, and damaged cards. Improving access to transaction accounts and financial literacy can contribute to the government’s thrust of developing an inclusive digital finance ecosystem and in line with the Digital Payments Transformation Roadmap 2020-2023 and the National Strategy for Financial Inclusion (NSFI) 2022-2028 to make formal financial services accessible to vulnerable and underserved sectors.16 Improving access means making multiple digital payment services available to beneficiaries and allowing them to choose their preferred financial service provider (FSP), including mobile money issuers such as GCash and Maya. This approach will require a hybrid of a program FSP (i.e., Land Bank of the Philippines in the case of 4Ps) and a recipient FSP chosen by beneficiaries because the 4Ps Act requires the use of authorized government depository banks (AGDB). 14 Quarterly Report on Pantawid Pamilyang Pilipino Program Implementation, 4th Quarter 2023 (last revised in Jan 2024). 15 Giving Cash to the Poor: Study of Pantawid Pamilya Cash Grants Generosity, Frequency, and Modality, Kris Ann Melad, et al 16 For the full text of the strategy, see https://www.bsp.gov.ph/Pages/inclusiveFiance/NSFI-2022-2028.pdf. STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 11 To date, the implementation of the second tranche of the Social Amelioration Program (SAP 2) is the closest to digital payments to beneficiaries using various FSPs. DSWD signed memoranda of agreements with six FSPs (three traditional banks and three e-money issuers).17 However, instead of allowing beneficiaries to choose their FSP, DSWD assigned them an FSP geographically. Nonetheless, the time and financial costs for beneficiaries to receive SAP 2 benefits were modest, with the average time ranging from 1.87 to 4.25 hours, with said time attributed largely to queuing and the variations in accessibility of service by FSP. The average financial cost attributed to transportation and withdrawal fees was around ₱132 for grants between ₱5,000 and ₱8,000 (Glynn- Broderick et al. 2021). Moreover, digital payments through multiple FSPs expedited payments that it took only two months for payments reach about 13.3 million families. These suggest that digital payments have great potential in reducing costs for both beneficiaries and implementers. FSPs, on the other hand, encountered operational challenges with the beneficiaries’ access to internet connection and the devices they used (e.g., smart phone, computer, notepad); know-your-customer (KYC) or identification issues; low public trust in digital payments due to internet scams or misinformation; and low financial literacy. Some of these can be addressed by enhancing the quality of registration, payroll data and information management, and supporting financial literacy and awareness campaigns. Whether multiple FSPs can be utilized for 4Ps with a beneficiary choice is unclear. Unlike SAP 2, 4Ps payments are guided by the 4Ps Act, which limits the use of financial intermediaries other than AGDBs apart from exceptional cases.18 Further, Commission on Audit’s regulations are also prohibitive as they require financial intermediaries to be procured. The only option to expand the pool of FSPs without going through a cumbersome procurement route19 is to allow beneficiaries choose their FSPs and let them pay for the transaction costs themselves.20 Even in such case, it would be necessary to establish the minimum criteria for FSP participation, standardized fee structure and payment, service standards, reporting requirements, and oversight mechanisms (Cook & Lennox 2023). GLOBAL EXPERIENCES AND EVIDENCE Targeting. There are various targeting methods (Table 2) and each has its own pros and cons. For instance, a targeting experiment of Indonesia’s social assistance showed that targeting using a proxy means test (PMT) is better in identifying consumption poor households (i.e., welfare targeting) compared to community-based targeting and a hybrid, but community targeting appears to yield greater satisfaction as it may utilize local information that a statistical model may be unable to capture. 17 The engagement of the FSPs was through a multilateral Memorandum of Agreement (MOA) dated June 30, 2020, and signed by DSWD, LBP, and the six FSPs – Rizal Commercial Banking Corporation (RCBC), Robinson’s Bank, Union Bank, GCash, PayMaya, and Starpay). 