As the demand for well-designed conditional cash transfer (CTT) programmes, which provide cash to poor households in exchange for commitments in pre- specified ways, keeps growing across the world, an evaluation report made by the World Bank shows that countries have adopted the programme at a prodigious yet widely skewed rates. Leading the list are the Latin American countries, where almost every country had implemented such programmes, and countries like Bangladesh, Indonesia and Turkey, which run large-scale programmes. However Malawi, Cambodia, Moracco, Pakistan and the continent of South America have restrained these interventions to pilot projects. In India, the report identifies just one programme?Apni Beti Apna Dhan programme in Haryana?which confers incentives to the female child.
The popularity of CCT, which has been hailed as a path-breaking way to reduce poverty, has ensured that these programmes become the largest social assistance programmes in countries like Brazil and Mexico, covering millions of households. Mexico?s Progresa started with approximately 3,00,000 beneficiary households in 1997 and it now covers five million households, while the Federal Bolsa Fam?lia programme in Brazil serves 11 million families. But pilot projects in countries like Kenya and Nicargua are restricted to a few thousands.
In terms of relative coverage, they range from 40% of the population in Ecuador, to about 20% in Brazil and Mexico, to 1% in Cambodia. The cost of CTT programmes also varies sharply from about 0.50% of GDP in countries such as Brazil, Ecuador and Mexico, to just 0.08% of GDP in Chile. The generosity of benefits varies from 20% of mean household consumption in Mexico, to 4% in Honduras, and to even less for programmes in Bangladesh, Cambodia, and Pakistan.
The growing popularity has boosted the notion that CCT programmes constitute a new form of social contract between the state and beneficiaries, and it is apparent in the use of the term co-responsibilities (instead of conditions) in a majority of programmes, at least in Latin America. Almost all CCTs have tried to target their benefits rather narrowly to the poor through a combination of geographic and household targeting (mostly via proxy means testing). Moreover, many programmes use community-based targeting or community vetting of eligibility lists to increase transparency. In many cases, CCTs have been the drivers for developing poverty maps or household targeting systems in their countries, or for upgrades to them. Indeed, it would not be an exaggeration to say that CCTs have moved forward the state-of-the-art and standards for targeted programmes generally.
The report shows that there is good evidence that CCTs have improved the lives of poor people. Transfers have been well-targeted to poor households, have raised consumption levels, and have reduced poverty by a substantial amount in some countries. Although there is clear evidence that CCTs have increased the use of education and health services, evidence on the impact of CCTs on ?final? outcomes in education and health is mixed. Some evaluations have found that CCTs contributed to improvements in child height among some population groups; there is also some evidence that programme beneficiaries have better health status.
Offsetting adjustments that could have blunted the impact of transfers, like a reduction in the labour market participation of beneficiaries, have been relatively modest. Moreover, CCT programmes often have provided an entry point for reforming badly-targeted subsidies and upgrading the quality of safety nets. The report argues that CCTs have been an effective way to redistribute income to the poor, while recognising that even the best-designed and best-managed programme cannot fulfil all of the needs of a comprehensive social protection system.
But the CCTs cannot be applied universally across all programmes. For instance, they cannot serve the elderly poor, childless households, or households whose children are outside the age-range covered by the CCT. In such cases, the redistribution efforts are better served through other means. In case of elderly poor, the potential labour supply disincentives from cash transfers are likely to be low, and the justification for further investments in human capital is questionable. Thus, social (or non-contributive) pensions often are the preferred instrument used by both developed and developing countries to provide assistance to elderly poor people. Other have argued strongly saying that CCTs represent an impractical way to improve the use of social services (particularly in low-income countries) and are immoral because they may deprive the neediest people of the assistance they deserve.
CCTs, therefore, need to be complemented with other interventions, such as workfare or employment programmes and social pensions. The report also considers the rationale for conditioning the transfers on the use of specific health and education services by programme beneficiaries. Conditions can be justified if households are under investing in the human capital of their children, for example, if they hold incorrect beliefs about the returns to these investments; if there is ?incomplete altruism? between parents and their children; or if there are large externalities to investments in health and education. Political economy considerations also may favour conditional over unconditional transfers: taxpayers may be more likely to support transfers to the poor if they are linked to efforts to overcome poverty in the long term, particularly when the efforts involve actions to improve the welfare of children.