“COMBAT POVERTY TODAY AND BREAK THE CYCLE OF POVERTY TOMORROW “
Conditional cash transfers (CCTs) have been frequently highlighted as an innovative tool of
social protection by combining the short term objectives of alleviating poverty with incentives
for families to increase their investments in human capital so as to break the intergenerational
poverty traps. The only criteria for the families to receive cash benefits is that their household
income falls below a certain income cut off or that they live within a geographically targeted
region. Brazil and Mexico have been extremely successful at including the poor-plummeting
poverty and initiated approximating inequality gap.
Opportunity NYC ended on August 31, 2010. The program built on the conceptual framework
and success of international conditional cash transfer (CCT) programs was the first major
CCT initiative implemented in the United States. The principal objective of Opportunity NYC
Family Rewards was to test the impact of monetary incentives on children’s education, family
health and adults’ workforce outcomes.
In Latin America by 2011, CCTs had spread to 18 countries in the region and covered as many as
129 million beneficiaries. Although the conditions and amounts of money may vary from
country to country, ranging from $5 to $33 per child, in general these programs provide money
to poor families under the condition that those transfers are used as an investment on their
children’s human capital, such as regular school attendance and basic preventive health care.
The purpose of these programs is to address the inter-generational transmission of poverty and
to foster social inclusion by targeting the poor, focusing on children, delivering transfers to
women, and changing social accountability relationships between beneficiaries, service
providers and governments. Most of these transfer schemes are now benefiting around 110
million people in the region, and are considered relatively cheap, costing around 0.5% of their
GDP. In short, rather than the older thought, “transfers of income today and transfer of income
tomorrow,” the new paradigm emphasizes “transfers of income today to facilitate greater
owned earn income tomorrow.”
This approach is expected to supplement the consumption of the poor, create employment
opportunities and bring about improvements in health and education. Three things need to be
noted about CCTs. First, all poor households benefit from them, regardless of whether their
workers hold formal or informal jobs. Second, the size of the income transfer is not meant to,
by itself, raise households from poverty. The transfer complements the income that they earn
with their own efforts, and aims to provide some minimum consumption and compensate
parents for the lost income of having their children in school rather than helping on the family
farm or begging in the streets. Larger transfers can undermine households’ incentives to work,
creating a “poverty trap.”Third, these programs do not create jobs, although by giving
youngsters more education they should help them find jobs with higher productivity when they
enter the labor market. The program’s exit door is a more productive job. Put differently, CCTs
are not meant to be permanent welfare, but temporary investments in the human capital of
the poor.
Effectiveness: CCTs have resulted in sizeable reductions in poverty among recipients—
especially when the transfer has been sufficient, well targeted, and structured in a way that it
does not discourage recipients from taking other actions to escape poverty. Because CCTs
provide a steady income, they have helped protect poor households from the worst effects of
unemployment, catastrophic illness, and other sudden income shocks.Making cash
transfers to women, as virtually all CCTs do,this may have increased their bargaining power.
WHY HAVE CCTs PROGRAMS BEEN ATTRACTIVE?
CCTs have shown good outcomes and easily adaptable to particular country settings and
political contexts. Incentivizing regular engagement with local health systems, Oportunidades
empowered patients to demand better quality of care from their providers.
Removing structural barriers to accessing health care and education via CCTs helped create a
healthier, more educated generation. On average, 80% of the benefits go to the 40% poorest
families. The programs have also promoted equality of gender providing larger funds
to girls since they often drop out earlier, it has increased their enrollment and attendance to
secondary levels of education. In the long run, these investments may also yield to significant
changes in women's empowerment and insertion in economic networks.
CCTs are scalable, can readily move from pilot phases to national programs. In words of Stef
Bertozzi ,”Even though this was a “band aid” solution to poverty, over time it actually led to
real structural changes”. They have been highly visible and the governments can show policy
action by providing a platform for agency and program coordination of basic social services by
sector coordination of relevant ministries operating at low administrative costs.
