Conditional cash transfer

By Jesse Edep 

THE international community is committed to the Millennium Development Goals (MDGs), including the target to halve poverty by 2015. But tremendous challenges stick around. For instance, 800 million people around the world remain hungry, 11 million children under five die unreasonably each year, and 63 million primary-age girls are out of school.  Large numbers of the poor—represented by women, children, older people and those living with disabilities—are meshed in long-term, chronic poverty that is spread from generation to generation.

As economic growth is indispensable for sustainable poverty reduction, the very poor are unlikely to benefit from any trickle down that may result from growth. And in countries, like the Philippines, where growth is inadequate, there is a need to put in place mechanisms that trim down poverty directly and develop the ability of the very poor to contribute to growth.

High inequality shrinks both growth and the efficiency of growth in facing poverty. If no particular measures are taken to reach the poorest, millions will keep on dying needlessly or, at the very least, continue to endure appalling living situations.

World Bank country director Bert Hofman says, “There is increasing evidence from some developing countries that social transfers could help growth reach the very poor and, where growth is weak, have a direct impact on poverty.”

Social transfers are standard and predictable grants, usually in the form of cash, to protect and transform the livelihoods of citizens, including the vulnerable and chronically poor.

One of its kind is the conditional cash transfer (CCT) program, which, according to Hofman, is the most widely studied poverty-reduction program in the world.

Apparently, this is a different concept from Iraq’s Prime Minister Nouri al-Maliki’s activities on the streets, as he has doled out Iraqi dinars. The leader earlier said his objective was to rebuild basic services and jump-start Iraq’s damaged economy by rapidly sharing out as much of the country’s glut of oil revenue as possible.

Take a peek

IN Mexico, for example, 70 percent of households participating in its Oportunidades program have shown improved nutritional conditions. Its impact on stunted growth in children has also been notable, with the growth rate among children aged 12 months to 36 months escalating by one centimeter a child a year.

By improving children’s nutrition in their early years, the CCT program has helped enhance their long-term cognitive ability, says Hofman. Once they are in school, a good diet and full stomach should guarantee they perform better. Different from school-meal programs, the CCT program benefits preschool children and other household members rather than just those in school.

It has been clear that the CCT program has increased school attendance among poor families, the World Bank official adds.

The Bangladesh Cash for Education program—formerly a food-for-education program—has resulted in a 20-percent to 30-percent increase in school enrollment among beneficiaries who are likely to stay in school up to two years longer than other children.

Likewise, the Red de Proteccion in Nicaragua brought about a 23-percent boost in school attendance for the target population between 2000 and 2003.

Hofman believes that the CCT program impacts tremendously on health by improving nutrition and augmenting the ability of those living in severe poverty to access health services and pay for medicines and other associated costs.

In Namibia, pensioners spend 13.8 percent of the cash they receive on health care for themselves. In many instances, though, their pensions also involve spending on health for the entire household.

An indication on the influence of the CCT program on health can be apparent in Mexico, where the Oportunidades program has brought about a 12-percent drop in ill health among beneficiaries up to five years old and 19 percent fewer days of illness among adults.

In Nicaragua, where the transfer has been conditional on attending clinics for vaccinations, appropriate immunization among beneficiaries aged between 12 and 23 months increased by 18 percent.

The CCT program, tells Hofman, has also brought about significant reductions in income poverty. For example, social pensions have doubled the income of the poorest by 5 percent of the population in Brazil through its Bolsa Escola program. Mexico’s Oportunidades program eased the poverty gap among recipients by 36 percent between 1997 and 1999.

Own version

LIKE the CCT programs of Latin American countries, the Philippine version is called Ahon: Pantawid Pamilyang Pilipino program, or what is known as PPP.

Under the program, the Department of Social Welfare and Development (DSWD) grants money to the poor on the condition that they make investments in human capital, like sending their children to school or bringing them to health centers on a regular basis.

The CCT program shall address low educational achievement, high maternal and infant mortality rates, high malnutrition rate and child labor.

To ensure that children go to school, acknowledgment of money is dependent on enrollment and regular attendance of at least 85 percent of school days. Along health and nutrition of children and mothers, receipt of money depends on regular visits of children to health centers for immunization and preventive health care, as well as improvement in the nutritional status of the children and regular prenatal visits of pregnant women.

The DSWD is aiming to reach 300,000 of the country’s poorest households from January 2008 to December 2012 with the PPP package: Health and Nutrition Cash Assistance at P6,000 a year, or P500 a month for each household for 12 months; and Education Cash Assistance at P3,000 a year, or P300 a month for each child for 10 months up to a maximum of three children.

