Financial Crisis Highlights Need for More Social Safety Nets, Including Conditional Cash Transfers

July 15, 2009

Beijing, July 15, 2009 – Demand for well-designed safety net and cash transfer programs to assist poor families is growing across the world, as 2009 has developed into a year of tough economic challenges-especially for households already hit by the recent food and fuel crises, and for governments concerned that the financial crisis could turn into a humanitarian one, according to a World Bank report presented in Beijing today.
The report, Conditional Cash Transfers: Reducing Present and Future Poverty, evaluates CCT programs that offer qualifying families cash in exchange for commitments such as taking babies to health clinics regularly or keeping children in school. It finds that these programs—where the responsibility for breaking out of poverty is shared by the state and poor households—can reduce poverty both in the short and long term, particularly when supported by better public services.

After early successes in South Asia and Latin America, CCT programs are now found on every continent. They operate in more than two dozen developing countries, as well as in several developed countries, including the United States. In countries such as Mexico and Brazil, CCT programs were introduced as part of larger efforts to make safety nets more effective, replace badly targeted subsidies, or integrate smaller programs. Colombia's nationwide Familias program has generated important and positive evaluation results and has received sustained support from the World Bank.
CCTs have also grown tremendously within countries. Mexico's Progresa began in 1997 with 300,000 households; its successor Oportunidades now reaches 5 million households. Positive evaluations by researchers encouraged this scaling up. In economic terms, the program's transfers account for about one-fifth of the consumption of the median recipient household.

"With their focus on mothers and young people and their ability to deliver critical health and education services, conditional cash transfers are a vital safety net for countries seeking to help those hardest hit by the financial crisis," said Justin Lin, World Bank Chief Economist and Senior Vice-President, Development Economics.

The report's analysis of more than 20 impact evaluation studies of these programs shows that CCTs have led to many positive results: higher household consumption; increased use of preventive health services; a reduction in child labor; and higher school enrolment.

"CCT programs have also helped modernize social sector management since they require coordination across many agencies," said Ariel Fiszbein, report co-author and Chief Economist for Human Development at the World Bank. "Many have built in careful monitoring and evaluation that is invaluable in assessing results objectively and helping design better programs going forward."


CCT programs should be seen as part of a social protection system. CCT programs are mainly intended to support poor households with children. They should be supplemented by other transfer programs such as social pensions or workfare to provide social protection to all vulnerable groups.

CCT programs have reduced poverty. In general, transfers have been well targeted to poor households, raising consumption levels among beneficiaries, and reducing the incidence of poverty by several percentage points. Concerns that participants might exit the labor force or have more children as a result of receiving cash are not borne out-such effects were absent or very small.

CCT programs have increased the use of health and education services. For example, in Mexico the CCT program decreased the drop-out rate between 6th and 7th grade by 9 percentage points; while in Cambodia, two pilot programs have reduced the drop-out rate between these grades by 20 to 30 percentage points. In Pakistan, another program increased the number of 10- to14-year-old girls in school by 11 percentage points. CCT programs have increased the use of preventive health care services in Colombia, Honduras, Mexico, and Nicaragua by between 8 and 33 percentage points. Encouragingly, many of these improvements have been concentrated among the poorest households.

CCT programs cannot work in isolation. Using services more has not always translated into improved outcomes in health and education. For example, in Cambodia and Mexico higher school enrollment rates have not been matched by better performance in learning tests. To actually reduce child mortality or improve learning, CCTs need to be complemented by higher-quality education and health services and a strong focus on giving children a head start, such as via better nutrition or preschool programs.

"CCT programs enable households to make critical investments in child nutrition, health, and education," concluded Norbert Schady, report co-author and a Senior Economist in the World Bank's Development Research Group. "But many obstacles remain at the household level, including a lack of information and inadequate parenting practices. CCT programs are now experimenting with new complementary approaches to help address these constraints."

“CCT programs have growing relevance for China,” noted Jack Langenbrunner, Human Development Sector Coordinator in the World Bank’s Beijing office.  “In Health, coupon programs are being piloted in Chongqing, allowing mothers to better access post-natal care services and child nutritional supplements.  With growing numbers of multi-drug resistant TB patients (now over 100,000), CCTs also could be utilized to improve compliance with drug treatment programs, helping patients and reducing risks to those around them.  To improve the quality and effectiveness of education, CCTs hold the potential in areas such as Early Childhood Development to provide cash to poor families if they can send kids to kindergartens or child centers.  These could be used to help provide subsidies to poor families if the children can complete compulsory education, and, finally, CCTs can help in the areas of technical and vocational education and training by providing cash to poor families that send graduates of junior or senior secondary to enter into vocational schools and obtain skills certification.”