of Social Security Allowance Program in Nepal

1 Government of Nepal National Planning Commission Singh Durbar, Kathmandu, Nepal May 2012 Assessment of Social Security Allowance Program in Nepal Assessment of Social Security Allowance Program in Nepal Government of Nepal National Planning Commission Singh Durbar, Kathmandu, Nepal May 2012 n Assessment of Social Security Program in Nepal , 2011 3 Published by: Government of Nepal National Planning Commission Singha Durbar Kathmandu, Nepal Tel: +977-1-4211629 Website: i FOREWORD Social Security has been recognized as a concern of citizen's rights in the world. Social Security is linked to enhancing Social equity and justice.

2 Realizing this fact, the Government of Nepal has included a provision for Social Security in the Interim Constitution of Nepal , 2007. With the intention of expanding Social Security rights of citizens, the Social Security Program (Operational Procedure), 2008 has been formulated and implemented under the Local Self-Governance Act, Government of Nepal has been implementing various Social Security programs for decades. The growing concerns on the protection and promotion of the rights of citizens of the country also require an assessment of present interventions, which may give valuable inputs for the future, particularly in policies and programs .

3 This study aims at assessing the outcome and identifying problems of the Social Security Program implemented in Nepal over the years, and also focuses on the socio-economic outcomes of the Social Security Allowance especially for elderly people, differently able persons and single (widow) women. We would like to thank TEAM Consult Private Limited especially the Team Leader, Mr. Prithvi Raj Ligal and Team Member, Dr. Devendra Shrestha for successfully completing this study. We appreciate the guidance of Mr. Janak Raj Shah, Hon'ble Member and Mr. Yuba Raj Bhusal, Member-Secretary of National Planning Commission; and Mr.

4 Sushil Ghimire, then Secretary of Ministry of Local Development to the study. Similarly, we extend our sincere thanks to Joint Secretaries, Mr. Atma Ram Pandey, Mr. Pushpa Lal Shakya, Mr. Dhruba Prasad Dahal, Mr. Bhaba Krishna Bhattarai and Mr. Teertha Raj Dhakal, and Program Directors, Mr. Rabi Shanker Sainju, Mr. Krishna Prasad Acharya and Mr. Krishna Prasad Dhakal including other concerned officials and Planning Officers of National Planning Commission Secretariat. The technical inputs of Mr. Bishnu Prasad Gauli and Mr. Mitra Mani Pokhrel, Under-Secretaries of Ministry of Local Development are also appreciated.

5 Similarly, We express our sincere thanks to all Local Development Officers, Village Development Committee secretaries and the Chief Executive Officers of Municipalities for their excellent support and cooperation during the field survey in the district. The beneficiaries, key informants, members participating in the group discussions and family members of the beneficiaries also deserve our special thanks for their free and frank suggestions and sharing of experiences regarding the usefulness of the Program . We highly appreciate the technical and financial support provided by UNDP to complete this study. Our thanks are also due to Ms.

6 Lazima Onta-Bhatta, Assistant Country Director and Mr. Dharma Swarnakar, Program Analyst of UNDP, and Mr. Gyanendra Kumar Shrestha, National Project Manager, and Dr. Hari Pradhan, then National Project Manager for his initial support; Ms. Sujeeta Bajracharya, Monitoring and Evaluation Specialist; Mr. Laxman Raja Shrestha, Administrative and Finance Assistant; Mr. Dol Bahadur Kunwar, then Administrative and Finance Assistant and Mr. Saras Rana, Intern of SPMC NPC Project for their coordination and technical support to this study. Similarly, Mr. Bijay Lal Shrestha deserves sincere appreciation for language editing of this report.

