This blog is based on an article in Social Policy and Society by Zahid Mumtaz. Click here to access the article.
A sizeable segment of the global population, particularly in Global South nations, lacks access to state-provided formal welfare. Consequently, they rely on informal support to meet their needs. This informal assistance however – whether originating from family, non-kin relationships, friends, religious organisations, NGOs, or other sources – may not consistently meet recipients’ requirements. Similarly, in some instances state-provided formal welfare also falls short of addressing recipients’ needs. There are also scenarios where both informal and formal welfare systems inadequately cater to the requirements of individuals benefitting from both. It is thus imperative to explore the interaction between formal and informal welfare when recipients are exposed to both, determining relative effectiveness. Previous research on the interplay between formal and informal welfare has largely focused on the crowding-in and crowding-out hypothesis, which examines how formal welfare substitutes the use of informal welfare. In this study, 90 semi-structured interviews were conducted with households in 14 Pakistani cities. These households received both formal and informal welfare.
The study’s findings revealed that when both formal and informal social protection adequately met households’ needs, they complemented each other. However, when formal social protection fell short in addressing risks compared to what informal social protection could provide, households tended to replace formal welfare with informal support. This substitution also occurred when households encountered administrative issues that hindered access to government support.
Households were willing to forgo the benefits offered by informal welfare if formal social protection adequately fulfilled their needs. In cases where inadequate informal social protection was provided by patrons and landlords to clients or tenants, it restricted their access to formal social protection, rendering even formal welfare ineffective. This led to resentment amongst households or individuals towards formal welfare, signifying a conflicting relationship.
Based on the level of effectiveness of formal and informal welfare in meeting the needs of households or individuals, five different relations were observed: complementary, substitutive, compliant, crowding out, and conflicting, as provided in Table 1.
Enhancing living conditions through welfare provision has long been a shared objective of scholars and practitioners in the fields of social policy and development studies. The findings of this study offer valuable insights into the circumstances in which formal and informal social protection can prove more effective, thereby enhancing the overall efficacy of social protection. These insights are particularly vital for countries with limited financial resources to support extensive social protection programmes. In such contexts, leveraging informal social protection to complement formal welfare policies can be a strategic advantage.
The study also sheds light on how ineffective formal and informal social protection systems, particularly those characterised by patron-client relationships, adversely affect marginalised groups, with a particular impact on gender dynamics through asymmetrical and exploitative informal relations. One potential area for intervention in such situations could involve improving targeting mechanisms for vulnerable individuals or households and scaling up formal social protection mechanisms to help individuals break free from these exploitative relationships.
The study yields valuable insights for Pakistan in its efforts to enhance social protection. It uncovers the challenges faced by individuals in remote areas of the country, who experience limited access to social protection benefits compared to their urban counterparts, who enjoy more extensive opportunities and access to formal and informal resources. Building upon these findings, the government can strategically reallocate its resources to address the pressing welfare needs in rural areas, thereby enhancing the efficiency and effectiveness of the delivery of social protection services to their intended beneficiaries.
Social protection is widely acknowledged as a critical instrument for addressing inequality and social exclusion. However, the involvement of donor agencies in financing social protection programmes in developing countries has sparked debates regarding the design and implementation of such initiatives. These agencies often rely on their own experts and consultants to design and execute social protection programmes in the Global South. These experts have faced criticism for offering standardised solutions that fail to account for country-specific needs and nuances. This study has illustrated the complementary relationship between formal and informal social protection systems, showcasing their potential to enhance the overall well-being of households. To address inequality and social exclusion, it may be valuable to expand the involvement and roles of informal actors in the policymaking and implementation of social protection by the international organisations.
In conclusion, this article does not aim to present an exhaustive conceptualisation of the interaction between formal and informal social protection. Nevertheless, it highlights significant ways in which these two forms of protection intersect and provides a theoretical framework to guide future research in this area, serving as a valuable reference for researchers exploring the dynamics of formal and informal social protection. The interplay between these two systems is intricate, and understanding it is essential for crafting effective policies that cater to the diverse needs of individuals in various social protection scenarios. Ultimately, achieving harmony between formal and informal social protection is pivotal for ensuring the well-being of vulnerable populations, reducing inequality, and promoting social inclusion.
About the author
Zahid Mumtaz is a Fellow at the London School of Economics.
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