Extending social security in developing countries: a review of three main strategies

Abstract

The article discusses strategies to extend social security cover‐age in developing and newly industrialised countries. The three major options are to extend social insurance coverage, to rely on mutuals or micro‐insurance or to bring in social assistance in one form or another. Social insurance usually covers small population segments. Insiders are seldom willing to extend coverage to poorer groups, as poorer groups are usually higher‐risk groups. Micro‐insurance and mutual societies work pri‐marily among people with similar risk profiles. Discretionary social assistance targets poorer groups, but is open to patronage and misuse. However, some social assistance designs are less open to misuse than others. Demogrants, i.e. benefits given to people in vulnerable social categories, are easy to administer and difficult to misuse. Whether or not a developing country provides such benefits can be considered an indicator of the willingness of the ruling elite to alleviate hardship among ‘unproductive’ population groups.