7 We hope the findings of this study will be useful to the concerned stakeholders. (Deependra Bahadur Kshetry) Vice-Chairperson National Planning Commission ii TABLE OF CONTENTS Foreword i Table of Content ii List of Table iii List of Figures iv Acronyms/Abbrevations v Executive Summary iix Chapter 1 Introduction 1-9 Background of the Study 1 Objectives of the Study 2 Methodology 3 Organization of the Report 9 Chapter 2 Social Security System Theory and Practice 10-13 Social Security System and its Rationale 10 Old Age Security System in Some Selected Countries 12 Chapter 3 Social Security System In Nepal 14-24 Historical Perspective on Social Security System in Nepal 14 Coverage Under Social Security System and Schemes Followed 15

8 Social Security Policy, Acts and Regulations 16 Operational Modality 16 Chapter 4 Operationalizing Social Security Syetem: Insights from Institutional Survey Data 25-36 District, Municipality and VDC Coverage 25 Institutional Survey 25 Contribution of DDC, Municipality and VDC on Social Security Fund 35 Issues in Operationalizing Social Security Scheme 35 Chapter 5 Operationalizing Social Security System: Analysis of Beneficiary Survey 37-61 Examining Effectiveness of Social Security Allowance Program 37 Assessing Reliability of Social Security Allowance Program 45 Impact of Social Security Allowance 49 Problems Reported by Beneficiary 56 Suggestions as Perceived by Beneficiary 57 Chapter 6 Reforming Social Security System in Nepal 62-65 Summary of Main Findings 62 Major Issues and Challenges 62 Reforming Social Security System: Some Policy Recommendations 64 References 66 Annexes 67-99 iii LIST OF TABLES Table No Title Page Table : Research Methods Study Objectives Matrix 3 Table.

9 Sample Performance by Beneficiary Type in Survey Districts 4 Table : Number of KII, FGD and Case Study Conducted in the Survey 5 Table : Selected Districts by Ecological Belt and Development Region 6 Table : Sample Districts, Predetermined Sample Size and Actual Beneficiary Surveyed 6 Table : Selection of VDCs and Required Sample Size 7 Table : Estimated Number of Target Population by Type of Allowance , 2066/67-67/68 15 Table : Districts with Maximum and Minimum Number of Recipients by Allowance Type, 2067/68 16 Table : Annual Government Budget and Social Security Allowance Expenditure, 1998/99-2010/11 19 Table : Districts Receiving Maximum and Minimum Amount by Type of Allowance , 2067/68 19 Table : DDCs, Municipalities and VDCs Covered in the Institutional Survey 25 Table : Number of Beneficiaries by Allowance Type across Surveyed Districts, 2064/65-67/68 26 Table : New Entry, Dropout and Reasons for Dropout by Surveyed District and Allowance Type 27 Table : ID Card Renewable by Surveryed Institution (in percentage) 29 Table : Problems Experienced While Updating Records (in percentage) 30 Table : Formation of Social Security Allowance Coordination Committee (in percentage) 30 Table.

10 Perceived Implementation Capacity and Associated Reasons 31 Table Allowance Distribution Process (in number) 33 Table : Allowance Payment through Banks (in percentage) 34 Table : Economic Characteristics of Beneficiary (summary statistics) 40 Table : Non-beneficiary by Type of Allowance 42 Table : Average Amount of Expectation 44 Table : Summary Statistics Transaction Cost 49 Table : Contribution of Allowance to Household Expenditure (in percentage) 51 iv LIST OF FIGURES Figure No Title Page Figure : Estimated Proportion of Beneficiaries (in %) 15 Figure : Social Security Expenditure, 1998/99 2010/11 19 Figure : Sex of Respondent by Type of Allowances (in %) 37 Figure : Educational Attainment of Beneficiary (in %) 38 Figure : Living Arrangements of the Beneficiary (in %) 38 Figure : Source of Income by Economically Active Beneficiary (in %) 39 Figure : Beneficiaries by Wealth Quintile (in %) 39 Figure First Source of Information about Social Security Allowance 42 Figure : Area of Expenditure of the Allowance (in %) 43 Figure : Regularity of Allowance Distribution 46 Figure : Time of Allowance Recipient by District 46 Figure : Collection of the Allowance 47 Figure : Use of Allowance if not Returned (in %) 48 Figure.