Strengthening Public Safety Nets from the Bottom Up

Helping to reduce vulnerability poses a new set of challenges for public policy. A starting point is understanding the ways that communities and extended families try to cope with difficulties in the absence of public interventions. Coping mechanisms range from the informal exchange of transfers and loans within families and communities to more structured institutions that enable an entire community to provide protections to their neediest members. This paper describes ways to build public safety nets to complement and extend informal and private institutions. The most effective policies will combine both transfer systems that are sensitive to existing mechanisms and new institutions for providing insurance and credit and for generating savings.