Conditional Cash Transfers

By: Bikal Dhungel 

Aid Agencies and National Governments are looking for ways to generate best results from development aid. Aid Effectiveness has become a serious challenge as a large part of aid are 'wasted'. This has gave birth to some outspoken critics like William Easterly and Dambisha Moyo whose main argument is, ' why is Africa poorer than 40 years ago despite aid in all these years ? '. There is no doubt that there are other issues connected to it which makes difficult to achieve appreciated results. Aid are mostly targeted to poorest people in any country but as life is not only about money, other infrastructures, healthcare, better education etc are also required to achieve better result. Giving aid to one sector does not always help because poverty is multi-dimensional. When we provide the poor with better nutrition, this is not enough because, what to do after that ? To come out of the poverty trap, support with education, health, and other entrepreneurial activities is required. There is also an assumption that focusing on entrepreneurial support is enough because when people are financially secured, other development will follow. However, the importance of health and education will continue to remain.

Along with many other tools to realise development, Conditional Cash Transfer (CCT) is a very important one. CCT simply means paying cash to poor people or families but with conditions, for example, 'if you get money, you have to send your children to school, you have to immunize your children or yourself, you have to stick to hygiene etc '. This scheme has already been implemented in over two dozen countries, among them, also middle income countries who target to reduce poverty. The basic conditions attached to cash transfers are regular health check visits for the receivers, vaccination, courses on nutrition etc. The largest program so far was in Brazil where 11 million people get conditional cash transfers and the expenditure for the government is about 0.5% of the GDP. Most important advantage of CCT is that it addresses both short-term as well as long-term poverty. In the short term, poorest households get cash injection which will help them to fulfill their basic needs whereas in the long term, the money they receive will cause better health, better education etc. Moreover, as conditions are put, it is less likely that the poor will use this money in wasteful things like Alcohol or for Dowry etc. the poor decide the best use of the funds themselves and the market profits by the increase in sell because of the increased purchasing power of the poor.

As CCT were only introduced recently though they are gaining popularity, the outcome is yet to be seen. However, short term assessments in few countries of South America has shown that CCT have positive impact.

There are also issues that makes CCT difficult for example the lack of information, impatience, no self control and a natural tendency to procrasticate. Poor people can simply postpone things like Health Check-ups because the effect of vaccination can only be seen in a longer term. So, a monitoring body is required in this case.

This policy of CCT seems to be simple but it not that simple to implement. First of all, the eligibility criteria should be chosen carefully, either it should be given only to the poorest of the poor or also to low income families. There are issues like the misuse of the funds, especially in those countries with bad governance records.

Researchers studying such programs to check the feasibility in other countries often point to the difficulties to evaluate such programs. In natural sciences, it would be easier in such cases. There will be treatment group who gets the intervention and there will be control group that does not and after the trial period, one can simply look at the differences in outcome to find the effectiveness of the intervention. Difficulties in social science is also that they are facing number of other real life changes which might impact them as treatment group. So the result is likely to be biased. Up to now, economists have used econometrics techniques to evaluate the policies in one place but there is another challenge of external validity, which means, if the results can be applied to other times, places or settings.

When a country wants to implement CCT, it should do a feasibility check first, either it will be successful or not. But another problem in social sciences, it is almost impossible to do experiments in such a scale. It is expensive. It also requires a strong political support and if it does not work ,there will be heavy criticisms and lots of money will be lost, that could be used for other purposes. Due to financial constraints faced by least developed countries, losses in such policies can mean government change, which the ruling political parties do not want to risk.

The study of areas where CCT has already been implemented has generated positive results. There was increases in school enrollment rates, increases in preventive health services, increases in nutritional diets, decrease in child labour etc. On the other hand, there are also limitations, for example, after getting cash transfers, the poor will obviously demand more healthcare but if the quality of healthcare itself is bad, this will be a waste of money. Moreover, there are also poor people in the society who have no children, or who are in temporary shocks. They need the cash injection too but do not qualify for it.

Despite all such limitations and criticisms, CCT is an innovative idea that will have a long term impact on human development by better education, better health and better nutrition and due to special focus on women, successful results are likely. Research has shown that women are careful household managers. Giving money in the hand of women will improve the health of children more than they do when you give the money to men, who tend to use that for alcohol, cigarettes etc.