Cash transfers during the pandemic in Peru: Lessons and policy recommendations
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Cash transfers during the
pandemic in Peru: Lessons
and policy recommendations
Samy del Pilar Gálvez Vargas
Master of Public Administration, Class of 2021,
London School of Economics and Political Science
Photo by Pixabay on Pexels
Photo cropped and modified to black and whiteABSTRACT
The cash transfer scheme implemented in Peru
during the COVID-19 pandemic has supported 8.4
million households during the enforcement of one of the
strictest lockdowns in the world. The story of its design
and implementation amid a context that required swift
response is featured by pre-pandemic challenges as the
high degree of informality and the low levels of financial
inclusion, and the lack of clear communication of the
measures adopted. There has been a crucial learning
process that must be harnessed by authorities for the sake
of the effectiveness of social assistance interventions. To
that end, based on evidence from comparable regions,
the country’s efforts should be aimed at improving the
comprehensiveness and management of citizen datasets,
the strategy of public policy communication, and the
adequacy of the delivery methods of the cash transfers.[Cash transfers during the pandemic in Peru: Lessons and policy recommendations]
INTRODUCTION
Peru enforced one of the most timely and rigorous lockdown
policies globally to stem the infections of the novel coronavirus.
As such, the state of emergency was accompanied by national
quarantine measures that lasted for 107 days. Being aware of the
far-reaching economic effects of the pandemic, the government
has devised an economic plan equivalent to roughly 20% of
its gross domestic product centred on four axes (Graph 1).
The second thrust comprises several measures to support
economically the most vulnerable households (4.8% of GDP),
among which the monetary transfer policy is the principal tool
(1.9% of GDP). The latter policy will be the focus of this brief.
Cash transfers have been widely implemented since the
emergency began. Indeed, they have been deployed in 131
countries, with an average coverage of 15% of the world
population and of 22% of Latin America and the Caribbean
(Gentilini et al., 2020). The general rationale behind the
implementation of cash transfers during the pandemic is that
these can smooth the consumption of vulnerable population
groups while encouraging them to comply with the rules of social
distancing (Braun & Ikeda, 2020). This policy tool becomes more
relevant in developing regions such as Latin America, where
the rate of poverty and informal workers exceed 30% and 60%,
respectively (ECLAC, 2019; David et al., 2020).
39THE PUBLIC SPHERE | 2021 ISSUE
GRAPH 1: ECONOMIC RESPONSE TO COVID-19 (% OF GDP)
Main measures
Cash transfers
Electricity bonus
4.8 Food baskets
Work disability
12.5 1.8 0.6 allowance
Support for students
Resources for front line services to attend the emergency
Economic support to micro and small enterprises
Economic support to vulnerable households
Payment chain and support to the economy
Own elaboration.
Source: Ministry of Economy and Finances of Peru (2020).
The structure of the document is as follows. First, the main
features of the transfer programme are described. A second
section elaborates on the challenges that authorities have faced
during the implementation. The last section presents proposals
to enhance the social assistance policy in the current context of
the pandemic and future emergencies.
BONO FAMILIAR UNIVERSAL
The Bono Familiar Universal is the broad name for what has
been the temporary response to alleviate the income loss of
vulnerable households, in a context where most of them have been
prevented from working due to movement restrictions. Since
the measure was announced, the design and implementation of
the subsidy policy have been modified to consider the different
conditions among workforce groups and thus extend the scope of
the economic support. As such, four categories of bonuses can be
distinguished (Table 1). In total, Bono Familiar Universal would
have reached 8.4 million households (63% of total households
40[Cash transfers during the pandemic in Peru: Lessons and policy recommendations]
in Peru) providing them with a monthly transfer equivalent
to US$ 2181. The scheme includes two payments delivered in
phases according to the payment method. The first payment was
delivered between March and May and the second one started in
October and finished in December 2020.
The first bonus, Bono Yo me Quedo en Casa, targeted mainly
households in urban areas classified as poor and extremely poor
by the national targeting system (SISFOH, Spanish acronym).
The second, Bono Trabajador Independiente, targeted households
with self-employed workers with a total family income of up to
US$ 343. The third, Bono Rural, targeted the poorest households
in rural areas, and excluded households with active users of social
assistance programmes.
41 Poor or extremely poor
Rural areas
D.U. 042- Recipients of social programmes Pension 65,
Bono Rural S/ 760 (US$ 218) 1.1
2020(19/04/20) Juntos and Contigo are excluded
Household members cannot be mayors,
regional governors or MPs
Rural and urban areas.
