Institute of Development Studies

Cash transfers: to condition or not to condition?

13 April 2010

Cash transfers are an increasingly popular social protection mechanism. Programmes for delivery include conditional cash transfers (CCTs), widely used in Latin America, and unconditional cash transfers, more prevalent in sub-Saharan Africa. How can this difference in approaches be explained, and what evidence exists on their relative effectiveness?

New Insights examines issues around cash transfer

A recent issue of Insights, edited by Stephen Devereux from the Centre of Social Protection at IDS, examines the case for and against conditional cash transfers (CCTs). In the context of the G-20 countries and the World Bank increased spending on social protection programmes, in response to the recent food crisis and global financial crisis, this IDS Knowledge Services publication provides valuable insight into the impacts of cash transfer programmes.

Contributors examine comparative research on CCTs in Latin America to determine whether they deliver on poverty reduction, a pilot exploring universal unconditional cash transfer in Namibia, the impact of cash transfers on inter-generational poverty in South Africa, whether CCTs are beneficial to women in Nicaragua, the effect of cash transfers on gender relations in Lesotho, and whether cash transfers achieve food security (looking specifically at Ethiopia).

To condition or not to condition?

Unconditional cash transfers are given to poor and vulnerable people with no restrictions on how the cash is spent, and no requirements beyond meeting the eligibility criteria (for example, being poor, an orphan, or over 60 years of age). The primary objective is to protect current consumption or food security.

By contrast, conditional cash transfers (CCTs) are delivered only on condition that recipients meet certain requirements, such as that their children should be enrolled in and attending school, and must be immunised. These programmes aim not only to alleviate current poverty through income transfers, but also to reduce future poverty by encouraging investments in human capital - education, health and nutrition.

Some of the arguments in favour of CCTs (largely derived from Latin American evaluations) include:

• CCTs deliver both well-being benefits to recipient households and improved education and health outcomes for children in these households
  
• they achieve significant impacts on poverty reduction, especially poverty gap and poverty severity measures
  
• domestically financed social protection requires buy-in from tax-paying middle classes who typically object to ‘welfare handouts'

Whilst some of the arguments in favour of unconditional transfers (based on evidence from African countries) include:

• recipients invest some of their cash transfers in education and health anyway so there is no need to compel them to do so
  
• conditionalities are paternalistic and interfere with people's right to choose how they allocate their resources
  
• linking social transfers directly to public services requires well-functioning services
  
• the burden of adhering to conditionalities falls disproportionately on women

Risky business

However, the global food crisis highlighted a risk associated with all cash transfer programmes - that their purchasing power is undermined by inflation. In some cases this has undermined the popularity of cash transfers and led to resurgence in beneficiary preferences for food aid.

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