Where Angels Prey

Where Angels Prey is a novel by Ramesh S Arunachalam. Please refer to www.whereangelsprey.com for more information

Saturday, February 26, 2011

Security Needs of Low Income People: Potential Areas for Intervention…

Ramesh S Arunachalam

Rural Finance Practitioner

Typically, low-income peoples’ need for security can be broken into 5 different categories and these areas can be taken up for interventions. The various aspects are diagrammed in figure 1 below

“The International Labour Organisation’s notion of social security as expressed in the International Convention No.102 includes nine core contingencies that lead to stoppage or substantial reduction of earnings.  These are sickness, maternity, employment injury, unemployment, invalidity, old age, death, the need for long-term medical care and for supporting families with children.[i]” These are briefly highlighted in table below

1. Health Security: Health security can be described as ensuring low exposure to risk and providing access to healthcare services along with the ability to pay for medical care and medicine when necessary. Such health security should be equally available and accessible to all citizens and would need to be serviced by an inclusive delivery mechanism

(a) Minor and Major Incidence of Illness: The risk of health insecurity needs to be categorised on the basis of the kind of illness, - i.e. minor illness which can be treated with medication at home, and major illness necessitating hospitalisation. The latter can be termed as a ‘catastrophic’ risk[ii] as it has potential to cripple the family’s main/primary bread winner

(b) Risk of Untreated Morbidity among the Poor: A number of studies have shown that if the poor lack the resources to pay for healthcare, they often forego it completely or end up becoming indebted or impoverished while trying to pay for it[iii]. The aspect of indebtedness is rather severe and many families tend never to recover from this kind of borrowing…

(c) Cost of Treatment: The cost of treatment includes medical fees, cost of medicines and diagnostic facilities, hospitalisation and the cost of travel, boarding and lodging[iv]. Corruption is an increasing cost in this as payments have to be made at various levels to facilitate good treatment (more of a perception sometimes). This issue tends to be rather severe and harsh, as always, for low income people and those under extreme (and severe) medical stress

(d) Burden of Treatment: There is a difference between the ‘cost of treatment’ and ‘burden of treatment’ as pointed out by Krishnan (1999). The latter includes the cost of treatment (depending on the nature and duration of illness) plus ‘the loss of income of the patient and others during the period of illness’.  The burden of treatment for an individual or family is defined as the ratio of total cost of illness to the income of the individual or family[v].” While it is tempting not to include the livelihood loss, this may be particularly important for low income people, who may miss out on the fragile sources of income/livelihood to avail the treatment

2. Maternity Needs: This is indeed a critical aspect and especially true in countries like India – which “has a high maternal mortality rate, even judging by the standards of developing countries as a whole, not to speak of the Asian region.  The National Human Development Report prepared by the Planning Commission (GOI, 2002) states that, as of 1999, the maternal mortality rate (MMR) was 407 (indicating deaths per 100,000 deliveries  based on the Sample Registration System, SRS). The National Family Health Survey (NFHS), I and II, however, recorded a higher MMR and worse still, an increase in MMR from 424 in 1992-93 to 540 in 1998 (Priya, 2006)[vi].”

3. Life and Accident Security: The death of a breadwinner is a tragic event, but in the case of informal workers, it also raises the question of survival for the family left behind due to the permanent loss of income. Further, death entails additional expenses for which the family has to borrow money, often on onerous terms, spend savings or sell assets[vii].

4. Old Age Security: “The share of the aged (60+ years) in India is lower than the corresponding figure in its Asian neighbours in East and South-east Asia. However, as the demographic transition picks up in India, the share of the aged is likely to increase. Projections indicate that the current share of 7.47 per cent for the aged is likely to increase to 9.8 per cent by 2021. What is important from the social security point of view is the need for an institutional mechanism for taking care of the aged informal workers, in general, and the poor, in particular[viii].” The double burden of being poor and old indeed has a telling effect on such individuals and their families

5. Unemployment Insecurity: Another source of insecurity reported by the informal workers is unemployment. For the informal/unorganised workers, under-employment and low productivity employment with the consequent risk of low incomes and high levels of poverty constitutes a greater source of insecurity.

