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Amir 1
Muhammad Faizan Amir
17110171
MGMT- 263
Ahsan Rana
April 1, 2015
Social Safety Nets in Pakistan
According to International Labor Organization (ILO), “Social safety net is the protection
that society provides for its members through a series of public measures against the economic
and social distress that otherwise would be caused by stoppage or substantial reduction of
earnings resulting from sickness, maternity, unemployment, injury, invalidity and death” It is
also known as Social Protection or Social Security. Most countries fund safety net programs for
the protection of their people. There is an increasing number of safety net programs which are
extremely well thought out, adroitly implemented, and demonstrably effective, many others are
not. Safety nets are one of the poverty reduction strategies covering social insurance, financial
services, health, education and other policies which are aimed to reduce poverty and to provide
relief to the helpless. Specifically there are numerous types of Social safety nets (SSN) such as
Social insurance, Provident fund, Social assistance, Social allowance, and Employers’ mandates.
Safety nets play an important role in development policy such as they redistribute income to the
poorest and most vulnerable, they enable households to make better investments in future, help
households to manage risk and they allow governments to make choices that support efficiency
and growth. (Grosh 18). They are a compromise between the rights of citizens for income
protection and their responsibility to secure an income through work.
In Pakistan, the Constitution also states the government’s responsibility in the provision
of social services to the people. According to Article 38, “Promotion of social and economic
well-being of the people: The state shall secure the well-being of the people, irrespective of sex,
caste, creed or race, by raising their standard of living, by preventing the concentration of wealth
and means of production and distribution …” Pakistan has many social protection programs
ranging from cash transfers to pension. Pakistan’s social protection system consists of safety
nets, social security and employment promotion and protection. Government perceives social
safety nets as a mean to manage risk, vulnerability and to reduce poverty through transfers and
social insurance for risk mitigation regardless of prior or future contribution. The targeted groups
are casual and informal workers, low capital self-employed, low rank formal sector workers,
women and children without family or community support and so forth. The government has
aimed to follow a sustained poverty reduction strategy (PRSP). The government of Pakistan
allocated a minimum of 4.5 percent of GDP to social and poverty related expenditures during the
year 2013-14 (“Poverty and SSN” 3).
Amir 2
The Pakistan’s social assistance includes two main federal cash transfer programs (Zakat
and Bait-ul-Mal) and other programs that provide social welfare and care services to the needy.
The primary objective of both programs is to provide cash transfers but they also offer other
benefits such as stipends and training. Zakat is funded through private contributions which were
collected through a 2.5% religious levy on Muslims holding particular classes of financial assets.
It is only distributed to Sunni Muslims. The two main programs under Zakat are under Zakat
include the Guzara (subsistence) which is a monthly cash transfer of Rs.500 to eligible Muslims
in poverty (Mustahiqeen) and the Permanent Rehabilitation Scheme. The Permanent
Rehabilitation Scheme was launched in 2002 to provide lump sum allowances of around
Rs10,000 to 50,000 to assist the poor. Nut this scheme was discontinued due to lack of funds.
The total disbursement of Zakat was PKR 4.053 billion in 2013-14 (“Poverty and SSN” 8). Bait-
ul- Mal was established in 1992 to assist the poor who were excluded from Zakat like minorities,
Muslims of certain sects. The two main schemes under the PBM banner include the Food
Support Programme (FSP) and the Individual Financial Assistance (IFA). PBM also provides
financial support to educational, vocational and other charitable institutions.
However, both programs were inefficient and ineffective as “both programs were weakly
targeted to the poor as only 46 percent of total Bait-ul-Mal expenditures and 43 percent of total
Zakat expenditures reached the poorest 40 percent of the population” (“Safety net report” 9) This
is mainly due to poor targeting, corruption, poor quality of services, weak delivery system, weak