CHALLENGES ENCOUNTERED:
As an age old adage, “Poverty of good is easily cured; poverty of the mind is irreparable”.
According to me, it is poverty which affects the mind sets which then has a domino effect on the
behavioral economics. I argue here that CCTs, despite their notable contributions to the
reduction of poverty in the region, are insufficient in bringing about further and lasting gains in
social welfare.
In an article in the New York Times addressing the termination of the pilot CCT, Opportunity
NYC, the committee leader of one of its lending institutions stated that people were distrustful
and confused by the program's intricacies. It has been found to undermine personal freedom.
People are free to choose their ideological reasons. Living in poverty being a unique life stressor
creates a cognitive tax similar to skipping a night of sleep or becoming addicted to alcohol. This
reduction in cognitive ability accounts to the added complexities of living a life with small
amount of money. For example, in Bogota a CCT program paid mother’s a monthly stipend if
they took their children to school. Attendance during the first school year was good but the re
enrollment
rates went low. Later, withholding a part of regular payment until just before the
start of the next school year was found to boost the enrollment sharply.
I believe the various ideologies of parents include: being unaware of the correct
information regarding the economic returns of the education, considering sending children to
school not worth the cost or perhaps families who have lived at a subsistence level for
generations and who lack complete formal education themselves have formed mental models
and psychological biases that restrict them to understand that actual worth of education.
Shortage of financial and institutional support for the program partly explains the brief time
limit which highlights the major challenge. On many occasions, changes in political leadership,
natural disasters, or changes in program administration have delayed the implementation
schedule and lead to decreased efficiency or program termination.
Replicability and sustainability of these programs in country settings where financial and
operational frameworks are weaker. Size of the transfers is too small and insufficient to make
real impacts on the lives of the people. Institutional weakness with inadequate skill mix and frail
information technology and management information systems (MIS) add to the problem. One such delay in
Mexico's Oportunidades program caused 27% of its targeted population to not receive any
transfers after two years of implementation.
CCTs are corruption prone and vulnerable to pressure from a variety of local elite resources and,
are inefficiently used and wasted. Often there is inability to separate the effect of the cash
transfer on the desired outcome from the effect of other program components. As majority of
times political coincidence is observed where the economy grows at the same time, the
program is designed and institutionalized. The relation between the two is often confused with
the causation.
They have failed to address the vast majority of vulnerable people who are living on or just
above the poverty line. Primarily, conditional cash transfer programs are not flexible enough to
extend benefits to households that fall into the program's targeted population only during
economic downturns. Thus, those not normally covered by the program's benefits may be
hit harder than those who are, but will not be able to be assisted.
Another common obstacle to success in most CCTs is exclusion of needy homes in the targeting
process. In an assessment by the World Bank, much exclusion was due to remote communities'
inability to access schools or clinics. Many such communities fall into developing countries' most
poverty-stricken populations but cannot follow through with conditionalies since the
transportation costs to attend schools or hospital visits outweigh the benefits. Furthermore, an
evaluation of Mexico's Progresa-Oportunidades program addresses the issue that those in
poverty with debilitating illnesses can be excluded from CCTs due to their physical inability to
accomplish the conditionalies.
SOLUTIONS TARGETING TO BRING ABOUT SYSTEMIC CHANGES:
To continue to be effective, CCTs need to focus sharply on their objectives to invest in the
human capital of the poor:
One way people assess their own self is to compare themselves with the available role models
within their social networks. Positive role models can serve to bolster clear set of values,
commitment to community, acceptance of others and an ability to overcome obstacles.
Encouraging poor people to participate may also address the effects of transient poverty due to
loss of employment and income during crisis.
Status Quo where everyone has mobile phones, periodic alerts regarding the job
opportunities and time to receive the benefits can counteract the problem of lack of
information about the exit program. These should be both linguistically and culturally adapted
for maxima efforts to reach local participation. Media interventions and awareness campaigns
can also be effective in reaching the poor and the excluded groups, notably the extreme poor
living outside the reach of social protection programs tied with formal sector employment.
