WP 2020-06: Aid Distribution during the COVID-19 Crisis

Working Paper No. 2020-06
Aid Distribution During the COVID-19 Crisis
Alvin P. Ang, Ser Percival K. Peña-Reyes

This paper highlights a large informal economy, a low propensity to save and invest, and widespread financial exclusion as factors that expose Filipinos to financial vulnerability. These factors could, in turn, make the distribution of government aid all the more challenging in the midst of the COVID-19 crisis. The sheer number of displaced informal economy workers, combined with economy-wide low savings and investment rates, would call for a massive amount of financial aid. Because of widespread financial exclusion, cash handouts are probably the quickest way to deliver the aid, which would expose local government units (LGUs) to considerable risks of wrong targeting, late delivery, and incomplete accounting. To ease the burden on LGUs, at least on the accounting aspect, it might be beneficial to consider enlisting the services of other channels, such as microfinance institutions, pawnshops, payment centers, and domestic money transfer service providers, to assist in the distribution of financial aid. Consumer awareness of these facilities appears to be high among the masses. Also, by involving the private sector, the government can take advantage of the efficiency of existing systems. The administrative costs to deliver the funds can be reduced, and the funds can also reach the beneficiaries faster.

Keywords: COVID-19 pandemic, financial vulnerability, social amelioration