In India, the National Rural Employment Guarantee (NREG) Act is an attempt to provide employment security by guaranteeing at least 100 days of work in the several selected backward districts of the country. The Employment Guarantee holds the promise of significantly alleviating the problem of under-employment for those sections of the labouring population who can undertake manual labour. However, informal workers who are varied in terms of both the nature and location of work, would continue to face the risk of loss of employment for a variety of reasons. Hence further adaptation of the above to meet needs of a variety of informal workers to help them face certain types of contingencies needs to be considered[ix].”

Thus, as discussed above, the time has come to initiate a comprehensive and protective social security system that is inclusive of all low income people and workers in the informal economy – one that attempts to provide them comprehensive protection against all major risks simultaneously as if even one of them were left unattended, it may result in the individuals/their families being completely wiped out and/or suffering for years/generations. Thus, this would have to include social protection and risk mitigation strategies, apart from access to a variety of financial services including various types of insurance (health, life, accident, asset, livelihood etc), pensions and the like.

It is in this context that the micro-finance industry needs to explore various alternatives available…and come up with an attractive client oriented (social security) package that can have a lasting impact on the poor and their vulnerable families…without this, history will continue to repeat itself and we will be confronting with repeated crisis situations, again and again…


Have a Nice Day!

[i]  Compiled and quoted with adaptation from NCEUS Report (2006) “Social Security for Unorganised Workers”
[ii] “Catastrophic risks have been further categorised as those wherein the household health expenditures exceed either a certain fraction of the total household expenditures or their ability to pay (Garg and Karan, 2006). Household expenditure incurred on healthcare amounting to more than 5 per cent of the total non-food expenditure of the household is generally taken to be catastrophic.”
[iii] “On an average, the poorest quintile is 2.6 times more likely than the richest to forego medical treatment when ill (quoted in Devadasan, et. al., 2004). A study of slums in the two metropolitan cities of Chennai and Delhi found that 89 per cent of sick individuals residing in these slums did not obtain treatment when ill (Sunder, et. al., 2002). The relatively rich were more likely to obtain treatment. “
[iv] “According to the NSS, the cost of treatment includes direct payment to the hospital, and the cost of medicines, investigations and tests.  The NSS data records a steep rise in the cost of healthcare during the period 1985-86 to 1995-96. The cost of out-patient treatment rose by 132 per cent in the rural and by 146 per cent in the urban areas during this period. The cost of in-patient care rose by 436 per cent in the rural (Rs.3202 per episode in 1995-96) and by 320 per cent in the urban (Rs. 3921 per episode) areas during the given period (Iyer and Sen, 2000). The average expenditure for hospitalisation per hospitalised treatment, varied considerably across states and across rural and urban areas. In 1986-87, the lowest reported total expenditure for treatment in rural and urban sectors was in Kerala. The highest average total expenditure was Rs. 2053 and Rs. 1821 for rural and urban Delhi, respectively, as compared to a low of Rs. 464 and Rs.487 in rural and urban Kerala, respectively (Krishnan, 1999). There can be various reasons for the low cost of treatment in Kerala. However, the most important cause is the high density of government health facilities in rural areas and a high degree of competition between the public and private sector in healthcare in the state. Thus, the availability of public health infrastructure is crucial for bringing down the cost of treatment.”
[v] “Using NSS 1986-87 data, Krishnan (1999) estimated the relative burden of treatment, including only direct costs, as the ratio of treatment cost to the annual per capita expenditure of each monthly per capita expenditure decile group, to assess the extent of the financial burden faced by different socio-economic groups. The burden of treatment in government hospitals in the rural sector is below 30 per cent in Kerala, Tamil Nadu and West Bengal, while it varies from 100 to 230 per cent in Bihar, Assam, Punjab, Rajasthan, Haryana and Uttar Pradesh. The burden of treatment in private hospitals in the rural areas exceeds 100 per cent in all states except Assam, West Bengal, Kerala and Tamil Nadu.  This implies that many households in these states financed healthcare by incurring debt or foregoing their overall consumption.  Such a reduction in consumption, often of the food intake, could increase the risk of infection and morbidity in the society. Women and children are likely to face higher risks in this regard.”
