Just give the poor cash

An article in last week’s Economist made a strong case for conditional cash transfer schemes, which give stipends to the poor based on them meeting certain criteria such as school attendance for children and regular prenatal and antenatal health visits. Is it really that simple? Should we just give cash to the poor?

I’ve long been convinced of the merits of conditional cash transfer programmes. Back in 2006, I worked with Bella Duffield then at Save the Children UK to review the evidence on what makes these schemes effective (or not effective) and lessons to learn from them. At the time there was a lot of skepticism about the merits of these programmes, and so we wanted to carefully separate truth from fiction.

In short, the success of these schemes is much greater than many other attempts (such as community based nutrition projects) to improve health and nutrition among the poor. The evidence is strongest for Mexico which piloted one of the first social protection schemes to improve health using a conditional cash transfer programme, initially called Progresa and now known as Oportunidades.

The main goal of Oportunidades is to increase the basic capabilities of extremely poor people in rural Mexico. To do this, it provides monetary incentives directly to families to help overcome financial barriers to health services use and schooling. But this is conditional- mothers only receive the funds if their children attend health clinics and school. The mastermind behind the programme, noted,

Compared with giving a kilo of tortillas or a liter of milk as we used to do in the past, progresa delivers purchasing power. But even poor parents must invest in their children’s futures- that’s why the strings are attached.

Since it was introduced in 1997, the scheme has reduced morbidity and stunting and increased enrollment in school. The Mexican government initially paid for the scheme but as the scheme rolled out to cover 5 million families, it has had to take loans to cover the budget coming in at around $1 billion in 2000, and with a budget approved in 2008 of $3.8 billion. The scheme represents 0.2 percent of the GDP and 20% of the federal budget.

Bella and I identified eight important characteristics of the scheme that contribute to its effectiveness:

1.            A large cash transfer – households receive, on average, one-third of their income through the programme.

2.            Transfers are regular (every two months) and made to women.

3.            Targeting is objective and transparent.

4.            Coverage is high.

5.            High-quality food supplements are given to all children aged 6–24 months and to older

growth-faltering children.

6.            Free healthcare is provided to households.

7.            Nutrition and health education are provided to all household members by well-trained

medical staff.

8.            When it was created, the government of Mexico funded 100 per cent of the programme and controlled its development from the beginning.

At their heart, social protection programmes are redistribution programmes- reallocating money from the rich to the poor. They can be dressed up with numerous rules and regulations and conditions- but at their core is a choice society makes about social justice and redressing inequality.

There are two lingering questions in my mind. Is this just the latest fad? Bilal Siddiqi triggered this thought when he asked a very important question at a presentation on nutrition a few years back. Development is all about fashions- within health it’s moved from HIV/AIDS, to health systems, to maternal and child health- and so maybe in nutrition it’s moved from micronutrient supplementation, to growth monitoring and now to cash transfers (and fortification led by the Gates Foundation)

The second question is: Are conditional schemes more effective at improving health, nutritional and educational outcomes than unconditional? Should there be strings attached? I haven’t come across convincing evidence one way or the other and am curious whether a careful analysis is available or in the works looking at this question.

Devi Sridhar

3 thoughts on “Just give the poor cash

  1. We agree with Dr. Sridhar that cash transfers — whether conditional or unconditional — provide purchasing power, giving women the power to determine the unique needs of their individual families as a means to alleviating extreme poverty. But more must be considered in social protection programs. Based upon the experiences of microfinance (the fad before this fad), it is clear that a more complex policy is necessary to ensure that families who successfully increase their standard of living — and no longer qualify for the cash transfers — do not fall back into extreme poverty. With our own research on the household consumption patterns of Mexican microfinance clients showing that microfinance is effective only for relatively less impoverished individuals with successful microenterprises (to rise above the national poverty line and maintain a higher standard of living over a two-year period), it becomes clear that cash transfers can be thought of as complementary strategies in a comprehensive social protection program. Rather than a one-size-fits-all approach to aid, a complex systemic approach — following unconditional cash transfers with complementary development tools, including microfinance, microfranchise, and conditional cash transfers — can be employed more effectively to alleviate poverty through development assistance.

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