In response to the recent food crisis and global financial crisis, the G-20 countries and the World Bank announced increased spending on social protection programmes, including cash-based systems. Cash transfers are an increasingly popular social protection mechanism throughout Latin America, where conditional cash transfers are dominant, and sub-Saharan Africa, where unconditional cash transfers are more common. This issue of insights examines the case for and against conditional cash transfers (CCTs).
The topics covered are:
- Are conditional cash transfers a way out for poor people?
- Do cash transfers discourage work?
- Is a universal ‘Basic Income Grant’ feasible in Namibia
- Can cash transfers prevent inter-generational poverty in South Africa
- Do women pay the price with conditionalities?
- Can cash transfers improve gender relations?
- Are cash transfers susceptible to high food prices?
Arguments in favour of CCTs (largely derived from Latin American evaulations) 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’.
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.
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 a resurgence in beneficiary preferences for food aid.