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Cash Grants: Benefiting the World’s Poor

cash grants
New research suggests that recipients of cash grants use money strategically to start businesses and provide themselves with sustainable incomes.

“We’ve been doing ‘trickle down’ for a long time before starting cash transfers and we’ve never seen the kind of impact we have with cash transfers,” says Carolyn Heinrich, professor of public affairs and economics at Texas University.

Recent studies to support Heinrich’s observation include the Transfer Project, which focused on the impacts of grants to individuals in Zambia, Ghana and Malawi. The results were positive: cash grants improve not only quality of life and overall happiness levels, but also eating habits.

The Ugandan government experimented with the idea of cash grants in 2008. Thousands of poor 16 to 35-year-olds in Uganda were grateful recipients of $382 dollars if they could provide a plan for how the money would help them start a trade. The results were analyzed by Columbia University’s Chris Blattman.

Blattman, along with his co-authors, looked at the status of the recipients in 2012 and found that they were earning 40 percent more money than before, and were 40 percent more likely to be paying taxes. So, not only were they personally benefiting from the cash grants, but the money also enabled them to contribute to society by paying taxes and providing services with their new trade.

The Ugandan case introduces the power of conditional grants within cash grants. By placing conditions on the money, cash grants can be used to enforce positive behavior.

For example, Berk Ozler of the World Bank explains that grants conditional on a child being enrolled in school resulted in 41 percent more children attending school. Programs without that condition still resulted in improved school attendance, but by only 23 percent.

Even without the conditions, cash grants can have a range of positive benefits in areas including crimes rates, children’s health, child mortality, early marriage and teenage pregnancy.

The idea of providing the poor with money is not a new one. In the 1960s, economist Milton Friedman advocated for a “basic income guarantee,” where the U.S. government would ensure all Americans make a minimum income. This would replace other aid programs the U.S. employs, such as food stamps.

Friedman’s idea is similar to cash grants – instead of giving food or supplies to those in need, give them the one tool they need to provide for themselves: money.

It was not until the 1990s, that cash grants were first distributed in Latin America. The long-term effects were enough to prompt the spread of cash grants to Africa, and then Asia.

Now, Michelle Adato, a researcher on the impact of cash transfers, says, “Cash grants are now being seen as part of a comprehensive development strategy as opposed to just a safety net.”

– Julianne O’Connor

Sources: The New Yorker, Business Week, IRIN
Photo: Business Week

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The Power of 12 Dollars

12 dollars
Before the 1990s, many people disapproved of giving unregulated cash to the poor. People feared that handing out checks would lead to corruption, waste and an increase in drug and alcohol abuse among the impoverished.

However, the increasingly popular cash grant programs that have appeared in countries such as Brazil and Mexico are disproving these stigmas. Those in extreme poverty receive invaluable benefits from cash grants of as little as 12 dollars per month. When desperately needy individuals get small monthly cash transfers, research shows that better health, education and smarter overall life decisions will follow.

Michelle Adato has studied the impact of cash transfers for many years. She reveals, “Cash grants are now being seen as a part of a comprehensive development strategy as opposed to just a safety net.” What was previously thought of as a short-term solution is proving to have longer, more sustainable results.

When individuals and families receive grants, such as South African child support grants and those from The Transfer Project led by UNICEF, they can buy things they really need such as food, clothes and an education for their children. Extended grants to adolescents have proven to decrease risky sexual behavior, thereby reducing the chances of teen pregnancy and HIV, by 63 percent.

John Hoddinott, a deputy director at the Washington-based International Food Policy Research Unit, argues that cash grants not only give the poor a means to buy necessary survival items, but they “give beneficiaries a base from which to make longer term investments.”

“The research shows that in the vast majority of cases, poor people use their money well — the evidence is unambiguous.”

The Transfer Project, which runs programs across Sub-Saharan Africa, operates on the premise that income poverty has highly damaging impacts on human development, and that cash empowers people living in poverty to make their own decisions on how to improve their lives.

Those receiving grants from The Transfer Project in Zambia, Ghana and Malawi “all reported being happier with their lives, and research showed that recipients in these countries were eating better too.”

The child support grant in South Africa has expanded to include 17-year-olds, and now reaches 11 million children. The U.N. reports that a total of 20 African countries have social protection programs like these and both the number of countries and size of the programs are growing, with Kenya, Zambia, Lesotho, Mauritania, Mali, Niger and Zimbabwe all expanding their programs.

In many ways, the initial skepticism of cash grant programs have only served to increase scrutiny and research, in turn strengthening them. Handing out cash rather than food and supplies empowers the impoverished to make their own choices and invest the stipends wisely. The widespread success of programs like The Transfer Project and the South African child support grants is a testament to the power of a small amount of money on lifting the poorest of the poor out of dire living conditions and into a brighter future.

– Grace Flaherty

Sources: CPC, IRIN News
Photo: Poke