Responses to the financial impacts of COVID-19 through social cash transfers and digital payment infrastructure

Countries with well-developed digital payments infrastructure and shock-responsive social cash transfer systems have been able to respond rapidly to the negative impacts of the COVID-19 crisis. A faster response can lessen the financial impact on the poor. This means that beneficiaries do not have to resort to negative coping mechanisms, such as selling productive assets—such as livestock or tools—which may undermine their ability to earn a living and recover financially in the long term. Using digital delivery mechanisms instead of delivering physical cash or food parcels is an advantage as it supports social distancing, thus reducing the risk of spreading the disease. These early responses to the economic impacts of COVID-19 also provide a guide for other national governments, demonstrating several measures to support a governmental response—both “quick-fixes” and long-term investments. World Bank Group President David R. Malpass said that the challenges that stem from COVID-19 represent “an unprecedented crisis, with devastating health, economic, and social effects felt around the world.” He stated, “If we do not move quickly to strengthen systems and resilience, the development gains of recent years can easily be lost.” He added that while the pandemic’s effects are global, “this crisis will likely hit the poorest and most vulnerable countries – and people – the hardest.” As of 1st May 2020, 159 countries have planned, introduced, or adapted 752 social protection and jobs measures in response to the pandemic. The increasing number of countries responding with social protection measures has been striking—growing from 45 countries as at 20th March to 151 countries by 24th April. Initial estimates of the investment going into social protection response to COVID-19 are at over half-trillion US dollars (USD 567 billion). Among classes of interventions, social assistance or non-contributory transfers are the most widely used, accounting for 60% of the global response (455 measures), followed by actions in social insurance (27%), and supply-side labor market programs (13%). Within social assistance, cash transfer programs (54%) remain the most widely used intervention by governments.

Themes: COVID-19, Digital Payment Ecosystems