Not beneficiary of the previous bonuses
D.U. 052- Fulfil at least one of the 3 conditions:
2020(05/05/20) Poor or extremely poor,
Bono Familiar D.S. 214-2020- Be affiliated to any of the three cited social
Universal EF(04/08/20)
programmes, S/ 760 (US$ 218) 3.8
(tranches I D.S. 223-2020-
and II) EF(09/08/20) Non-poor and any member in the private
D.U. 098- or public payrol, and iv) Household income
2020(20/08/20) up to S/ 3,000 (US$857)
Household members cannot be mayors,
regional governors or MPs
THE PUBLIC SPHERE | 2021 ISSUE
1/D.U. is the abbreviation in Spanish of Urgency Decrees enacted by the Executive and D.S. to Supreme Decrees enacted by the Ministry of Economy and Finances
2/Average monthly exchange rate between March and September.
Own elaboration.
Sources: Ministry of Development and Social Inclusion and Ministry of Economy and Finances.
4243
[Cash transfers during the pandemic in Peru: Lessons and policy recommendations]
TABLE 1: BONO FAMILIAR UNIVERSAL
Monthly transfer amount Beneficiaries
Bonus Legistlation /1 Household targeting criteria (million of
/2 households)
D.U. 027-
Bono Yo me
2020(15/03/20) Poor or extremely poor 2 fortnightly payments of
Quedo en 2.726773
D.U. 044- Urban areas S/380= S/ 760 (US$ 218)
Casa
2020(21/04/20)
Non-poor
Independent workers
D.U. 033- Household income up to S/ 1,200 (US$ 343)
Bono
2020(27/03/20) 2 fortnightly payments of
Trabajador Recipients of social programmes Pension 65, 0.78
D.U. 036- S/380= S/ 760 (US$ 218)
Independiente Juntos and Contigo are excluded
2020(10/04/20)
Household members cannot be mayors,
regional governors or MPsTHE PUBLIC SPHERE | 2021 ISSUE
In a final stage, Bono Familiar Universal, included households
in rural and urban areas that had not received any of the previous
transfers mentioned and that met the criteria detailed in Table 1.
After completing this registry (first tranche), many households
claimed that they had not yet been included. In response, the
government authorised excluded households to register or
update their socioeconomic status in the platform of the National
Registry of Households and thus, be eligible for the transfer
(second tranche). In the end, 3.8 million households were added
to the entire beneficiary database.
Regarding the operativity of the policy, three aspects
should be underlined: the registry of beneficiaries, the delivery
mechanisms, and the communication strategy.
The initial database of beneficiaries was drawn from the
Padrón General de Hogares, which is administered by the SISFOH
and contains socioeconomic information on citizens. Then, the
geographic and poverty criteria were applied to obtain the first
list of recipients. As the subvention increased its scope to other
population groups that demanded economic support, other
databases managed by different public institutions were employed
to build the final list of beneficiaries. The process of integrating
the databases was notably intensive during the last stage of the
policy, in which excluded vulnerable households were given a
time window to register their socioeconomic information.
In terms of the implementation, initially, the delivery was
made through bank windows, instead of digital mechanisms.
That decision brought consequences and social discontent
about how the cash transfer scheme was deployed. Then, as the
beneficiary registry became larger due to the approval of the other
bonuses, more modality payments were established. Households
could verify if they qualified for the subsidy in the web platform
and once their eligibility status was verified, they were assigned
one of five payment methods. These included bank drafts at the
counter, deposits in an account, ATM or agents withdrawals
44[Cash transfers during the pandemic in Peru: Lessons and policy recommendations]
using mobile banking, and securities transporting companies to
reach households located in areas of difficult access.
Pertaining to the communication approach, in addition to
the information published on the web platform, the government
enabled an e-mail contact and a free telephone line for inquiries
in order to avoid unnecessary movements to financial branches.
In rural areas, people could go to the Tambos2, places where 2. Part of the
social programme
individuals can access the platform Bono Familiar Universal and ‘Plataformas de
receive guidance. Acción para la
Inclusión Social’ that
seeks to increase
MAJOR CHALLENGES
access to social and
economic activities
and services of the
poor and extremely
Implementing massive transfers to the vulnerable groups in a poor population,
especially in rural
timely and secure manner amid a pandemic was challenging at areas.
every stage of the policy. First, the lack of a comprehensive and
up-to-date targeting database of households significantly limited
the policy. Indeed, several databases needed to be merged and
even created from mid-March to the beginning of June to identify
the vulnerable households including workers with volatile or
low incomes (most of them informal workers). For instance, the
initial beneficiary database did not have a record of household
financial information, which initially prevented the authorities
from considering digital mechanisms as a form of payment. As a
result, beneficiaries had to attend financial offices in person and
long lines were observed outside the banks3. 3. Bono: se reportan
largas colas en
For the delivery stage, the low levels of financial inclusion at exteriores de banco
the regional level have been a critical issue. In fact, only 40.4% para cobrar subsidio
económico de S/ 380
and 15.5% of the adult population at the national level hold a (2020).
debit account and a credit card, respectively4. In terms of financial 4. Superintendence
of Banks, Insurance,
infrastructure, there is a considerable gap in the available network and Pension Fund
of financial channels between the capital (Lima) and the rest of Administrators
(2019).
the regions.
