Country

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BOX 5.7

Chile: Evolution of the Targeting System in a High-Capacity Countrya

For many years, Chile used proxy means testing (PMT) as the main targeting method for poverty-targeted social assistance programs. The eligibility form for the scoring system was Ficha CAS. The first version of the Ficha CAS was developed in 1979 using principal component analysis. Households were classified using a discrete score ranging from 1 to 5, and the score was used to allocate the crisis response cash transfer and workfare programs. In 1991, the eligibility form was expanded and applied during home visits, allowing the verification of housing conditions. A new formula scored households on a continuous PMT index that estimated household income. A two-year recertification period was also introduced. This continuous estimate of household income was used across a larger number of programs, with different eligibility thresholds and sizes. In 2007, the data collection instrument changed to Ficha de Protección Social, and the PMT formula changed from predicting household income to estimating income generation capacity and incorporated some features of a hybrid means test (HMT). It also used the national identification (ID) to validate identity and cross-verify the data with pension databases.

Between 2007 and 2012, the Ficha de Protección Social was applied to an increasing share of the population, from 5 million to 12 million people, and was used to allocate resources for 80 different programs and benefits. This expansion put pressure on the social protection system as many programs did not have resources to cover all the people meeting the eligibility criteria, resulting in waiting lists, as well as leading people to request out-of-cycle recertification (and lower HMT scores through distortion of self-declared information).

In 2014, the Chilean government decided to implement a new targeting system, the Registro Social de Hogares (RSH), which ranks households in seven groups based on an income and assets test (means test). For the first time in Chile’s history, the RSH was allowed to collect information on income and assets on behalf of applicants from other administrative databases, based on their informed consent and with regulations for respecting personal data protection. Thus, the RSH has not embarked on collecting new information from applicants; it only accesses and uses existing information from administrative databases (tax records, wages, social security contributions, health insurance [public and private] contributions, unemployment insurance,

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BOX 5.7 (continued)

pensions [contributory and noncontributory], education records,b real estate, and vehicles).

The gradual development of the targeting instrument in Chile was possible due to political commitment to reform, a desire to improve coordination across stakeholders, and investments in the delivery system’s human and physical capital. The reform resulted in better data integration and system interoperability, efficient use of existing administrative data, and cross-verification of self-declared information. This degree of integration and interoperability was only possible due to the large coverage and use of the national ID system (Rol Único Nacional) throughout the country. The use of a unified and single assessment of household means ensures horizontal equity across multiple programs. According to the government, this improvement has led to a reduction in inclusion errors and a better public understanding of selection criteria.

The Chilean case emphasizes the importance of continuously monitoring learning and improving over time. Each change was built on the experience accumulated in previous phases. The targeting system began and evolved to provide support for social policies and adjusted over time to the objectives of such policies. The targeting method has been modified consistently with a prioritized approach to social policies and programs, not by a particular program or development partner. The system has benefited from advances in technology, but also invested significantly in communication and delivery systems so that federal and municipal bodies could contribute to the social protection system.

Sources: Clert and Wodon 2001; Larrañaga 2005. a. Ficha CAS, 1979–90; Ficha CAS 2, 1991–2006; Ficha de Protección Social, 2007–15; and Registro Social de Hogares, since January 2016. For more details, see Silva et al. (2018). b. From the education level of individuals and school enrollment database.

Means testing and HMT are both suitable for shock response if changes in well-being are quickly captured by the information systems used. Changes in formal income may be reported at short intervals through the social security contribution records, for example, but only annually and with delay in full income tax records. Ownership thresholds of or imputations from assets may have to be altered for natural disasters, as land or property registers are unlikely to be updated quickly to reflect damages or the likely loss of earnings from weather-related disasters. In general, as they rely heavily on good data integration, most shock responses using these

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methods are fast given that people just need to trigger benefits by using the existing application process.