Each program should be tailored to specific country needs and circumstances. For example, in
countries with no working safety nets, CCTs may have a larger social assistance role than in
other countries with a working and efficient safety net. In the countries with such safety nets,
CCTs may have a larger role in addressing the human capital gaps of poor children.
CCTs should have a solid design with considerable amount of technical legitimacy. This can be
achieved by geographically targeting through poverty map, preventing discretionary politically
driven expansions. Attract strong donor support to raise substantial grant funding from bilateral
donors and financial institutions. Careful implementation is critical for program success. Key
areas of attention include selecting beneficiaries in an objective, transparent, and uniform way;
making payments on time and efficiently and putting in place an efficient complaint and grievance
redress system.
There’s a need to strengthen the mechanisms of local participation particularly by beneficiary
committees- as they are regarded as vital arenas for ensuring legitimacy and publicity of activities
such as targeting and programming follow up. Capacity building and incentives at the grass
roots level is as important as monitoring the approach which helps in broadening the scope of
participation in these committees. Institutional weaknesses can be surmounted over time with
significant restructuring efforts within the ministries (especially when the program achieves a
national scale), patient work and considerable technical assistance.
Therefore, after ensuring that CCTs reach all of their target population and operate effectively,
the weight of the additional efforts to help the poor needs to focus on raising their productivity;
this requires facilitating that they get a productive formal job. For those who believe
that social programs never work in poor countries and that most of what is spent on them gets
stolen, conditional cash transfer programs offer a convincing rebuttal.
These programs are
focused to help to those who need help the most, and do so with little waste, corruption or
political interference. They have enabled economic growth and have yielded trickle down benefits
to the poor and vulnerable. Initial results have been promising in reducing the absolute number
of poor in the country and some states have witnessed less proportion of poor than even the
national average. Yet, it’s been observed that even though vast resources have been allocated
and spent, we are still far from reaching the goal of complete eradication of poverty.
social protection by combining the short term objectives of alleviating poverty with incentives
for families to increase their investments in human capital so as to break the intergenerational
poverty traps. The only criteria for the families to receive cash benefits is that their household
income falls below a certain income cut off or that they live within a geographically targeted
region. Brazil and Mexico have been extremely successful at including the poor-plummeting
poverty and initiated approximating inequality gap.
Opportunity NYC ended on August 31, 2010. The program built on the conceptual framework
and success of international conditional cash transfer (CCT) programs was the first major
CCT initiative implemented in the United States. The principal objective of Opportunity NYC
Family Rewards was to test the impact of monetary incentives on children’s education, family
health and adults’ workforce outcomes.
In Latin America by 2011, CCTs had spread to 18 countries in the region and covered as many as
129 million beneficiaries. Although the conditions and amounts of money may vary from
country to country, ranging from $5 to $33 per child, in general these programs provide money
to poor families under the condition that those transfers are used as an investment on their
children’s human capital, such as regular school attendance and basic preventive health care.
The purpose of these programs is to address the inter-generational transmission of poverty and
to foster social inclusion by targeting the poor, focusing on children, delivering transfers to
women, and changing social accountability relationships between beneficiaries, service
providers and governments. Most of these transfer schemes are now benefiting around 110
million people in the region, and are considered relatively cheap, costing around 0.5% of their
GDP. In short, rather than the older thought, “transfers of income today and transfer of income
tomorrow,” the new paradigm emphasizes “transfers of income today to facilitate greater
owned earn income tomorrow.”
