Qualitative impact evaluations necessary to enhance effectiveness of cash handouts in Malaysia in reducing inequality, poverty

In 2018, the Malaysian Inland Revenue Board underwent a rebranding of its social assistance initiative, transitioning from Bantuan Rakyat 1Malaysia (BR1M) to Bantuan Sara Hidup (BSH).

This programme offers direct financial aid, ranging from RM500 to RM1,000, aimed at benefiting the bottom 40 per cent of income groups or households earning below RM3,166 per month.

Families with children aged 18 and under also receive an extra RM120 per child, up to a maximum of four children. The primary goal of this programme is to alleviate the financial burden on households caused by the reduction of fuel subsidies and the imposition of the goods and services tax (GST), thus enabling them to fulfill their daily needs.

However, a study by the World Bank revealed that this financial aid is relatively modest and has limited effectiveness in diminishing inequality and poverty. A more substantial impact could be attained through an increase in the amount of funds provided.

Currently, nearly four million households throughout Malaysia benefit from this programme, collectively receiving a total of RM4  billion in cash assistance in 2019.

Concerns are emerging that this allocation might seem insufficient for the ongoing expenditures of the Malaysian government, and could potentially dwindle with each passing year.

Another critique directed at this programme pertains to targeting challenges, as it has yet to comprehensively reach all strata of society. Residents of rural areas and indigenous communities encounter difficulties in accessing the programme through the Internet, particularly those in Sabah, with its hilly topography and small islands.

This difficulty is further compounded by their limited financial literacy, exacerbated by a lack of bank account ownership. The inadequacies in targeting have even led individuals with honorific titles, like ‘Datuk,’ to become beneficiaries of the programme.

Unfortunately, there is currently scant discourse on how the cash assistance is being utilised by the recipients, and whether this programme genuinely aids them in meeting their daily needs.

The assistance they receive is one shot at a time, leaving them responsible for continuing to address their daily necessities and monthly expenses.

Moreover, given that the BSH programme functions as an unconditional cash transfer, it lacks stipulations dictating how beneficiaries must allocate their funds. This stands in contrast to common obligations tied to government cash transfers.

Neighbouring countries such as Indonesia and certain developing Latin American nations, for instance, necessitate that recipients of cash transfer programmes with school-aged children ensure regular school attendance up to a certain educational level; otherwise, their cash assistance would be terminated. Such measures are aimed at preventing recipients from becoming overly reliant on government aid, and at breaking the cycle of poverty by elevating educational attainment.

The absence of these obligations in the BSH programme renders it a short-term solution to social inequality, as it fails to address the fundamental underpinnings of poverty.

Some critics contend that this programme is primarily politically motivated, intended to garner support from the lower socioeconomic strata. Cash assistance, whether conditional or not, can indeed mitigate consumption disparities for economically disadvantaged households, although small amounts of cash assistance are not necessarily able to transform their lives.

Henceforth, it is imperative to undertake a comprehensive evaluation of the evidence-based policies for BSH, even though the programme itself has been operating for less than five years.

The evaluation can encompass both qualitative and quantitative aspects. Quantitative assessment typically entails gauging the extent of specific outcomes attributable to the programme.

However, quantifying the programme’s impact necessitates an expansive sample size and the application of complex econometric and quasi-experimental methodologies to ensure robust and rigorous data analysis.

The qualitative impact is equally important to measure, which often involves in-depth case studies in specific regions to explore on-ground phenomena in-depth.

Qualitative impact evaluations manifest in the form of narratives and descriptive analyses. In fact, conducting such evaluations comes with a substantial cost, necessitating collaboration between the government, institutions of higher education, and potentially international organisations.

Nonetheless, this evidence-based policy evaluation assumes paramount importance in the pursuit of designing a more effective and well-targeted programme for poverty reduction in Malaysia.

Dr Romi Bhakti Hartarto is a Postdoctoral Research Fellow, Ungku Aziz Centre for Development Studies, Universiti Malaya, and Assistant Professor, Department of Economics, Universitas Muhammadiyah Yogyakarta.

The views expressed here are the personal opinion of the writer and do not necessarily represent that of Twentytwo13.