PMT by nature predicts long-run welfare and, in practice, registries using PMTs do not usually update information frequently.19 These features make PMT too static to be as effective in responding to shocks, at least without adjustments. This includes both idiosyncratic shocks where household assets, housing, and demographic characteristics do not change significantly when sickness or job loss occurs, as well as broader economic shocks. However, adjustments that involve using information about the risk of weather-related shocks as part of PMT can develop triggers for vertical or horizontal expansion of programs following such shocks; chapter 6 discusses these issues, including the PMTplus method. However, PMT may be serviceable for ranking households for programs meant to address chronic poverty.

CBT may be the conceptually preferred method when governments wish to devolve the definition of welfare to communities. It may be practically preferred when it seems that communities have better information than official administrators have (from existing databases) or could practically gather (for example, in a survey sweep or application process). The philosophy of information gathering is very different for a CBT-based method. It does not rely on databases or statistics, which may be absent or unreliable, but on the tacit knowledge of neighbors who observe markers of each other’s welfare in the course of daily life. The first minimum condition that would need to be met would be that community members know each other well enough to rank or assess each household’s needs. In Niger, Premand and Schnitzer (2018) found that in many communities, members were unable to rank some other households, although by using multiple committees, all households could be ranked. Moreover, when the number of households to be ranked is large, fatigue sets in. In Indonesia, error rates were between 5 and 10 percentage points lower for the first household than for households ranked in the latter half of the meeting (Alatas et al. 2012). In Djibouti, CBT was used for targeting in rural areas, but PMT was used for urban areas on the basis that community cohesion was not as high in urban areas (see box 5.2).

There are sometimes tensions between the rules established by the central agency financing the program and how communities or their elites wish to implement them. Sometimes communities are given some guidance on the notion of poverty the program administrators hold, but the exact information considered and the weighting of different factors are only implicit and presumably may vary from community to community even within a country. For example, in Malawi, community committees would exclude some households from programs because they were already receiving other assistance (considered double dipping) even if this undermined

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the program’s objectives (Lindert et al. 2018). Communities sometimes share benefits, diluting their effect, as was done with Indonesia’s Raskin subsidized rice program until it was phased out (World Bank 2010b); or, out of jealousy, communities may implicitly or explicitly demand a share from beneficiaries, as in Chad (Della Guardia, Lake, and Schnitzer, forthcoming). Alternatively, community committees may come under pressure from elites to include their family members, although there are various ways to minimize this in the design of community processes.20

The effectiveness of CBT in the aftermath of a shock depends on how quickly communities can reassess their members’ changed needs. As committees must meet to identify the cases, response times will be in the range of other postdisaster assessment methods. Communities are also known to consider individual household circumstances when targeting in normal times, such as whether someone had recently suffered an illness or accident or lost a job. Such local knowledge can help overcome the lack of formal data on idiosyncratic shocks in less developed contexts.

Factors Related to Administrative Systems

Targeting capacity must be built, and the sort of effort required varies among the methods. To build means testing capacity where none has previously existed usually involves developing client interfaces, which tend to be continuously available through a mix of in-person and virtual means. Building targeting capacity may require work on the databases used in verification to improve them and make them more compatible (this work may improve not only the capacity to target, but also the other functions of government that the data were meant to support, especially development of direct taxation on income and assets). HMT involves the same, plus some modeling to figure out the estimation techniques used in the parts of income to be estimated. PMT similarly requires modeling work upfront. The administrative capacity it requires depends on whether a survey sweep, an on-demand approach, or a mix of both will be used for client interface. The periodic survey sweep approach generates a “lumpy” rather than continuous staffing need, which has implications for budget—this sort of spike in cost is amenable to project financing from development partners, but it can be harder for domestically financed programs to handle. Community-based approaches also require some field capacity to animate and supervise the community processes, which may also be done only periodically and thus may be lumpy.

