Improving the impact of ODA on social protection in Kenya

Official development assistance (ODA) is facing unparalleled pressures from growing, competing demands including humanitarian and crisis response, national development priorities, and investment in global public goods (such as tackling climate change), among others. Development Initiatives (DI) seeks to highlight the value of ODA in programmes that are national priorities to recipient countries. In addition, DI aims to enhance the understanding of enabling factors that contribute to improving the impact of aid.

Led by national demand for international finance data and evidence on its most appropriate use, DI embarked on producing a series of reports to consider how aid has been more effective in specific development sectors in Kenya, Ethiopia and Uganda (forthcoming), including trends, the factors that unlock the value of aid, and the challenges that lie ahead.

This briefing builds on our analysis of the role of ODA in delivering social protection programmes in Kenya, diving deeper into the three case study programmes: the Cash Transfer for Orphans and Vulnerable Children, the Hunger Safety Net Programme and the Home-Grown School Meals Programme. These were chosen due the availability of impact data, and our analysis is based on secondary data from impact evaluation studies and key informant interviews (KIIs) with government officials, donors and civil society organisations.

Chapter 1 finds that the programmes have improved the welfare of vulnerable households. For example:

• Cash Transfer for Orphans and Vulnerable Children contributed to a 13-percentage point reduction in the proportion of beneficiary households that were experiencing US$1-per-day poverty.
• The Hunger Safety Net Programme provided unconditional cash transfers to households experiencing extreme poverty. Every Kenyan shilling the programme transferred to the beneficiaries of regular cash transfers generated an additional KES 0.93 of total (nominal) income in the county’s local economy.
• The Home-Grown School Meals Programme reduced the amount of money parents needed to spend on feeding their children – a direct cash saving of between 4% and 9% of annual household income.

Chapter 2 considers challenges that face the programmes. Chapter 3 looks to see how the government might leverage additional ODA and domestic resources to expand the coverage of social assistance programmes.

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In Kenya, ODA played a critical role in establishing effective social protection interventions. It contributed to the design and implementation of social assistance programmes by financing:

• Programme design, pilot and expansion, especially at the early stages when there was little domestic funding.
• Institutional capacity strengthening interventions through development of skills, sector policies and enabling infrastructure.
• Impact evaluations that provided the evidence that justified continued investments in the programmes and lessons for strengthening implementation.
• Technical support that promoted adoption of innovative approaches in programme implementation.

Impacts of social assistance programmes

Investments in social assistance have positive welfare effects on beneficiary households, but their overall impact on poverty is modest. A literature review on the impacts of social assistance in Kenya shows that Cash Transfer for Orphans and Vulnerable Children (CT-OVC) has enhanced the life chances of children in beneficiary households. It has enabled their healthy and safe transition to adulthood by improving access to healthcare, education, and nutritious food. The Hunger Safety Net Programme (HSNP) has alleviated hunger, mitigated the worst effects of poverty, and strengthened livelihoods. The Home-Grown School Meals Programme (HGSM) has enhanced the food security of children and contributed to improved school attendance, enrolment and retention of children in schools.

However, the overall impact of social assistance on the national poverty headcount is still modest. A World Bank analysis in 2023 showed that Kenya’s social assistance cash transfers have reduced the national poverty headcount and poverty gap by only 1.2 and 0.5 percentage points respectively. This modest impact is attributed, in part, to limited coverage of social assistance programmes, inadequacy of cash transfer amounts, insufficient expenditure and operational challenges at programme level.

The limited fiscal space slows efforts aiming to address the challenges that constrain the impacts of social assistance. The national government is facing a fiscal deficit of US$32.1 billion between 2022/23 and 2026/27. Notably, Kenya’s risk of debt distress rating increased from low in 2017 to high in 2022. Meanwhile, its debt service to revenue and grants ratio is expected to increase from 52% in 2022 to 62.7% in 2024, meaning that much of the national revenue will go to debt repayment rather than service delivery.

Improving the impacts of social assistance programmes

Leveraging ODA alongside domestic resources is critical for strengthening the impacts of social assistance programmes. To promote sustainability, the national government has made significant progress in funding social assistance programmes using domestic resources. The CT-OVC and HSNP were fully financed by domestic resources from 2019/20 fiscal year, while HGSM fully transitioned from external to domestic financing in 2018/19. Despite this significant achievement, social assistance programmes still face a huge funding gap. In 2023/24 fiscal year, for instance, budget allocations to the National Safety Net Programme, which comprises the four national cash transfers, covered only 36.7% of the programme’s funding requirement. A limited fiscal space is part of the reason for this low budget allocation, as more than half of national revenue goes to public debt repayment. Given this resource constraint, strengthening mobilisation of ODA to co-finance social assistance programmes is critical for expanding programme coverage, improving the adequacy of cash transfer amounts and addressing operational challenges to enhance impact.

In the long term, social protection programmes should rely on domestic resources to ensure sustainability. Therefore, leveraging ODA to support government efforts to strengthen domestic resource mobilisation, including implementing the Medium-Term Revenue Strategy for the period 2024/25 to 2026/27, is important for ensuring sustainability. This is aimed at strengthening domestic revenue mobilisation through implementation of tax policy and administrative reforms.

To address the root causes of vulnerability, the government has to complement existing social assistance schemes, which mainly enable households to meet immediate expenditure needs, with resilience-building programmes, including livelihood interventions and provision of basic services. This calls for prioritising investment of ODA and domestic resources in long-term, resilience-building interventions, especially in the arid and semi-arid land (ASAL) counties that are vulnerable to climatic shocks.

However, ODA remains a scarce resource globally. Therefore, apart from strengthening mobilisation of ODA, the government must ensure it is using the resources that are already available to it effectively. This includes reallocating public expenditure to create additional fiscal space for strengthening investment in social assistance programmes. In 2023, for instance, the government eliminated fuel subsidies to free up additional resources to fund its development plans. Some of the resources were previously earmarked for fuel subsidies could then be redirected to social assistance programmes to support vulnerable groups.