Chapter 5


There are, however, a number of crucial difficulties and problems involved in establishing a
functioning food stamp system:

1) It is important that the intended beneficiaries are effectively targeted. This requires a
 system to identify and register the beneficiaries, and to provide regular entitlements on
 the basis of continuously updated records. Apart from the administrative capacities
 required, this is an almost insurmountable task in countries without an established social
 welfare system and with large informal sectors which makes it difficult to validate
 eligibility.

2) The near-money property of the coupons makes them highly vulnerable to financial abuse
 and leakage. This refers to all stages of the network: issue of the coupons, distribution,
 use by the recipients, acceptance by the retailers up to refunding. To minimise abuse
 requires a well administered system of control.

3) As food stamps are usually denominated in monetary terms, their value rapidly erodes in
 countries with high inflation rates, implying a substantial reduction in the real transfers to
 the poor (see, for example, the Sri Lanka case recorded in Box 4-2, Chapter 4). Even if
 revalued, in practice value adjustment often lags behind in time and value.

For the reasons mentioned above, food stamp programmes are only feasible and effective in
countries with strong public administration. In countries with weak public administrations,
(and this may apply to most of the countries concerned), less sophisticated targeting
procedures, specifically self-targeting approaches, appear to be the more appropriate
solutions.

There are further aspects which limit the applicability of targeted food subsidy programmes
in general:

* Food subsidies can only benefit those population groups who have, although minimal,
 cash income. All population groups without any cash income (e.g. subsistence farmers,
 jobless, old and sick persons, children, refugees, etc.) cannot be reached by food
 subsidies. These may be the most vulnerable to food insecurity.

 Food subsidies are relatively ineffective in alleviating food deficiencies resulting from
 unequal intra-household distribution, e.g. distribution patterns favouring the adult male
 household members at the expense of the children, female members, etc.

 Food subsidies are relatively ineffective in alleviating specific nutritional deficiencies
 with certain types of food commodities which represent either high value products or
 food items which are unfamiliar to the target groups (e.g. high protein food to mitigate
 protein deficiencies in young children, pregnant and lactating mothers).

 In all the latter cases, direct food transfers appear as the only feasible alternative of targeted
 food interventions.


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