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David Seidenfeld and Sudhanshu Handa
Principal Researcher, American Institutes for Research (AIR) and Professor, University of North Carolina (UNC)
United States of America, 09-03-2015

Cash Transfer Programs: the gold standard for poverty reduction

National cash transfers programs that target the poor, both conditional and unconditional, appear to be the most successful interventions for reducing poverty and providing a wide range of benefits to the poor. Dutch policy can focus on encouraging governments in developing countries to pilot and take up CT programs, while also providing the initial funding for governments to pilot the CT and rigorously evaluate it.

The abundance of evidence from dozens of cash transfer programs across the world suggest that there are few interventions that can match the range of impacts and cost-effectiveness of a small, predictable monetary transfer to poor families in developing countries. Since the ground-breaking experiences of Progresa (Mexico), Bolsa Familia (Brasil) and the Child Support Grant (South Africa) in the mid-1990s, literally dozens of developing countries have made direct cash payments to poor families part of their economic development strategy. Evidence based on independent studies from different programs across the world demonstrates that cash transfers can have an impact on a wide range of development domains.

Cash transfer programs can impact both protective and productive domains for the beneficiaries, but can also produce positive spillover effects to non-beneficiaries living in the same community, making CTs a socially acceptable policy.  On the protective side, a recent review by Baird et al. (2011a) indicates for example that both conditional and unconditional cash transfers have significant impacts on children’s schooling. Beyond schooling, impacts of national cash transfer programs, whether conditional or unconditional, have been reported for consumption (Seidenfeld, Handa, and Davis 2014 for Zambia; Kenya CT-OVC Evaluation Team 2012; Hoddinott & Skoufias 2004 for Mexico), children’s health (Luseno et al. 2012 for Malawi), intra-household decision-making (Handa et al. 2009 for Mexico), child nutrition (Behrman & Hoddinott 2005 for Mexico), and even HIV prevention (Handa et al. 2014 for Kenya; Cluver et al. 2013 for South Africa). On the productive side we find impacts to asset accumulation, agricultural productivity, and non-farm enterprises (Seidenfeld, Handa, and Davis 2014 for Zambia; Covarrubias et al. 2012 for Malawi).  Recent work by the FAO and UC Davis finds positive spillover effects to non-recipients of the program living in program communities who benefit from selling their goods to CT recipients or by being hired as labor by beneficiaries (Kenya, Zambia, Malawi, Zimbabwe, and Ghana).

As for the best policy mix, CT programs require complementary interventions in both the demand for, and the supply of specific services in order to have significant impact across all key development indicators.  In the case of the Zambian Child Grant program, the cash transfer did not have significant impacts over some indicators. The program did not impact spending on education, nor use of health care, nor nutritional status, nor school enrollment or attendance of older teenagers.

These results suggest that the ultimate range of effects depend on program design, availability of services, and context. CTs should be accompanied by improvement to support services such as education and health care.  If schools and health clinics are unaccessable, overrun or under stocked, then the impact of the program to affect education and health care domains is limited.  Some impacts, such as nutritional status, are complex to move and depend on other factors beyond the cash transfer program such as access to clean water and latrines.


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Promoting inclusiveness in the Dutch policy agenda on trade and international cooperation

This contribution is part of a consultation for the Dutch Ministry of Foreign Affairs on how to promote inclusiveness in the Dutch policy agenda on trade and international cooperation.
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