18 Section 13 of the 4Ps Act states that for “localities not adequately served by an AGDB, the DSWD may, by itself or through an AGDB, contract the services of rural banks, thrift banks, cooperative banks, and institutions engaged in money remittances duly accredited by the BSP.” 19 Department of Justice (DOJ) Opinion No. 33, s. 2021, where the Department of Justice opined that the selection of the FSP subject of DSWD Memorandum of Agreement dated June 30, 2020 did not fall under the ambit of RA 9184 (i.e., the procurement law). 20 Section VI, 1.c of DSWD MC 001, series of 2021 may have to amend the statement: “[t]he DSWD shall credit directly the cash grants to the transaction accounts of household-beneficiaries and shall pay the AGDB or BSFI’s initial bank or service fee.” STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 12 Globally, CCT programs tend to use a combination of geographic targeting (to focus on vulnerable areas), welfare targeting (with many using proxy means testing in developing countries), and categorical targeting (for pregnant women and young children). While these targeting methods are more progressive than others, there are a few important challenges beyond conventional inclusion and exclusion errors. First, beneficiary identification based on a static database or registry can lead to significant errors as information becomes outdated. Second, given the conditionality on health check-ups and school attendance, programs may inadvertently exclude out-of-school children, some of whom may be malnourished and from the extreme poor. Third, despite positive messaging and behavioral changes promoted by CCT programs,21 stigma and social exclusion can limit the participation of marginalized social groups. To address these challenges, many countries complement a social registry and statistical model (e.g., PMT) with social workers’ assessments. For instance, Chile’s Solidario program relies heavily on the social workers’ needs assessment and case management, in addition to the initial identification of beneficiaries using the traditional PMT (Carneiro et al. 2019). Türkiye’s integrated social assistance system, which is a virtual social registry, includes social workers’ home visitation observations and assessment of outcomes into the registry. Countries such as Pakistan and Türkiye are also making the registry more dynamic by allowing self-registration and updates and by linking the social registry to administrative databases such as civil registry and tax and social security information. Moreover, utilizing alternative data sources (e.g., satellite imagery or mobile phone data) and machine learning to refine the statistical poverty model is part of recent efforts to strengthen targeting, especially when up-to-date data are lacking. Table 2. Common Targeting Methods Method Description Strength Weakness Means Test Actual consumption or Very accurate with good Expensive to collect income income is compared to the income or consumption data or consumption data for all eligibility threshold potential beneficiaries Proxy Means Consumption is proxied Can accurately and cost- Does not address the impact Test through readily observable effectively target the chronic of short-term shocks and verifiable variables and poor compared to the eligibility threshold Community- Groups of community leaders Incorporates local knowledge Vulnerable to elite capture based and members determine and is responsive to short- and eligibility decisions can Targeting household eligibility term shocks. Can generate lack transparency community support 21 Many CCT programs have positive titles. To name a few: Mexico’s PROGRESA (program for health, nutrition, and education) was renamed to Oportunidades (opportunity), which was renamed again to Prospera (prosperity); Peru’s Juntos (together); Chile’s Solidario (supportive); the Philippines’ Pantawid Pamilyang Pilipino Program (Bridging program for Filipino families); and Indonesia’s PKH (family hope program). STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 13 Method Description Strength Weakness Geographic Target by location, including Easy to implement and Does not account for Targeting all residents within the transparent. Can rapidly differences in household location target in response to natural well-being in the area disasters and other large covariate shocks Self-targeting Benefits and transaction Easy to implement and low Stigma and lack of program costs are set so that only the implementation cost knowledge may discourage needy households enroll participation Socio- Individuals or households Cheap to implement and Unless poverty is strongly demographic that belong to a specific has high political and social concentrated in a particular targeting category are eligible acceptability demographic group, it can produce large targeting errors Multiple The use of a combination of Minimize