This approach is expected to supplement the consumption of the poor, create employment
opportunities and bring about improvements in health and education. Three things need to be
noted about CCTs. First, all poor households benefit from them, regardless of whether their
workers hold formal or informal jobs. Second, the size of the income transfer is not meant to,
by itself, raise households from poverty. The transfer complements the income that they earn
with their own efforts, and aims to provide some minimum consumption and compensate
parents for the lost income of having their children in school rather than helping on the family
farm or begging in the streets. Larger transfers can undermine households’ incentives to work,
creating a “poverty trap.”Third, these programs do not create jobs, although by giving
youngsters more education they should help them find jobs with higher productivity when they
enter the labor market. The program’s exit door is a more productive job. Put differently, CCTs
are not meant to be permanent welfare, but temporary investments in the human capital of
the poor.
Effectiveness: CCTs have resulted in sizeable reductions in poverty among recipients—
especially when the transfer has been sufficient, well targeted, and structured in a way that it
does not discourage recipients from taking other actions to escape poverty. Because CCTs
provide a steady income, they have helped protect poor households from the worst effects of
unemployment, catastrophic illness, and other sudden income shocks.Making cash
transfers to women, as virtually all CCTs do,this may have increased their bargaining power.
WHY HAVE CCTs PROGRAMS BEEN ATTRACTIVE?
CCTs have shown good outcomes and easily adaptable to particular country settings and
political contexts. Incentivizing regular engagement with local health systems, Oportunidades
empowered patients to demand better quality of care from their providers.
Removing structural barriers to accessing health care and education via CCTs helped create a
healthier, more educated generation. On average, 80% of the benefits go to the 40% poorest
families. The programs have also promoted equality of gender providing larger funds
to girls since they often drop out earlier, it has increased their enrollment and attendance to
secondary levels of education. In the long run, these investments may also yield to significant
changes in women's empowerment and insertion in economic networks.
CCTs are scalable, can readily move from pilot phases to national programs. In words of Stef
Bertozzi ,”Even though this was a “band aid” solution to poverty, over time it actually led to
real structural changes”. They have been highly visible and the governments can show policy
action by providing a platform for agency and program coordination of basic social services by
sector coordination of relevant ministries operating at low administrative costs.
CHALLENGES ENCOUNTERED:
As an age old adage, “Poverty of good is easily cured; poverty of the mind is irreparable”.
According to me, it is poverty which affects the mind sets which then has a domino effect on the
behavioral economics. I argue here that CCTs, despite their notable contributions to the
reduction of poverty in the region, are insufficient in bringing about further and lasting gains in
social welfare.
In an article in the New York Times addressing the termination of the pilot CCT, Opportunity
NYC, the committee leader of one of its lending institutions stated that people were distrustful
and confused by the program's intricacies. It has been found to undermine personal freedom.
People are free to choose their ideological reasons. Living in poverty being a unique life stressor
creates a cognitive tax similar to skipping a night of sleep or becoming addicted to alcohol. This
reduction in cognitive ability accounts to the added complexities of living a life with small
amount of money. For example, in Bogota a CCT program paid mother’s a monthly stipend if
they took their children to school. Attendance during the first school year was good but the re
enrollment
rates went low. Later, withholding a part of regular payment until just before the
start of the next school year was found to boost the enrollment sharply.
I believe the various ideologies of parents include: being unaware of the correct
information regarding the economic returns of the education, considering sending children to
school not worth the cost or perhaps families who have lived at a subsistence level for
generations and who lack complete formal education themselves have formed mental models
and psychological biases that restrict them to understand that actual worth of education.
Shortage of financial and institutional support for the program partly explains the brief time
limit which highlights the major challenge. On many occasions, changes in political leadership,
natural disasters, or changes in program administration have delayed the implementation
schedule and lead to decreased efficiency or program termination.
Replicability and sustainability of these programs in country settings where financial and
operational frameworks are weaker. Size of the transfers is too small and insufficient to make
real impacts on the lives of the people. Institutional weakness with inadequate skill mix and frail
information technology and management information systems (MIS) add to the problem. One such delay in
Mexico's Oportunidades program caused 27% of its targeted population to not receive any
transfers after two years of implementation.
