Targeting Resources Effectively for the Poor in Bangladesh

Also available in Bengali

 One of the Government of Bangladesh’s policy objectives is to provide for greater and more equitable resource allocation to the poor. The Government is committed to improving equity under the Poverty Reduction Strategy, and as stated in the Government’s Strategic Investment Plan (SIP) July 2003-June 2010, the Ministry of Health and Family Welfare (MOHFW) will shift the allocation of budget towards areas in the country with the greatest health, nutrition and population (HNP) needs.   A World Bank study recently sent to the GOB titled, “Targeting Resources for the Poor in Bangladesh: Development of Guidelines and Tools”, reviewed several poverty alleviation programs in the public and NGO sectors in order to understand the strengths and weaknesses of the methods used in identifying and targeting the poor. Building on these, it introduces a new, objective technique, known as the Proxy-Means Test formula, that would complement the existing targeting efforts.

The government’s current allocation of budget for health services across districts and upazilas are centrally determined. Resource allocations are primarily driven by the capacity of the public health facilities and historical norms, rather than the actual health needs of the areas or the extent of poverty (as determined by the district’s Human Poverty Index or its Human Development Index). The following graph depicts this uneven and random pattern of resource allocation across districts, highlighting the geographical inequity (poor districts get much less government health spending than rich districts):

Current Per Capita Health Budget Allocations, by Poverty Status of Districts in Bangladesh, 2001-02

(in Taka)

                       HCR: Head Count Ratio

Thus effective targeting of health care spending will require proper identification of both poor and non-poor households. The major challenge of Bangladesh’s health, nutrition and population (HNP) sector has been to identify a technique which will identify poor households accurately and cost effectively. The objective of the study was to develop a tool which could be used by both the government and the NGO sector to effectively identify the poor and the most vulnerable. While per capita household income can serve as a welfare indicator for identifying poor households, studies show that measuring household income and expenditure is time consuming and expensive, especially for a country like Bangladesh. However, an alternative method known as the proxy-means test (PMT) formula can be employed.

The PMT formula generates a “score” for households, based on easily identifiable characteristics of families, such as location and quality of housing, ownership of goods, family size and structure, education and occupation of family members. A cut-off score is identified, based on which the households can be classified:

·        poor households who are eligible for subsidies, and

·        non-poor households who are not eligible for the subsidies.

The PMT formula has had success in other developing countries. Field testing of the PMT model in Bangladesh has shown that poor households could be identified with a 94% accuracy rate. The findings of the study, therefore, indicate that the PMT model can be introduced in selected areas of Bangladesh for identifying poor households objectively and without high administrative costs. All said, the success of the PMT model depends very much on close monitoring and accountability, as well as strong local government and community participation. The Government of Bangladesh, with assistance of its development partners, will now be looking into putting in place proper institutional arrangements for effective and transparent functioning of a pro-poor strategy for the HNP sector. Such a model, and other targeting schemes, may assist in this.

Source: The World Bank