Hofman says the World Bank is waiting for the government’s proposal to tap into the bank’s rapid financing facility to address the urgent needs of the people along with rising food and oil prices. The country is still way beneath its ceiling of $230 million so it can still avail itself of the facility.

Before the government designed a wider program of CCT, it had launched pilot schemes in Agusan del Sur, Misamis Occidental, Pasay and Caloocan—wherein former social welfare secretary Corazon “Dinky” Soliman earlier questioned the project as mere dole-outs.

Soliman said if the government is determined in keeping children in school, it should use the money in building more schools and hiring more teachers, particularly in far-flung areas in Mindanao. There is an encompassing sense among poor communities in Metro Manila and other parts of the country that the government is not doing adequately to solve the problems that trouble the poor, particularly soaring food prices, she added.

“The people now are more angry because they’re feeling the pinch. There is a sense that they will accept the dole-outs as long as it’s being given out, but there has to be a longer-lasting solution to all these problems,” she earlier said.

President Arroyo is expected to explain in her eighth State of the Nation Address the realignment of expenditures to social programs for the country to cope with the scrimping global economy.

The DSWD has explained that the money provided in the CCT program is not mere dole-outs but aims at sustainable long-term poverty lessening as the conditions are directed toward social development and empowerment of the beneficiaries.

“It’s a very good safety-net program the government is rolling out. If it is well-targeted and the conditions are right, it is much more than a handout; it is actually a development program,” says Hofman.

Political will

HOFMAN says corruption is a noticeable risk with the CCT program, and a key challenge for targeting is to make sure the money is delivered into the right hands.

The Gapvu program in Mozambique, which was a model cash-transfer program in its first five years, swiftly collapsed because of corruption scandals. It was replaced by the similar National Institute for Social Action program.

He says providing unambiguous information to recipients on the size of their endowment should make it more difficult for executing agencies to siphon off funds. Compared with food, which is dreadfully tough to manage, the clarity of the CCT program means they are more easily monitored by recipients, he adds.

Evidence from India implies that the small, regular payments given by social transfers are much less likely to be misappropriated than larger one-off transfers, specifically if they are passed through less corruptible institutions, such as the post office.

Dishonesty seems to be “minimized” where the poor are aware of their rights and are able to access information for monitoring the performance of plans, says Hofman.

He adds that safeguards also need to be created to guarantee that money is handed over to the right people.

In Zambia, recipients of the Kalomo cash pilot program are mandated to sign checks. In Namibia and Mozambique, finger-printing is needed. South Africa has begun using biometric identification to go along with withdrawals from cash-dispensing machines.

“Good monitoring of delivery by capable authorities is essential,” points out Hofman.

A key challenge of any social transfer program, he says, is making certain that handouts arrive at those who are meant to benefit from the program.

But even well-targeted programs have possible beneficiaries who miss the boat—worse, if some people are included who should not be. In Mexico’s Oportunidades program, 20 percent of aids still go to families among the richest 60 percent of the population.

Some programs can be very poorly targeted. In a subsidized food-distribution program in India, the receivers were largely from middle-income families, although the program was intended to benefit only the poor.

“It is not possible to ensure perfect targeting of transfers. The aim should be to make targeting as effective as possible while minimizing costs,” says Hofman.

Targeting can either concentrate on recognizing and reaching the poorest, or transfers can be provided to a specific class of the population that is recognized as vulnerable, like older people or those living with a disability.

In many circumstances, conclusions on who to target will be controlled by local political considerations. There may be robust political backing for targeting the poorest households in some countries.

On the other hand, there is a peril in some countries that governments will want to focus on households with greater productive ability in the principle that they will be able to graduate from assistance in the short to medium term, leaving behind the most vulnerable that include large numbers of children.

As with other public policies, the CCT program requires political support and promise. “Building this political will may be a crucial challenge, predominantly in poor countries with little experience of successful social welfare systems,” says Hofman.

The outcast and the weak are often politically vulnerable whose interests are missed out or not prioritized in poverty-reduction strategies and national plans. Governments are probably willing to take actions to citizens whose interests have a stronger voice. And those whose interests are well served by the status quo may oppose change if they distinguish that it will not benefit them.

In some cases, meeting the needs of the poorest may be regarded as a waste of resources, wrongly understood as diverting the country from its main tasks of promoting growth and increasing access to social services.

“Building political support will entail an examination of the social and political forces for and against change,” says Hofman.

With all the safeguards, political will and learning experiences, the CCT program could take part in a significant role in achieving the MDGs. The rapid spread of the CCT program through Latin America and the less-poor countries of southern Africa and parts of Asia is a signal of a mounting consensus on the worth of facing both poverty and high levels of inequality.

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