CCTs are corruption prone and vulnerable to pressure from a variety of local elite resources and,
are inefficiently used and wasted. Often there is inability to separate the effect of the cash
transfer on the desired outcome from the effect of other program components. As majority of
times political coincidence is observed where the economy grows at the same time, the
program is designed and institutionalized. The relation between the two is often confused with
the causation.
They have failed to address the vast majority of vulnerable people who are living on or just
above the poverty line. Primarily, conditional cash transfer programs are not flexible enough to
extend benefits to households that fall into the program's targeted population only during
economic downturns. Thus, those not normally covered by the program's benefits may be
hit harder than those who are, but will not be able to be assisted.
Another common obstacle to success in most CCTs is exclusion of needy homes in the targeting
process. In an assessment by the World Bank, much exclusion was due to remote communities'
inability to access schools or clinics. Many such communities fall into developing countries' most
poverty-stricken populations but cannot follow through with conditionalies since the
transportation costs to attend schools or hospital visits outweigh the benefits. Furthermore, an
evaluation of Mexico's Progresa-Oportunidades program addresses the issue that those in
poverty with debilitating illnesses can be excluded from CCTs due to their physical inability to
accomplish the conditionalies.
SOLUTIONS TARGETING TO BRING ABOUT SYSTEMIC CHANGES:
To continue to be effective, CCTs need to focus sharply on their objectives to invest in the
human capital of the poor:
One way people assess their own self is to compare themselves with the available role models
within their social networks. Positive role models can serve to bolster clear set of values,
commitment to community, acceptance of others and an ability to overcome obstacles.
Encouraging poor people to participate may also address the effects of transient poverty due to
loss of employment and income during crisis.
Status Quo where everyone has mobile phones, periodic alerts regarding the job
opportunities and time to receive the benefits can counteract the problem of lack of
information about the exit program. These should be both linguistically and culturally adapted
for maxima efforts to reach local participation. Media interventions and awareness campaigns
can also be effective in reaching the poor and the excluded groups, notably the extreme poor
living outside the reach of social protection programs tied with formal sector employment.
Each program should be tailored to specific country needs and circumstances. For example, in
countries with no working safety nets, CCTs may have a larger social assistance role than in
other countries with a working and efficient safety net. In the countries with such safety nets,
CCTs may have a larger role in addressing the human capital gaps of poor children.
CCTs should have a solid design with considerable amount of technical legitimacy. This can be
achieved by geographically targeting through poverty map, preventing discretionary politically
driven expansions. Attract strong donor support to raise substantial grant funding from bilateral
donors and financial institutions. Careful implementation is critical for program success. Key
areas of attention include selecting beneficiaries in an objective, transparent, and uniform way;
making payments on time and efficiently and putting in place an efficient complaint and grievance
redress system.
There’s a need to strengthen the mechanisms of local participation particularly by beneficiary
committees- as they are regarded as vital arenas for ensuring legitimacy and publicity of activities
such as targeting and programming follow up. Capacity building and incentives at the grass
roots level is as important as monitoring the approach which helps in broadening the scope of
participation in these committees. Institutional weaknesses can be surmounted over time with
significant restructuring efforts within the ministries (especially when the program achieves a
national scale), patient work and considerable technical assistance.
Therefore, after ensuring that CCTs reach all of their target population and operate effectively,
the weight of the additional efforts to help the poor needs to focus on raising their productivity;
this requires facilitating that they get a productive formal job. For those who believe
that social programs never work in poor countries and that most of what is spent on them gets
stolen, conditional cash transfer programs offer a convincing rebuttal.
These programs are
focused to help to those who need help the most, and do so with little waste, corruption or
political interference. They have enabled economic growth and have yielded trickle down benefits
to the poor and vulnerable. Initial results have been promising in reducing the absolute number
of poor in the country and some states have witnessed less proportion of poor than even the
national average. Yet, it’s been observed that even though vast resources have been allocated
and spent, we are still far from reaching the goal of complete eradication of poverty.
Great read , very well researched and very informative .
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