errors of exclusion Constraints by capacity to Methods targeting methods within a and inclusion implement single program Source: del Ninno and Mills Eds. (2015) Note: One type of means testing is affluence testing, which involves holding assets of certain types or above a threshold value to exclude households from eligibility (Grosh 2022). Benefit amount. A trade-off exists between the coverage and adequacy of benefits within a given budget. The adequacy of benefits generally includes the level, duration, and frequency of benefits. It is a policy decision to target the extreme poor and provide them with a high level of benefits or cover the broader poor and vulnerable population and provide a relatively lower level of benefits. There is no clear evidence on the optimal level, duration, and frequency of benefits. Emerging insights from various impact evaluations suggest that higher value benefits (i.e., over 30 percent of pre- transfer income per capita) generally yield greater impact. However, studies suggest that lower value benefits can also generate robust impact when combined with behavioral changes and nudges and provided consistently over time (McIntosh and Zeitlin 2021). The cost-effectiveness of transfer value is inconclusive as it would depend on impact persistence. A study on Kenya’s Unconditional Cash Transfer (UCT) programs compared large, lump sum transfer and small, monthly installments (Haushofer & Shapiro 2016). While both increase beneficiary households’ economic outcomes and psychological well-being, the former induces greater consumption of durables while the latter improves food security. Studies on Mexico’s PROGRESA suggest that higher transfer levels are also associated with improvements in nutrition outcomes of children, e.g., statistically significant improvement in the height-for-age Z scores and better child development in both physical and cognitive domains (Fernald et al. 2009; Manley et al. 2015). Baird et al. (2009) found that higher cash transfers in a Malawi program are associated with improved attendance and progression in school levels among schoolgirls. An analysis of six CCT programs in developing countries found no evidence of creating work disincentives even for large transfers (Banerjee et al. 2017). STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 14 There is significant variation in the generosity of CCT programs. Beyond the share of household expenditure, determining the level of benefits and coverage can be informed by the population of concern and policy objectives. For instance, when Mexico’s PROGRESA was introduced, it set the level of benefits for education by taking into account the opportunity cost of foregoing incomes from child labor. It also set higher benefits for girls in consideration of gender disparity. Moreover, even within the target population, benefit levels can vary by household vulnerability. For instance, Brazil’s Bolsa Familia provides additional benefits to the extremely poor. Program duration. There are no definitive best practice rules regarding a CCT program’s duration, which varies across programs (See Annex B). Countries often let programs continue as long as the beneficiary households have school age children, meet the eligibility criteria (based on welfare targeting), and comply with conditionalities. Regular revalidation of the eligibility including the poverty status is recommended, for instance, every two to three years. Several programs impose the maximum duration of program participation, commonly between two to five years. The rationale for the maximum period of program participation or regular revalidation of eligibility is to enable the program to support the transient poor in addition to the chronic poor, reflect the dynamic nature of poverty, and cover more people with limited resources. The relationship between the duration of a program and its effectiveness is difficult to assess. As previously discussed, the level, duration, and frequency of benefits along with the program coverage are often interlinked, which makes it challenging to disentangle the differential impact of the program duration separately. Another factor to consider when discussing the duration of a program is its timing. For instance, Araujo and Macours (2021) find exposure to the program at a critical period such as during the first 1,000 days or time of transition from primary to secondary school produced significant impacts on children’s schooling and earning outcomes 20 years after the program participation relative to the control groups who were exposed to the program 1-1.5 years later. Recently, some studies