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 in which 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 to more structured institutions that enable an entire community to provide protection to its neediest members. This article describes ways of building public safety nets to complement and extend informal and private institutions. The most effective policies will combine transfer systems that are sensitive to existing mechanisms with new institutions for providing insurance and credit and for generating savings.