Falling into poverty: Where are the holes in formal and informal safety nets

Abstract

This study explores the use of safety nets as a redistributive mechanism to cushion households in mitigating risks and vulnerabilities, with urban communities in the Sekondi-Takoradi metropolis of the Western region as a case study. A safety net is an essential component of an effective development strategy in a world where shocks and risks persist, conditions which make people vulnerable to poverty. Formal and informal safety nets are part of a holistic framework of poverty alleviation, to protect the poor and the vulnerable against the consequences of risks. This enhances their capability to prevent the depletion of resources to keep them sustained in their degree of poverty. The study adopts social risk management and resources approach to explore the ability of the formal and informal safety nets to prevent households from falling into poverty or becoming poorer from the perspective of informants. Household interviews were conducted selectively, with varied consideration of socioeconomic background of informants. The formal and informal safety nets have the ability to keep households from falling into poverty or becoming poorer. However, there are problems in the formal and informal safety nets which makes cushioning vulnerable households challenging in an urban community. Of significance are wrong targeting, long bureaucratic process, corruption and mistrust. The study documents the use of different mechanisms by households to cope and mitigate these shocks. Most of the coping strategies used by households are a means of survival and may not be considered as a safety net hence their susceptibility to become poorer. I therefore recommend an expansion of formal safety nets to complement the informal safety nets without necessarily replacing the functions of the latter.