investigated the effect of duration of program participation on key outcomes. A sub-component in Rwanda’s child nutrition intervention was to randomize cash recipients to examine the differential impact of a large lump-sum transfer and smaller monthly installments that are cost equivalent. The study (McIntosh, Zeitlin et al. 2021) did not find any significant difference in child nutrition outcomes between the two options. In Kenya, a study (Banerjee et al. 2020) experimented with one-time transfer, short-term transfers (2 years only), and short term receipts out of anticipated long-term duration (2 years received, 10 more years anticipated). These interventions improved food security and health indicators, with a greater impact observed by the long-term beneficiaries. Improvements in mental health were most evident in both short and long-term transfers rather than one-time transfers. These studies are based on unconditional cash transfers and may provide initial indications of effectiveness of long-term exposure to cash transfer programs. To date, there is limited research focusing on the duration of CCT programs. STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 15 Payment modality. The maturity of government-to-person (G2P) payment systems has been widely discussed, as shown in Table 3 (World Bank 2020). G2P 1.0 begins with cash delivery for a single program, whereas the most mature stage of G2P 4.0 utilizes digital payments offered by multiple FSPs across multiple programs and chosen by each client in a particular program. In between, the range of digital payments used varies, with some based on single purpose and closed loops and others more conducive for financial transactions beyond receiving cash transfers. Delivering digital transfers through more mature systems reduces transaction costs for implementers and recipients, provides increased control over entitlements, improves timeliness and convenience, reduces corruption and leakages, and encourages financial inclusion (Gelb et al. 2020). Table 3. Maturity of G2P Payment Systems Manual, Digitalized and Full Interoperability Digitalized 2.0 Paper-based 1.0 Partially Integrated 3.0 Federated Model 4.0 Cash or immediate Digital payment in Digital payment Digital payment cash out by agent; closed loop system into transactional into transactional each program has (e.g., smart card, ATM, account (which accounts with separate process mobile money); single makes transactions beneficiary choice of Payment purpose account; with other accounts FSP through single program specific possible); program treasury account or specific, no PSP choice sub-account for all programs The progression in the maturity of digital G2P payment systems is critical for the beneficiaries’ convenient access to funds, financial inclusion, and exposure to other opportunities. For instance, since 2017, Pakistan’s Benazir Income Support Program has evolved from cash to funds delivery through post office, to cash cards, and to cards with biometric verification functions. Through this, Pakistan was able to expand access points and contribute to enhancing the transparency of payments and women empowerment—as the majority of beneficiaries are women (World Bank 2022). In the case of Brazil’s Bolsa Familia, payments are made on their debit cards (social cards or bank cards), which are used exclusively for the program. The cash can be withdrawn at different cash-out points such as banks, ATMs, and lottery sales points. The card, while purposed for the program, allows for accessing financial services such as microcredit, savings, and insurance. The account is also exempt from banking fees and can be opened on the spot (Hellman 2015). The pandemic greatly expedited the advancement of digital G2P payments in many countries, with payment systems increasingly building on digital, foundational ID; biometric verification; and single beneficiary management systems. STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 16 POLICY RECOMMENDATIONS Based mostly on the 4Ps Act and global experience with cash transfers, this note reviewed the program’s targeting, benefit adequacy, duration, and payment systems.22 Without attempting to be exhaustive in every aspect of the program, the following recommendations are laid out along the four dimensions: 1. Targeting. Many operational challenges faced by the 4Ps are related to targeting: lack of revalidation (recertification), the exit of better-off families, and enrollment of new vulnerable families. Thus, it is urgently needed to complete the revalidation of beneficiary eligibility using Listahanan 3 and DSWD’s case management tools (i.e., Social Welfare Development Indicators or SWDI), based on which households that have become better-off over time are to graduate from the program. After facilitating the exit of self-sufficient households and natural attritions, the registration and enrollment of new households identified as poor and vulnerable under Listahanan 3 can follow. In addition, future targeting strategies beyond the immediate use of Listahanan 3 should be discussed among government stakeholders, specifically DSWD, NEDA, and PSA, whose functions in targeting are specified in the 4Ps Act, Magna Carta for the Poor, and CBMS Act, respectively. A step in this direction is the current discussion of transitioning from a static database to a dynamic social registry—led by DSWD and coordinated with PSA’s CBMS—and utilizing a more relevant PMT scoring mechanism, an undertaking led by NEDA. The new standardized targeting system should be able to maximize the use of a dynamic social registry, which builds on the national ID, PhilSys, for beneficiary registration and data updating, interoperable administrative databases, and clear data governance. DSWD has recently crafted a strategy paper on dynamic social registry with a planned pilot testing exercise to inform the rollout implementation of the approach, and at the same time guide the transition phase from static to dynamic social registry. 2. Level of benefits. More resources should be transferred to 4Ps beneficiaries given the depreciation of 4Ps grants due to inflation and the increased vulnerability exacerbated by COVID-19 and subsequent shocks. This can be done by increasing 4Ps grants and adding other transfers to 4Ps beneficiaries (e.g., rice subsidies, unconditional cash transfers, targeted cash transfers). As suggested in the proposed bills (i.e., House Bill Nos. 4080, 4372, and 6813), the mandatory periodic assessment of the sufficiency of cash grants can be carried out more frequently than the prescribed six-year review period. Indexation could be used to adjust 4Ps benefit amounts as aligned with findings from regular benefit level assessments.23 Consider reallocating benefits between different age groups of children depending on their needs and program objectives (e.g., primary school to F1KD grants). In addition, promoting stronger convergence of complementary government programs to support and prioritize 4Ps beneficiaries (e.g., through livelihood support or other referral systems) can be an important strategy to strengthen 4Ps. 22 The note recognizes the areas for further research on the 4Ps’ three-child limit per household policy, transition from Listahanan to CBMS, and program coverage with respect to gender and social inclusion, which could all help inform 4Ps policy reforms. 23 The indexing approach is also in line with the government’s direction (see news article, Social Welfare department working with PSA, NEDA for inflation indexing method for gov’t cash transfers) STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 17 3. Duration of the program. As the seven-year maximum period has not been applied yet and large-scale revalidation of beneficiaries is ongoing, the duration of 4Ps for most beneficiaries has been quite long. As the program’s targeting system is strengthened and regular beneficiary revalidation takes place, along with the enforcement of the seven-year maximum, the duration of program exposure will likely be shortened. To ensure that the program can be effective even with a shorter intervention period, proactive and intensive support for beneficiaries is needed. This can be done through case management (e.g., using the Kilos Unlad framework) during program participation; coordination with other government and non-government agencies for program enhancements; and the convergence approach to ensure the well-being of families that transition out of the program (those who have already graduated or are preparing to do so). The DSWD can continue administering the SWDI tool to revalidate households that have reached the 7-year maximum residency in the program or tagged as non-poor under Listahanan 3 and to guide the decision on referral pathways. 