The debate

Cash transfer programmes are being widely adopted by governments in developing countries to tackle extreme poverty.  Instead of transfers in kind (typically in the form of food), poor households receive a small cash subsidy to help cover their basic needs. 

What are the advantages?

  • Households have more choice over what the cash is used for
  • Cash is more easily delivered than food. 
  • Once set up cash transfer programmes are relatively cheap and easy to administer.
  • Centralised data systems enable more accurate targeting of those most in need and the potential to make linkages to complementary services (e.g. reproductive health services, legal aid, etc.)

However opinion is divided on several counts. For instance:

  • Do cash transfers represent the best approach to social protection compared to say microfinance?
  • Is access to social protection a basic human right that should be provided by governments?
  • Do cash transfers create a culture of dependency?
  • Should cash transfers only be an emergency response?
  • Rather than promoting social inclusion, could cash transfers actually have socially divisive effects?
  • How much impact can cash transfers really have in contexts of widespread poverty and social need?
  • Should beneficiaries meet certain conditions in order to receive cash?
  • Is cash on its own a sustainable solution?
  • Are cash transfers expecting too much out of women for too little reward?

Are there any examples of success?

Yes – just look at Latin America where CTs reach over 100 million people and, in addition to reducing extreme poverty have:

  • Reduced inequality
  • Increased children’s attendance at school and health clinics
  • Allowed households to accumulate small savings to better cope with health shocks, or to invest in housing or livestock.

In Malawi, the Zomba Cash Transfer Programme (ZCTP)  which incentivises schoolgirls and recent dropouts to stay in or return to school with ten US dollars per month has had some tangible successes:

  • After 1 year there were significant declines in early marriage, teenage pregnancy, and self-reported sexual activity.
  • For those girls that were not in school at the beginning of the programme, the probability of getting married or becoming pregnant declined by more than 40% and 30%, respectively.

Further positive effects include:

  • Being able to afford to send children and grandchildren to school
  • Increasing access to credit when needed
  • Feeling a greater sense of self-respect and social-standing when they no longer need to depend on others for charity
  • Reductions in intra-household tensions

However, for all these positive effects of cash transfers, it is those programmes linked to health, nutrition and education services, as well as access to legal aid and information about rights, and which help households to secure sustainable livelihoods which have the greater potential to tackle poverty and transform lives.  If poverty is the result of a lack of education, skills and jobs combined with precarious livelihoods then tackling poverty effectively ultimately depends on CTs being part of an integrated approach to social protection and providing poor people with routes out of poverty.