Social protection modes of financing and capability challenges in low- and middle-income countries

Mobilisation of revenue to finance social protection is fundamental to the institutionalisation of adequate and sustainable social protection systems. This chapter reviews, first, existing modes of financing and fiscal capacity for social protection spending in low- and middle-income countries. It is argued that, despite great variations, fiscal capacity is inadequate and improvement in revenue mobilisation from taxes is needed. Second, the chapter explores how the mode of financing - whether international aid or tax based - is related to building administrative capacity and securing political will in complex ways. International aid can initiate social protection development and build administrative capacity but only if programmes are implemented through state structures and are aligned with the priorities of domestic governments. Social protection programmes financed from taxes indicate political commitment. However, initial political commitments cannot be taken for granted and inadequate administrative capacity continues to challenge the institutionalisation of social protection systems.