18 governments from Latin America and the Caribbean give out regular monthly cash transfers to almost 130 million poor. These transfers which are known as Conditional Cash Transfers or CCTs and which vary greatly in terms of objectives and coverage, try to alleviate poverty in the short term and develop human capital in the long run. These programs typically focus on children’s health and education and, in some cases, maternal health.
In a recent paper, Rômulo Paes de Sousa (from the Institute of Development Studies), Ferdinando Regalia and Marco Stampini (both economists from the Inter-American Development Bank) analyzed the experience of 6 countries and extracted 8 lessons for countries that have recently started or that are currently considering the introduction of a CCT.
These are the 8 lessons:
1. CCTs are long term interventions, whose budgets grow over time and typically converge to 0.3-0.4% of GDP.
2. The long term objective of breaking the intergenerational transmission of poverty through the development of human capital requires additional budget allocations for the expansion of the supply of education and health care services.
3. Beyond the allocation of budget resources, the setup of inter-sector coordination mechanisms (between social protection, health and education), the coordination with local governments and the supervision of the highest government hierarchies are necessary to ensure that CCTs produce human capital development impacts.
4. The accurate targeting of beneficiaries is key to ensuring program credibility. Beneficiaries are typically selected through a combination of geographical and categorical criteria, followed by means-testing and community validation.
5. Efforts to increase the precision of targeting cannot eliminate errors of both exclusion and inclusion. These can however be mitigated through regular audits, the dynamic management of the registry of beneficiaries, and processes of recertification.
6. The search for operational efficiency and effectiveness requires considerable (financial and human resource) investments in monitoring and evaluation. Results feed back into program design, producing incremental innovations.
7. Modern payment systems are needed to reduce the administrative cost of delivering the cash grants, and the opportunity cost of beneficiaries’ participation. Countries tend to converge towards the use of bank cards.
8. The effect of CCT programs on gender inequality has been reduced by the lack of attempts to redefine women’s household roles and responsibilities.