Cash Transfers: what does the evidence say?

April 12, 2011

     By Duncan Green     

bolsa familia 2you’re wondering, our research team doesn’t see any of DFID’s research dosh, so I’m not singing for my supper here). The latest example is a really useful ‘evidence paper’ on cash transfers, summarizing a literature that is expanding at a bewildering speed. Here are the highlights from the exec sum, (but if you want to read the full 134 pages, be my guest). “Over the past 15 years, a ‘quiet revolution’ has seen governments in the developing world invest in increasingly large-scale cash transfer programmes. These are now estimated to reach between 0.75 and 1 billion people. While this expansion began in middle-income countries (MICs), governments in low-income countries (LICs) have also started to develop cash transfer programmes. This rapid spread has been driven by a range of forces. Firstly, there is growing recognition that while global economic integration brings poor households opportunities, it also brings increased exposure to stresses (e.g. volatile food and fuel prices) and shocks, which can push many into poverty. In this context, transfers are seen to play a role in reducing transitory poverty. Secondly, there is growing evidence that transfers can help people escape chronic, often inter-generational poverty; in part by leveraging gains in non-income, human development outcomes. Finally, there is recognition that in situations of chronic food insecurity (e.g. Ethiopia), institutionalised transfer programmes are more efficient and effective than repeated annual emergency food aid. There is convincing evidence from a number of countries that cash transfers can reduce inequality and the depth or severity of poverty. There is an increasing volume of research into how cash transfers might support ‘graduation’ from poverty for those of working age. Evidence from Bangladesh and Ethiopia suggests that transfers are unlikely to achieve graduation without complementary interventions (e.g. skills training or agricultural extension) to promote livelihoods. There is robust evidence from numerous countries that cash transfers have leveraged sizeable gains in access to health and education services…. Cash transfers also have a proven role in supporting specific vulnerable groups (people living with HIV and AIDS, orphans and vulnerable children). However, transfers have had less success in improving final outcomes in health or education…. they cannot resolve supply-side problems with service delivery (e.g. teacher performance or the training of public health professionals). Cash transfers therefore need to be complemented by ongoing sectoral strategies to improve service quality. Nutrition may be an exception: households receiving transfers spend more on food, resulting in significant gains in children’s weight and height in several countries. [CTs] have helped poor households to accumulate productive assets, avoid distress sales, obtain access to credit on better terms and in some cases to diversify. There is very little evidence that cash transfers in developing countries have had negative effects on labour market participation or fertility. [i.e. they don’t stop people looking for jobs, or encourage them to have more babies] Transfers can influence gender relations and empower the poor to make their own decisions…. And may contribute to conflict prevention and peace-building Finally, there is growing interest in including cash transfers and other social protection measures (e.g. insurance) within integrated approaches to strengthening resilience to climate change. While conditional cash transfers (CCTs) have achieved considerable success, it is not yet clear whether conditionality itself contributes…. This debate matters as conditionalities create costs for governments, in monitoring, and for recipients, in demonstrating compliance. Public works programmes can respond quickly to shocks and the need to generate employment to tackle transitory poverty in fragile or post-crisis situations [but] In practice, however, PWPs in many Low Income Countries (LICs) have not performed well. bolsa familiaEvidence from South Africa, India, Kenya and Liberia has demonstrated that electronic payment systems involving smartcards or mobile phones can significantly reduce costs and leakage, while promoting financial inclusion of the poor. [CTs] require fiscal space and domestic political support. While electoral politics play a major role in Latin America and increasingly in Asia, this has not been the case in Africa. Most developing countries spend one to two percent of GDP on social transfers. However, this conceals significant variation in absolutespending. For MICs, two percent of Gross Domestic Product (GDP) to finance national cash transfer programmes that reach 25 percent othe population with proven effects. By contrast, LICs struggle to melevels of need from a smaller tax base.” And if you’re wondering what this means for DFID’s work “Over the coming years DFID plans to support cash transfers in 16 country programmes, with emphasis on building sustainable, nationally-owned systems. Recognising that appropriate solutions are highly context-dependent, DFID will seek to avoid prescriptive blueprint approaches to design.” This is probably just the first instalment from me on social protection, as I’m attending a big conference on ‘SP for social justice’ at IDS later this week (I reviewed some previous IDS work critical of current SP thinking here). IDS Director Lawrence Haddad has some good reflections here, including the need to focus more on the ‘social’ in SP and the possibility of using collective, rather than individual, conditions in conditional cash transfers (hey we could even apply that to governments… oh no, that doesn’t work). The conference is also the UK launch of the new 2011 European Development Report on (you guessed it) SP for Inclusive Development. Finally the World Bank is continuing its fiendish policy of death by consultation with an online forum to help it finalise its 2012-2022 SP and Labor strategy.]]>