Strengthening Social Security Systems in Rural Areas of Developing Countries

The paper identifies the major reasons for state and market failure in the provision of social security, especially in developing countries. It describes the existing systems and their institutional strengths and weaknesses, and analyses the possibilities for a public-private partnership. The paper identifies four (the state, the market, member-based organisations, and the private households) main providers of social security. It states that whereas the reasons for state failure is as a result of inadequate and inefficient programmes to deal with the socio-economic realities, and market failure is hinged on information problems and high transaction costs. Analysing these reasons in detail, it looks at the controversy on how adequately member and private household-based systems can protect members against basic risks such as illness, disability, accidents and death. It delves into the limits of traditional insurance arrangements, which basically provide insufficient coverage against co-variate risks. The paper explores the possibilities of a public-private partnership looking at the key success factors of a partnership. It paper concludes with a preliminary agenda for policy action and research.