Pakistan’s Tryst with Cash Transfers

A profile of the Benazir Income Support Programme, the country’s first large-scale social safety net
FOR PAKISTAN’S ULTRA POOR  The scheme is aimed only at the country’s worst off,
but there is no foolproof way to ensure this
PATIENCE PAYS  Women in Kallar Kahar, Pakistan, wait to claim their BISP handouts

Mukhtaraan Bibi says that the Pakistani Rs 1,000 she gets every month, and has been getting for the last couple of years, from the Benazir Income Support Programme (BISP), has been very useful to her. It is spent almost exclusively on consumption, supplementing the household budget for food, while getting some medicines and other necessities. Given that her overall monthly income is only Rs 6,000 odd, the extra money is more than welcome.

But she does have some concerns. Sometimes the money is not delivered for a few months and then she gets all of it together. Sometimes she is asked by the postman to pay him a small sum for delivering the money. She has also heard that the government might stop sending it at some point. She feels she certainly needs the help, and even more of it, but does not know if she will be eligible for any of the other BISP schemes she keeps hearing about.

Mukhtaraan Bibi’s story is not atypical. A number of women in Pakistan who get BISP monthly payments speak of their dependence on them, express uncertainty over their regularity and the demands of postmen (who usually ask for Rs 50-100 odd), and say that larger cash transfers would help them combat poverty better. Relying most heavily on such transfers are families headed by women, especially widows who must look after children with disabilities or elderly dependents, or people who are chronically ill or unable to sustain stable jobs for other reasons. In some cases, the Rs 1,000 transfer is a matter of life and death.  


The BISP no longer transfers money only through Pakistan’s postal system. Realising that changes in banking and mobile telephony promise new mechanisms that not only increase transparency, reliability and efficiency but are also more cost-effective, BISP managers have been experimenting with these. ATM cards for the poor are a possibility, but these still depend on ATM machines, which are not sufficiently widespread, especially in rural areas. Pakistan has some 120 million active mobile phones, and the programme has begun transferring money through this route. This clearly has the potential of changing the game as it can achieve high levels of efficiency and transparency at very low cost.

The identification of eligible households across the country is no trivial task. By way of broad eligibility criterion, the scheme focuses on the poorest of the poor—the ultra poor. Since it is not easy to get reliable data on a household’s income or wealth, the government decided to use proxy means testing to estimate household income/wealth. The scheme’s score card asks for observable and/or easily verifiable information on assets, and this is used to compute a score; a score be low a certain cutoff classifies a household as eligible for the monthly Rs 1,000.

This cutoff is not a poverty line, mind you, and has been set on the basis of a glance at the country’s statistics and an estimate of how many households could share the overall money available for BISP if each were to get Rs 1,000, which itself is just a rough estimate of how much flour a poor household needs, an estimate that is proving woefully inadequate now that double-digit inflation has drastically reduced its purchasing power since the scheme began five years ago.

To locate and log eligible households, the scheme used the services of several partners to carry out surveys across Pakistan. Once done, all households deemed eligible were contacted and informed of the offer. Some households refused it on moral grounds, though the overwhelming majority accepted it. A significant proportion of households are still in the process of getting their national identification cards for the scheme, but the number of recipients has been rapidly rising over the years.  


Before 2008, Pakistan had no integrated large-scale social safety net for its citizens. The needy relied on zakaat distributions as mandated by the principles of Islam. In the early 1980s, these were made official, but they were small. There were also Bait ul Maal and other distributive programmes at the federal and provincial levels, but these did not reach even a fraction of the poor. These measures did not aim to provide universal relief and most lacked transparency, their efficacy thwarted by corruption, lack of ownership by respective governments, and lack of focus. They worked on the whims of the regime in power—often to achieve overtly political purposes.

Though planning for a national large-scale social net began around 2006, with Pakistan’s Planning Commission—supported by various multilateral and bi-lateral organisations—doing the groundwork, it was the newly elected coalition in 2008 that took it up as a challenge. Though it had broad support within the coalition, which included the Pakistan Muslim League Nawaz (PML-N) in the initial days, it was named after Benazir Bhutto by the Pakistan People’s Party (PPP) government. Today, the BISP reaches about 5 million households. Early on, it was decided that the female ‘head’ of the eligible household will be the transfer’s recipient, for which she must have an identification card.

The transfer is unconditional, which means the cash may be used by the household for anything, though the government has also made a small beginning with conditional transfers—for education, vocational training, health and small business grants. The idea of these is to provide specific entitlements that serve Pakistan’s long-term welfare objectives. In particular, about 3 million children are expected to enroll in schools because of it, though it is not clear if enough seats are available, what role private schools will play, and how allied expenses (on books, transport and so on) will be met, realistically speaking.