4. Payments. The transition of the 4Ps single-purpose card into a transaction account and the use of multiple FSPs and other non-bank (i.e., electronic money issuers) in SAP 2 were welcome developments. Greater financial inclusion can be pursued by enhancing awareness of digital payments and financial literacy among beneficiaries, expanding the pool of FSPs that beneficiaries can choose from, and allowing flexibility (i.e., continued availability of cash payments) to better serve marginalized areas lagging in digital payments. STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 18 Annexes STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 19 Annex 1 Regional Breakdown of the Number of 4Ps Children by Grade Level No Grades 1-6 Grades 7-10 Grades 11-12 Kinder Grade (Primary Education) (Junior HS) (Senior HS) Percentage Region Total Level (%) Reported K 1-5 6 7-9 10 11 12 NCR 33,241 10,736 76,956 39,211 98,432 55,141 26,471 21,444 361,632 5% CAR 6,657 5,356 23,482 5,535 27,361 12,118 10,141 7,547 98,197 1% I 23,288 16,321 89,468 19,852 97,756 43,138 36,578 27,331 353,732 5% II 9,383 8,574 43,760 10,763 52,894 20,979 17,235 11,975 175,563 2% III 34,821 18,651 105,050 33,693 137,159 64,980 41,530 30,779 466,663 6% IV-A 43,971 17,922 119,329 35,857 128,663 57,725 39,043 27,358 469,868 6% IV-B 22,556 17,981 97,607 24,008 98,085 41,294 32,681 25,176 359,388 5% V 59,951 43,189 177,502 47,261 192,549 86,245 74,987 54,441 736,125 10% VI 38,945 35,628 146,360 39,906 173,322 80,650 71,252 45,558 631,621 9% VII 42,895 24,059 135,489 34,715 150,388 63,686 56,047 35,805 543,084 7% VIII 26,571 26,956 115,818 30,081 134,077 62,941 47,226 37,711 481,381 7% IX 19,904 21,037 104,876 36,899 129,179 62,576 44,694 30,393 449,558 6% X 14,698 25,062 120,715 49,741 115,537 71,437 30,107 22,773 450,070 6% XI 21,355 20,194 114,559 39,088 120,182 63,034 36,633 26,907 441,952 6% XII 19,760 13,551 96,154 39,282 103,262 56,975 28,293 21,605 378,882 5% CARAGA 18,803 17,773 89,594 25,476 88,598 46,509 28,988 23,501 339,242 5% BARMM 65,111 51,011 147,831 136,878 106,736 63,674 12,693 10,599 594,533 8% Total 501,910 374,001 1,804,550 648,246 1,954,180 953,112 634,610 460,915 7,331,524 100% Percentage 7% 5% 25% 9% 27% 13% 9% 6% 100% (%) Source: DSWD STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 20 Annex 2 Real Value of CCT and Other Social Assistance, 2008-2022 ₱ 300 Education, +₱ 500 for +₱ 600 +₱ 200 +₱ 300 +₱ 700 for ₱ 500 Health High School (HS) for Rice UCT UCT Senior HS 30% 25% 22% 3 senior HS kids, with rice & UCT 20% 18% 1 elementary, 1 junior HS, 1 senior HS, with rice & UCT 15% 15% 3 elementary kids, with rice & UCT 14% 1 elementary, 1 junior HS, 1 senior HS 11% 3 elementary kids 10% 5% - 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: ADB Estimates Notes: CCT = conditional cash transfer, HS = high school, UCT = unconditional cash transfer STRENGTHENING THE PHILIPPINES’ PANTAWID PAMILYANG PILIPINO PROGRAM 21 Annex 3 CCT Programs with Different Duration of Exposure CCT Country Started Grant Duration Programa Familias Argentina 2002 As long as eligible (children up to 19) Juancito Pinto Bolivia 2006 As long as eligible (children up to grade 6) As long as eligible (children up to age 19) Bolsa Familia Brazil 2003 subject to recertification every 2 years 5 years (intensive support only for the first 2 Chile Solidario Chile 2002 years, exit grants provided after 2 years) Familias en Accion Colombia 2001 As long as eligible (children up to age 17) Dominican 3 years (with a recertification and possible Solidaridad 2005 Republic extension by 3 years) Bono de Desarollo Humano Ecuador 2003 As long as eligible (children up to age 16) Red Solidaria El Salvador 2005 3 years Mi Familia Progresa Guatemala 2008 As long as eligible (children up to age 16) Programa de Asignación Familiar Honduras 1998 As long as eligible (children up to age 12) Program of Advancement through As long as eligible (children up to age 19); Jamaica 2001 Health and Education recertification after 4 years Oportunidades Mexico 1997 As long as eligible (children up to age 22) Red de Oportunidades Panama 2006 5 years Tekoporã/PROPAIS II Paraguay 2005/2006 3 years Juntos Peru 2005 4 years Education Sector Support Cambodia 2005 3 years of lower secondary school Program Maximum 6 years, subject to revalidation Program Keluarga Harapan Indonesia 2007 after 3 years Reaching Out-of-School Children Bangladesh 2004 5 years Benazir Income Support Program Pakistan 2012 As long as eligible (children age up to 22) (Waseela-e-Taleem) Social Risk Mitigation Project Türkiye 2001 As long as eligible (up to secondary school) Cash Transfer for Orphans and As long as eligible (children up to 17) or Kenya 2004 Vulnerable Children maximum 5 years Orphans and Vulnerable Children Burkina Faso 2008 2 years (children up to 17) Care of the Poor Nigeria 2008 As long as eligible Maximum 7 years (through 2019 4Ps Act), Pantawid Pamilya Philippines* 2007 children up to 18 Source: All countries’ information is based on the design as of 2008 described in Fiszbein and Schady 2009. 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