The Palestinian Authority should build up a social protection scheme in order to cushion the negative social effects of the economic development in the West Bank and Gaza Strip and to stabilise the Palestinian society and political system. The current schemes suffer from duplications, deficits and gaps, and the majority of the population has no access to formal social protection. Rather they depend on private transfers and non-governmental charity organisations. The article pays for a comprehensive funded social insurance scheme in addition to a means-tested social assistance programme for needy families.