Project Information Document (Concept Stage) - Bangladesh Safety Net Systems for the Poorest Project - P132634

 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Public Disclosure Copy Report No.: PIDC652 Project Name Bangladesh Safety Net Systems for the Poorest Project (P132634) Region SOUTH ASIA Country Bangladesh Sector(s) Other social services (100%) Lending Instrument Specific Investment Loan Project ID P132634 Borrower(s) Economic Relations Division, Ministry of Finance Implementing Agency Bangladesh Bureau of Statistics, Disaster Management and Relief Division Environmental B-Partial Assessment Category Date PID Prepared 21-Oct-2012 Estimated Date of 15-Apr-2013 Appraisal Completion Estimated Date of 18-Jul-2013 Board Approval Concept Review Track II - The review did authorize the preparation to continue Decision Other Decision (as The review authorized the preparation to continue; Public Disclosure Copy needed) The review authorized the proposed project to be prepared as a Results based SIL; The review decided to change the rating of the implementation risk from moderate to substantial. I. Introduction and Context Country Context Despite remarkable progress in poverty reduction, extreme poverty in Bangladesh remains high. Over the last decade, Bangladesh has experienced resilient GDP growth, averaging a rate of 6 percent per year. Poverty rates have also demonstrated an impressive steady improvement during this period with an average decline of 1.75 percentage points per year. An average decline of this rate out-performs a good number of other countries. Poverty fell from 48.9 percent in 2000 to 40 percent in 2005 and to 31.5 percent in 2010. Coupled with this substantial decrease in the poverty rate Bangladesh made steady progress in human development as characterized by better nutrition outcomes, increased literacy, and improved access to supply water and living conditions. While this overall consistent improvement in wellbeing is encouraging, poverty continues to be a substantial and stubborn problem with around 26 million people still living in extreme poverty. Large numbers of people are vulnerable to shocks. A changing climate has introduced new sources Page 1 of 13  of vulnerability faced by Bangladesh’s poor population. Economic impacts of shocks resulting from climate change could reverse the recent gains in the areas of economic growth and poverty reduction. The impact of shocks on poverty is of particular concern for Bangladesh given the large Public Disclosure Copy size of vulnerable population living around the poverty line: a small shock could potentially have large impacts on poverty. The size of the vulnerable population is at an estimated 80 million representing households who live between the national poverty line ($1.09 a day) and the $2.5 a day poverty line. Poor households living in the poorest regions are less likely to cope with shocks. A recent nationally representative survey conducted in 2009 show that households still rely on coping mechanisms that are likely to have negative welfare consequences or that are very costly. Rural households are particularly vulnerable. While urban households rely more on savings, rural households are, for example, more likely to dip into their assets or use high interest loans from money lenders compared to their urban counterparts. Almost 8 percent of households report having reduced essential consumption as a coping strategy, indicating the severity of some of these shocks and the lack of appropriate instruments to manage their effects. Such an extreme coping strategy is more common for economic shocks, and is mostly adopted by poor households relative to the non-poor, as one would expect. The Government of Bangladesh recognizes that shocks and vulnerability are mainstream problems for the poor. To address chronic poverty and vulnerability, the Government of Bangladesh (GoB) implements a large number of public social safety net (PSSN) programs of varying sizes. These programs address poverty and vulnerability from a broad perspective, including through education, health, nutrition, employment, and disaster response programs targeted to the poor. Vulnerable groups, particularly the elderly, women, children, and disabled persons, are given priority in the delivery of PSSNs and is also emphasized in the Sixth Five Year Plan (FY2011-2015). Programs provide benefits in the form of food, cash transfers, or a combination of the two, and are administered through the government administration and local governments. Public Disclosure Copy Well designed and implemented safety nets not only reduce poverty and vulnerability, they have shown to improve women’s wellbeing. Existing studies suggest that Bangladesh’s safety net programs have shown to be effective at reducing poverty and improving gender outcomes. Participation in programs such as VGD (Vulnerable Group Feeding) and RMP (Rural Maintenance Program) has a significant positive impact on household food consumption, on female calorie intake and other measures of female empowerment. Safety nets have also shown to have a positive effect on mitigating both seasonal and non-seasonal food deprivation. In the face of recent global food and energy price shocks Bangladesh was able to scale up coverage of several ongoing PSSNs. The Employment Generation Program for the Poorest (EGPP) program was set up in 2009 in response to the 2008 food price crisis. The Open Market Sales (OMS) program was also used to provide about 900,000 tons of subsidized rice. Anyone is allowed to buy up to 5 kilograms of low quality rice per day through this operation. A Fair Price Cardholders (FPC) progr am resumed in November 2010 allowing some two million low income households to purchase up to 20 kilograms of rice per month at a below-market price. In addition, the government initiated an input subsidy program in 2010, allowing farmers with less than 2.5 acres of land to open a bank account and receive a cash subsidy on diesel used in irrigation pumps. Nevertheless large numbers of poor and vulnerable people remain out of reach of PSSNs. GOB Page 2 of 13  recognizes that there are challenges with these programs with regards to coverage, targeting, leakage and program administration. A more effective and efficient utilization of expenditures has the potential to increase coverage of PSSNs and mitigate the impact of shocks for a larger group of Public Disclosure Copy vulnerable people. Recent analysis shows that the short term adverse impact of food price increases affects the poor in Bangladesh disproportionately. Thus PSSNs designed to ameliorate these adverse effects will only be effective if they can respond in a timely manner. The purpose of this proposed Project is to support the Government in its efforts to improve the performance of some of the largest PSSNs to help GoB provide timely income support to an increased number of poor households via a consolidated approach. An integrated system of safety nets administration would not only help to increase a much needed coverage of the poor but it would also help GoB focus on building both resilience and opportunities for better livelihoods for program beneficiaries so that they can ultimately “graduate