The degree of interface with other processes, programs, and agencies is correlated with the targeting method. A permanent cadre of intake officers can be used in that sole function and for a single program. However, often the same officers provide intake or referral services

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across a range of programs and/or provide functions beyond intake, such as onboarding, general information queries, a touchpoint for grievances, referrals to other services, and sometimes even providing counseling for clients where the program provides for job search assistance, psychosocial support, and so forth. These joint functions can provide a more convenient service to clients, lowering their transaction costs and increasing their trust in the state. A contracted-out survey field worker for a PMT, in contrast, would not be expected to provide information or functions beyond the collection of data. If the PMT targeted program does not have other local staffing, people do not have an obvious point of contact to answer questions about their eligibility, program rules, or any hitches during receipt of benefits. In CBT, practice can vary. The aspiration may be that the community representatives learn enough about the programs to help with outreach and to help community members know how to address any questions or complaints they have, although accomplishing this takes a good deal of training, which has not always been done. In PMT, the modeling and information technology (IT) capacities can be independent from other agencies. This approach may be viable when data sharing is not allowed between agencies and there is no political will to solve that.

The nature and frequency of grievances and their handling will depend on the targeting method. Means tests may be conceptually easy to explain, but they often have complex formulae and may rely on data cross-matches or verifications that lead to errors that may be the subject of grievances. PMT and to a lesser degree HMT have inbuilt statistical error. Even with full, accurate information that is properly reported and handled in all processes, a poor person can be judged not eligible. It would be unsurprising if that person wanted to file an appeal and have their case reconsidered. Programs need at minimum to provide some grievance procedure where the person can at least verify that their information was handled correctly and that there were no clerical mistakes. This will still leave such persons uncovered and the community around them with lower confidence in the accuracy of PMT or HMT, but it is at least the minimum standard of recourse that should be expected in a means test.

Some countries have processes that allow for some overriding of the targeting formula to mitigate the statistical error of PMT or HMT. A community validation phase is fairly common, but the statistics are not well compiled. Paes-Sousa, Regalia, and Stampini (2013) recount how community validation has been used in several Latin American programs, but it has been discontinued in some as it was considered relatively marginal in importance. It may be more helpful in bringing in households missed in enumeration than challenging errors of inclusion (Jones, Vargas, and Villar 2008). Several African programs still maintain the community validation

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phase, for example, Kenya’s Orphans and Vulnerable Children program, Tanzania’s Productive Social Safety Net, and Malawi’s Social Cash Transfer Programme (Arruda 2018). In the Republic of Congo’s Lisungi program, the grievance redress mechanism handles complaints related to inclusion or exclusion errors. Agents of the Agency for Counter-Verification may overrule the local committee’s initial decision or the PMT in case of inclusion or exclusion of households after the claim treatment process is completed. A few programs have or have had systematic and a bit more institutional systems to allow judgment-based overrides of the PMT formula. In Armenia, local social protection councils (consisting of five local government representatives responsible for the social sectors and five representatives of locally active nongovernmental organizations) are given the authority/discretion to allocate 3 percent of the actual expenses paid to Family Benefit Program beneficiaries in a given district to applicants who do not qualify for the benefit according to their vulnerability score but are found to be needy based on the results of social workers’ home visits and other considerations.

Privacy is an important principle in the human rights framework and harder to respect for some targeting methods than others. The principle is that personal information should be kept private, and that data should be collected with the knowledge and consent of the subject, accessible to him or her, accurate, complete, and up-to-date. Some parts of targeting practice do not respect this standard well.

• It is not clear that CBT would meet consent standards since the data used come from neighbors having observed people in their daily lives, without formal prior consent. For the other methods, applicants can be asked to sign a consent form prior to conducting an interview or as part of an online application process, although realistically, those badly in need of income support may feel that denying consent is not a real option. • The community validation of lists of beneficiaries determined through

CBT or PMT—often thought to be important in remedying errors of inclusion and exclusion—would seem to violate the right to privacy. So would the practice of public posting of beneficiary lists determined through any method. This is sometimes done as a means of transparency and sometimes as a practicality to communicate to all considered at low transaction cost, which are both positive objectives but in opposition to privacy. • Survey sweeps only every few years—adopted principally to lower administrative costs and as a way of providing outreach—violate the accurate and up-to-date standard unless there is a way to get on-demand reassessment between sweeps.