Azerbaijan: Providing Adequate and Prompt Pension and Social Insurance Payments 90401   Improving the Effectiveness and Transparency of Azerbaijan’s Social Programs Synopsis For the first time in the post-Soviet era, Azerbaijan introduced a new Targeted Social Assistance (TSA) program which, as of February 2011, provided 9.3 percent of households (173,206 families with 791,029 members) with TSA. The program has substantially reduced poverty: for each percent of GDP spent on TSA, poverty incidence declines by 2.8 percent. In addition, as a result of the project, pensioners now receive their pensions in full and on time, compared to the preproject level of 50 percent, and the number of those contributing to the social security system increased by 40 percent between 2003 and 2011 from 1.3 million to 1.87 million people. Challenge MULTIMEDIA Prior to the project, Azerbaijan’s social protection system was convoluted and spread thinly among many recipients. During the 1990s, severe fiscal constraints eroded the amount of the benefits to the extent that many became insignificant. Over this same period, other budget resources were used to supplement insufficient social insurance revenues, blurring the financing of benefits. Moreover, benefits were provided on an ad hoc basis and primarily to select population groups entitled to certain privileges, rendering social benefits nontransparent, poorly targeted, and Slideshow:  Technology Improves Azerbaijani inefficiently managed. Many recipients struggled Social Safety  to understand which programs applied to them. In addition, social insurance and social assistance programs were managed by separate agencies— both with a low capacity for administering benefits. Poor More Results recordkeeping practices, inadequately trained and insufficient staff, and the lack of modern equipment also hindered transparency and efficiency. Approach 9.3% of all households in the country The Azerbaijan Government’s recognition of the need to were covered by the targeted protect its poor and vulnerable populations was reflected in social assistance program as of February 2011 the design of the project, which aimed to help the Government improve its administration of social protection programs, make its pension system more sustainable, and 40% build its capacity to target social assistance benefits to the most vulnerable groups. The project was a logical continuation of earlier International Development Association (IDA) support under the Institutional Building Technical the number of contributors into the social security system Assistance I and II projects and the Structural Adjustment increased by 40 percent from 1.3 Credit, which built the foundation for the social protection million in 2003 to 1.87 million in 2011 reforms and capacity building efforts further supported by the project. MORE INFORMATION Results Azerbaijan Pension and Social The following results were achieved under the Pension and Assistance Project (June 10, Social Assistance Project: 2004 – February 28, 2011). Pensions and social assistance benefits are now paid on time and without arrears, with the majority of beneficiaries able to access payments through debit and ATM cards. Under the Pension Component, the number of contributors to the State Social Protection Fund (SSPF) increased by 40 percent (from 1.30 million in 2003 to 1.87 million in January 2011). Social insurance contributions increased from 59 percent (2003) to 63 percent (2010) of the SSPF’s total revenues, while the share of transfers from the state budget to the SSPF decreased from 41 percent (2003) to 37 percent (2010). A comprehensive, computerized registry of participants of the social insurance system was developed, and by the end of 2010, personal records for almost 1.9 million contributors and over 1.3 million pensioners were entered into the SSPF databases. Under the Social Protection Development Component, a TSA program was introduced, covering 9.3 percent of all households in the country (173,206 families with 791,029 members) as of February 2011. A centralized database of all applicants and recipients of the TSA program was established. The average annual TSA benefit payment increased from manat 44 in 2006 to manat 100 in 2011. Bank Contribution The total project costs were US$13 million, of which $10 million was funded by IDA and $3 million by the Government of Azerbaijan. Partners The activities financed under the Pension and Social Assistance Project were coordinated with the efforts of the joint United Nations Development Programme (UNDP)/SSPF project, “Capacity Building of the State Social Protection Fund.” The total amount of that project is roughly US$12 million, of which $2 million is from a UNDP grant and $10 million from government sources. Through this collaboration, the SSPF was able to develop useful software for its management information system, which helped to establish an electronic network among SSPF offices. In addition, a number of SSPF offices have been refurbished, furnished, and equipped with a Local Area Network (LAN). Moving Forward The Government of Azerbaijan has continued the reforms initiated under the project. For example, the TSA is regularly financed and has expanded its coverage of the poor. The SSPF has improved its client-oriented technology, allowing pensioners to withdraw benefit payments from ATMs and to verify the amount they are due through an online pension calculator. State budget transfers to the SSPF have been steadily declining, due to improved collection from contributors. Some of the reforms are supported by the ongoing, World Bank-financed Social Protection Development Project (P105116), which aims to improve the delivery of labor market and social protection interventions through strengthened institutions, enhanced institutional and human resources capacity, and improved targeting of social safety net programs. Beneficiaries Renovated offices, modern equipment, and sophisticated software have improved business processes at the SSPF, and this is being noticed by clients. Bayram Babayev is visiting the Narimanov district office and finds services much better than in the past. “ There are not any problems here, they serve on time. Transfer of pensions to card accounts is much better for us, when you want you can take out your money.” Salim Muslimov, chairman of the SSPF, smiles as he remembers preproject days. “ Everything was manual, paper-based and, as pensions were transferred to enterprises themselves to be distributed to employees, there was much opportunity for corruption. ” Now, 97 percent of pensioners receive their money directly through their debit cards.