There is also the question of how well Pakistan has identified the poor. Inclusion and exclusion errors are the main concerns here. The instrument in use should be good enough to exclude the non-ultra-poor and good enough to include all of the ultra-poor. Though detailed results are still awaited, it does seem that the dataset that the BISP has developed has targeted the poor well. Almost all the recipients are poor, but whether they are ultra-poor is something that detailed research will reveal. And though the initial surveys were carried out almost across the entire country, there might have been some ultra-poor families that were left out.

The scheme does allow households to file an appeal for inclusion, but this still leaves out those who are so marginalised (or in remote locations) that they are unaware of the appeal process, or simply lack the means to engage with it. They remain excluded.

There are other subtle issues that are important and must be addressed as well. If there are a lot of transient ultra-poor—a lot of people move in and out of the ultra-poor category, that is—then the country needs to either repeat the survey often to update its database or devise a mechanism to move people out of the dataset once they move out of the ultra-poor category and include new people who may be classified as such. There seems to be some evidence that a significant number of people regularly move up and down on the income scale, but for the moment, the BISP is using a static data-set, last updated a couple of years ago. It is also not clear when the next survey is going to be done.

How well modern delivery mechanisms can replace the current postal delivery system, by which the transfer is sent as a ‘money order’, is another point to ponder. Mobile phones are attractive since almost every household now has at least one phone, typically a pre-paid connection. Eligible households need have only their identity card and a mobile phone, and money could be transferred to them irrespective of where they are located in Pakistan. This would be efficient, timely and transparent, and would not impose any major transaction cost on anyone. 


The proof of the BISP’s success would be in its impact on poverty. Past evidence suggests that there are no quick ways of getting families out of poverty in a sustainable manner. They need support to meet current needs and necessities, which is what unconditional transfers promise. They also need help with making investments in physical and human assets so that they can increase their income in the future—the goal of conditional transfers, which are usually part of efforts to target subsidies accurately at the deserving.

Like India, Pakistan used to have a commodity rationing system till the early 1980s, when it was dismantled (which India has not done). This ration system used to provide specific amounts of sugar and flour to all families at controlled prices.

Flour availability had increased substantially by the late 1970s and the quality of flour in the market was much better than that available at ration shops, while the price differential was not large. By then, a lot of people had started buying flour in the open market. But sugar was, at times, still in short supply, and I remember as a young person going to the local ration shop to get sugar. By the early 1980s, sugar too had become more openly available and the price was more or less stable. This led to the demise of the ration system infrastructure.

By the mid-2000s, however, inequality had been increasing in Pakistan for more than a decade, and poverty was recognised as a pressing problem. Structural reforms implemented under various ‘Washington Consensus’ packages negotiated and agreed with the World Bank had been implemented over the 1990s, a lot of businesses had been privatised and deregulated, and many large-scale untargeted subsidy programmes had been discontinued. When it was thought that the State needed to support the poor, Pakistan did not have any infrastructure to attempt the delivery of any large-scale protection programme.

The BISP’s rationale was quite clear. The irony is that if Pakistan had good commodity distribution structures in place, as India has, or had employment guarantee schemes at work, it might have been harder to justify setting up the scheme. And it would have been interesting to evaluate the strengths and weaknesses of the respective programmes.

Among the key weaknesses in Pakistan is the lack of an inbuilt mechanism to keep cash transfers rising in line with inflation. This is a challenge that India may also face. In Pakistan’s experience, it has not been easy to achieve politically, and given the fiscal pressures that most governments usually face, expecting regular hikes is unrealistic. So, potentially, consumers who had entitlements in the form of physical quantities of commodities could be left worse off over time with cash transfers because this money buys less and less. The Pakistan example does not have anything to add on this point as the country did not have any commodity distribution programmes in place when the BISP was brought in. But for many of the poor in India, this will be a real issue if Indian policymakers decide to monetise current entitlements.


Pakistan is due to hold a general election on 11 May 2013. A caretaker government is already in place and the process of selection and nomination of candidates for the polls is underway, with political parties having released their manifestos. Understandably, the PPP claims credit for having initiated the BISP, but it is heartening to note that the concept of a social safety net—as the main vehicle to serve the poor—has been accepted by all of Pakistan’s mainstream and larger parties. There are big differences in the kind of programmes that each party wants to mount, depending on varying understandings of the dynamics of poverty in the country and the support base they are aiming for, but they all accept the need for large-scale programmes.

The BISP offers a prototype on the basis of which several other welfare schemes can be rolled out. As a project, it has been a positive sign for Pakistan’s effort to end poverty. Hopefully, this will result in a consensus among parties, especially if there is a coalition government that takes charge in May, on its strengthening and enhancement. The scheme needs to cover all those who deserve support—and with a wide variety of welfare measures to tackle one of the country’s most persistent problems.