Risks can affect individual households (i.e. illness, disability, unemployment, and health),¬†communities or regions (i.e. floods, famine), or nations (droughts, global financial crisis, shifts in terms of trade). For poor people the resulting lost income may force them to sell their land, livestock or their tools, send their children to work rather than to school, or eat less. Such drastic measures may mean survival, but make it much harder to vulnerable households to escape poverty. During economic downturns problems affect large parts of the population at once and appeals for public action are undeniable. But even when a country prospers, some households face hard times. Safety Nets are needed to address such risks. Safety nets can increase options that are available at the hand of both the poor and for the society at large. Knowing that safety nets exist can allow households to take initiatives that incur some risks, but bring potentially higher returns. When hard times do hit households, safety nets reduce the need to make hasty decisions that will diminish the chances of escaping poverty in the long run. At the national level, away from household worries, effective safety nets can also contribute to society‚Äôs choice of effective policies in other areas (e.g. policy reforms in labor markets to adjust to global trends etc.).
Social Safety nets are mechanisms that mitigate the effects of poverty and other risks on vulnerable households. Safety nets can be private or informal, such as family members in different households support each other through hard times with cash, food, labor or housing. Formal programs, run by Governments, Donors or NGOs, provide additional income or in-kind transfer programs, subsidies, and labor-intensive public works programs. Programs to ensure access to essential public services, such as fee waivers for health care services, and scholarships for schooling costs are other examples of safety nets.
Social safety nets can be distinguished from tradition social security or social insurance programmes, which are more relevant to developed countries or to organized segments of the workforce in developing countries. The former are generally (but not always) associated with a transfer of income to the poor, whereas the latter are largely related to earnings and are contributory in nature (insurance). Social Safety Nets play an important role in poverty reduction in both developed and developing countries. In the former, living standards are high, but growth is typically cyclical. The latter are characterized by low incomes, hunger, food and nutrition insecurity, illiteracy and lack of access to basic necessities across a large segment of the population.