Finally, another key challenge was the way in which the cash
transfer policy and its following changes (nine regulations) were
45THE PUBLIC SPHERE | 2021 ISSUE
communicated to the targeted households and, in general, civil
society. The adjustments generated confusion to the point that
citizens preferred to go personally to the banking agencies,
which resulted in agglomerations and exacerbated social distress.
In many cases, people stated that they went to the offices for
inquiries because the information on the web platform was not
accurate. In other cases, people attended personally because they
did not feel familiar with the digital payment method that had
5. Banco de la been assigned to them5.
Nación: ¿por qué en
el Perú se producen
largas colas para
cobrar los bonos?
POLICY RECOMMENDATIONS
(2020).
The policy recommendations centres on:
enhancing the development and management of
comprehensive databases;
effectively communicating key aspects of the cash transfers
policy to agents of interests and,
accelerating the efforts to increase the financial inclusion of
vulnerable groups in the most efficient and safe manner.
During an emergency, effective implementation of cash
transfers requires primarily good available data. That is,
comprehensive, reliable, and up-to-date citizen databases that
facilitate the process of identifying and extending the support to
beneficiaries. Some developing countries with such an advantage
over data have been able to strengthen their social assistance
programs. This has been the experiences of Brazil, China,
Colombia, and Indonesia, which responded by increasing the
coverage of their current wide-ranging safety net programmes
(Shang, Evans, An, 2020). In contrast, in Peru, the coverage of
the database used for the main social assistance programs was
narrowed to the poor and extremely poor and was outdated
(Jaramillo, Ñopo, 2020). As such, extending the coverage entailed
significant efforts to build new beneficiary registries based on 11
46[Cash transfers during the pandemic in Peru: Lessons and policy recommendations]
databases from different government bodies. In the short-term,
the government must take advantage of that joined database and
continue their efforts to improve it, with the purpose of better
targeting the current and future social programmes.
In that direction, Una et al. (2020) suggest that developing
countries could enhance their targeting databases by allocating
the task of identification of potential beneficiaries to local
and regional governments, private sector entities, non-profit
organisations, and community councils. These organisations
play a decisive role in minimising the error of exclusion of those
households located in remote areas. Also, as more data sources
become available, the government should allocate sufficient
resources to integrate them efficiently. In that regard, Prady
(2020) highlights the integration of three elements: a trustworthy
citizen identification system with financial and communication
access databases.
For instance, India has been able to deploy a universal safety
program thanks to the integration of its biometrical digital
identification system with other household surveys on the use
of financial services and mobile connectivity (Prady, 2020).
Furthermore, it is crucial that authorities validate the final list
of beneficiaries and the financial information used to deliver
the transfer (bank account, mobile banking). This (ex-post)
step would address issues related to households receiving more
transfers that they should or ‘ghost’ recipients (Una et al., 2020).
Likewise, authorities must consider the relevance of
communicating the policy in a timely and adequate manner
throughout the country. In this regard, Peru could have designed
a better communication strategy, especially in the last stage of the
Bono Familiar Universal, in which potential beneficiaries were
prompted to register or update their household information in
a 10-day window. Social unrest during this period could have
been minimised if potential beneficiaries would have had more
communication means to enrol themselves such as a mobile
47THE PUBLIC SPHERE | 2021 ISSUE
application and call centres (Prady, 2020), rather than only
the web platform. Plus, it is essential that local governments
get engaged in the devising and implementation of public
campaigns tailored to the characteristics of the region (such as
communications infrastructure).
Furthermore, given the emergency, it has been crucial to
choose payment methods that both reach vulnerable groups
timely and minimise personal contact. For that purpose, the
government’s actions should be oriented to a digital delivery,
which entails increasing the financial inclusion of the potential
transfer recipients. It must be emphasised that geographic,
socioeconomic, and behavioural aspects need to be pondered
into the adequacy of certain payment modalities.
For instance, in Colombia, a joint work between the
government and mobile operators companies has been key for
adapting the delivery strategy of the cash transfer Ingreso Solidario
to the geographical differences of the country (given that regions
might differ in the types of mobile network technologies). In
that way, authorities ensure not only that the information details
of the transfer reach the interested recipients but also that they
are provided with suitable choices to receive the transfer (Prady,
2020). Regarding policies to increase the financial access during
an emergency context, Ecuador simplified the requirements for
agents to disburse cash payments, which resulted in an increase
in the number of access points by 4,000 (Prady, 2020). Another
interesting approach is the association of the national ID to a
bank account, as Chile did with its Cuenta Rut to deliver the
Bono Covid-19 to more than 2 million people with low incomes.
48[Cash transfers during the pandemic in Peru: Lessons and policy recommendations]
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