End-user subsidies

Description

Subsidies are typically provided to stimulate demand for products that have socially desirable outcomes. In the past, subsidies on goods have often been provided to the companies that produce them. Governments are increasingly seeking to bolster market forces and stimulate competition among firms by providing subsidies directly to the products’ users. These kinds of subsidies may also drive user-oriented innovation and efficiency gains. Subsidies can also play an important role when users need some initial experience in order to grasp a product’s benefits or where positive external effects exist. As consumers adapt to the new product, subsidies can be rolled back or discontinued.

Vouchers are one method by which to administer “smart” subsidies to end customers. Vouchers have the advantage as compared to cash transfers that their use is predefined, thus directing expenditure towards the specific products or services with the desired social benefits. Moreover, voucher schemes can represent a partial subsidy, which – unlike giving out products for free – allows firms to gauge user demand and willingness to pay. The level of the subsidy can subsequently be reduced over time as customers start to recognize the value of the products.

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Insurance Schemes - Policy Case Study on Inclusive Business

Insurance programmes for people at the bottom of the economic pyramid (BOP) empower them to participate in markets by protecting them against risks such as illness, injury, damage, or loss. People at the BOP are often more vulnerable to such risks because they are less able to cope with the financial burden caused by unexpected occurrences. Despite this, the BOP is typically ignored by mainstream commercial insurers. Micro-insurance schemes are built to cover people excluded from statutory social security, especially workers in the informal economy and their families.

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Germany - Country Case Study on Inclusive Business

Policymakers have expressed interest in learning from peers that have already begun to support inclusive business. To support this request for knowledge-sharing, the G20 Global Platform on Inclusive Business developed a series of short pieces that examine the motivations, institutional coordination mechanisms, priorities and challenges that countries face as they support inclusive business.

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