[vi] “The national average, however, conceals the considerable regional variation within India with Kerala registering a maternal mortality rate of 198 only and Uttar Pradesh a rate as high as 707. Even after half a century of independence, one of the most frequent causes of death among women in India is maternal mortality. Abortion, haemorrhage, toxaemia and anaemia account for the large majority of all maternal deaths. These causes of mortality suggest that a large number of maternal deaths are preventable. While nutrition and adequate spacing between births are important, the crucial factor that often comes into play is the lack of professional help during delivery.  If institutional delivery is taken as an indicator, then Kerala shows, as of 1999, almost complete coverage (with 94 per cent of the births in the State taking place in healthcare institutions) as against 42 per cent for the country as a whole, and less than 30 per cent for many States including the large ones such as Uttar Pradesh, Bihar and Madhya Pradesh. Thus the urgent need for adequate health infrastructure in the country cannot be over-emphasised.   However, a security cover such as an insurance scheme offering maternity benefits is also likely to increase the chances of institutional delivery, leading to a consequent decline in maternal deaths.”
[vii] An accident, either during the course of work or otherwise, is a major crisis for informal workers since it leads to loss of income. It further implies additional expenditure of medicines, hospitalisation, etc. If the accident leads to partial and/or permanent disability, the financial loss is much greater. 
[viii] The study by Rajasekhar, et. al. (2005) mentioned earlier, revealed that old age was a major concern for the workers.  According to the study, agricultural labourers and construction workers reported the fear of not being able to work during old age. Insecurity with regard to old age was perhaps due to the breaking up of the joint family system and also because the poor were more likely to be living in nuclear families. With the proportion of aged persons expected to increase significantly in the future, their work-related insecurities are also expected to increase due to various reasons. Firstly, adults in poor households themselves face insecurity of work and income in their quest to lead lives of security and some dignity. Successive Population Censuses have shown a declining work participation rate (WPR) among the elderly. This may be a positive feature, implying that they are able to retire early. For the informal workers, however, this could be a source of risk, since their earnings during their working lives are unlikely to support their needs in the old age. Secondly, in India, the aged are generally dependent on their children for support. The presence of the aged in poor families adds to the financial burden and further deprivation of the family as a whole. The insecurity of the household is further exacerbated by general poverty and greater morbidity among the aged. Thirdly, the absence of adequate public healthcare facilities, and the increasing cost of private healthcare facilities for the aged can throw the household into a major crisis (Alam, 2006).”
[ix] “A large number of voluntary and people’s organisations are involved in providing a measure of protective social security to workers and their families in the unorganised sector in the country.  However, such provision is often part of a larger package of services that include promotional social security such as access to micro-credit, housing, preventive healthcare and employment.  For the purposes of this report, we have selected organisations in the voluntary sector, which provide protective social security in one way or another. The total number of individuals covered by various social security schemes undertaken by NGOs is around 33.51 lakh.  In addition, about 1.06 lakh households have been covered as beneficiary units under various schemes. Further, community schemes cover around 40 villages.  If all these are converted into individual coverage, it would amount to around 48 to 50 lakhs.  This accounts for about 1.5 per cent of the estimated workforce in the unorganised sector.  Even if we assume that a number of small organisations might have been left out of the data set, it is quite unlikely for the entire voluntary sector coverage to be more than two to three per cent of the total workforce in the unorganised sector. The geographical coverage of organisations shows that they are concentrated in the three southern states {Andhra Pradesh (16), Karnataka (8) and Tamil Nadu (12)},   the two western states of Gujarat (5) and Maharashtra (10), and one eastern state, i.e. West Bengal (5).  As described in the previous chapter, Kerala (5) has a well-developed state-initiated and supervised protective social security system in the form of Welfare Funds/Boards, which explains the small presence of the voluntary sector in the State. However, the absence of the voluntary sector in most other states, especially in the large states of Uttar Pradesh (3), Bihar (1), Chattisgarh (1), Madhya Pradesh (1), and Orissa (3), is accompanied by the low presence or complete absence of any state-initiated social security system.  This should indeed be viewed as a matter of concern.”

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