By Robert Holzmann*
For decades, we have been used to hearing experts from industrialized nations propounding theories for poverty reduction in developing countries. Sometimes it goes the other way. Ideas that lead to success in developing countries soon are shared among others, with the word often passed along through academia, civil society organizations and international groups like the World Bank.
Now, an approach that has proven extremely promising in developing countries in encouraging families to keep their children in school and healthy through regular check ups is proposed for more than one million New Yorkers who live below the poverty line. Impressed by results abroad, Mayor Michael Bloomberg says he wants to introduce a conditional cash transfer program in New York.
Conditional cash transfer programs provide money to poor families if they make sound decisions, such as sending their children to school regularly or bringing their babies and youngsters into health centers for regular check-ups. The aim of these programs is diminishing poverty directly today by providing cash to poor families, and reducing poverty in the future by making sure poor children grow up healthy, educated and ready to find a job. The approach is analogous to, some would say inspired by, the US and European ‘welfare to work’ movement. Poor families receive income support, but in exchange for efforts that promise fundamental improvements in their lives.
Such programs are underway in around 20 countries, from Brazil to Turkey, reaching millions of people. An equal number of countries are proposing or piloting them. Like other development programs, this approach in itself is no panacea to poverty - there are no cure-all solutions - but it represents a critical piece of an integrated approach that promises to bring a lasting escape from poverty.
Very credible impact evaluations have been carried out for several early programs – most extensively in Mexico but with results from many other places as well – Bangladesh, Brazil, Cambodia, Chile, Colombia, Ecuador, Jamaica, Honduras, Nicaragua, Bangladesh and Turkey among them. The results strongly suggest these programs deliver what they promise. The programs have been well-targeted, with impressive shares of the benefits going to the poorest. Poor people’s incomes are raised commensurately with the size of the transfer. In Mexico, households manage to invest some of this money, putting themselves in a better position for the future. In Brazil, the transfers are enough to make a dent in the nation’s infamously high inequality.
But cash transfer programs are perhaps most acclaimed for having raised school enrollments significantly in many countries, and especially for groups where it was most deficient – girls, the poorest, and students in higher grades. The programs have been particularly successful at helping keep students enrolled through transitions, such as from middle to high school, or primary to middle school.
Results in the health field are also generally positive, but less consistent across countries. The use of some, but not all, public preventive services has improved. For example, use of child growth monitoring has generally improved more than vaccination rates. Some measures of child health outcomes have improved in some countries, but not in other cases. This shows that while the incentives can encourage families to seek health services, the services must be both available and of good quality to really change children’s lives.
Program participants are often positive in their opinion of the idea behind the conditional cash transfers, while at the same time offering suggestions on how to improve aspects of the specific program they are participating in.
CCT in Turkey was piloted in 2003 and rolled out across the country from 2004 onwards. Targeted to the poorest 6% of children, the program was originally anticipated to reach 1.3 million children but is now reaching 2.5 million. Already it has made a major impact in increasing school attendance of poor children, especially girls who receive a 30% premium over boys to help offset the cultural bias against sending girls to school, quite apart from the welfare increases for these poor families from the cash support. Poor children under 6 receive the support as long as they attend health clinics - this has led to increased immunization rates, and an opportunity to teach poor families about basic health issues such as nutrition, hygiene and family planning. The money goes to the mothers via bank accounts - almost all of whom never had a bank account before. This enhances the status and self-esteem of women. As one poor mother from Erzurum said: "I can now send my children to school in decent clothes and give them a little something to snack on."
A Brazilian mother, part of Brazil’s Bolsa Familia cash transfer program, has said: “This program has been a wonderful thing for me and my family. I have three kids and my husband is unemployed. The Bolsa Familia money helps me buy food…My kids know that when we get the money they will have more to eat so they look forward to it. The program also helps keep the kids in school because they know how important it is for us to get the money and that this depends on them attending school."
A parent of a child in a Jamaican program has told us that: “If my child is absent from school, the teacher sends me a letter asking me why he is absent three days. They do this so they will be able to answer to the…program staff as to why the child was not in school.”
A Nicaraguan mother said: “There has been a change because now with the [health and nutrition] counseling that people receive they are more knowledgeable about illnesses and how to treat them.”
What lessons can New York City learn from other countries’ experiences with these programs?
First, it isn’t just the model – it’s the management. Most conditional cash transfer programs have been much better implemented than other social programs. They have established procedures for the transparent selection of beneficiaries, good monitoring systems that allow program managers to make just-in-time decisions to run the programs efficiently, and they have included robust external evaluations of their welfare impact. Without such good management, conditional cash transfers might have been one more nice, but unrealized, idea.
Second, these programs are only as good as the education, health and nutrition services provided to the beneficiaries. If schools and health clinics cannot provide families with high quality services, the desired improvements in children’s welfare will not be achieved.
Finally, these programs are not a panacea for poverty. They are but one piece of a comprehensive poverty reduction strategy. Their focus on investing in children leaves a range of issues unaddressed, including the challenges of employment, affordable housing, accessible child care and old age security.
*Robert Holzmann is Social Protection Director at the World Bank