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Cash Transfer Programs Provide Food Security

Cash Transfer Programs
For the last 30 years non-government organizations (NGOs) like the Transfer Project and Concern Worldwide have been working with the governments of African nations and conducting trials and experiments with African villages to gauge how simple cash transfer programs will benefit their communities. The idea is to give households a small increase in their spending power through cash transfers. Then, after several months, see if these transfers had a lasting economic benefit on the affected households and villages.

Kenya’s Cash Transfer for Orphans and Vulnerable Children (CT-OVC)

Kenya’s Ministry of Home Affairs began a cash transfer program in 2004 with additional aid and funding from UNICEF. This program provides a cash transfer equivalent to $21 for households in Kenya that have a chronically ill caregiver for a child under 17 years of age. Since its implementation, this cash transfer program has aided more than 250,000 households and nearly 1 million people. It provides necessary resources for vulnerable children, such as food security and health care.

Niger’s Temporary Cash Transfer Program

Niger experienced a food and water crisis after a catastrophic drought threatened the agricultural industry in 2009 and 2010. The government of Niger implemented a temporary social program with the help of the NGO Concern Worldwide. This program aimed to provide cash transfers to families in order to prevent malnutrition and resource exhaustion. This program lasted for five months and provided more than 10,000 affected families with $45 each month in order to guarantee food security during the shortage crisis.

Niger’s Childhood Development Cash Transfer Program

After the successful trial of the cash transfer program during the drought and food crisis in 2010, Niger’s government decided to implement Project Filets Sociaux. This is a national cash transfer program dedicated to providing families with the extra help needed for childhood development. Since 2011, this program provided more than 87,000 households with nearly $16 a month for 24 months.

However, this program provided more than just cash transfers to hundreds of thousands of individuals. This program also included a behavioral change component which supplied education for thousands of households on early childhood development practices. Such education practices included breastfeeding, diarrhea rehydration, sleeping under mosquito netting and family planning. Later modules also included school readiness, brain development and discipline. This program experiment turned out to be so successful that many villages that were not receiving cash transfers still benefited from the behavioral modules and learning programs. These educational materials increased the number of affected households to as many as 200,000 with more than 1.5 million people aided.

Cash Benefits

Cash transfer programs have become one of the most popular ways for a government to address poverty within its country. Based on the success of previous cash transfer programs, Niger’s government knew that a cash transfer system would help alleviate poverty. In 2012, Niger began giving its most impoverished citizens about $16 a month for two years. This doubled the spending power of most of these citizens. Despite the fears that these individuals would instead spend this money on luxury items such as alcohol, the opposite was true. The recipients used their extra money productively.

A similar program in Kenya provided around $1,000 to more than 10,000 households in more than 650 random villages. Incredibly, economic activity also increased in nearby villages that had not received the cash transfer, further supporting the idea that cash transfer programs can reduce poverty in African nations.

A Promising Way Forward

A 2021 World Bank report identified nearly 200 similar cash transfer programs across 75 different countries, all providing food security and increasing the quality of life for nearly 92 million people. With such a promising track record, cash transfer programs have firmly established their usefulness in the fight to alleviate global poverty.

– Declan Harkness
Photo: Flickr

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Digital Cash Transfers in Cote d’Ivoire

Digital Cash Transfers in Cote d’IvoireCote d’Ivoire had been consumed by civil conflict at the beginning of the century. However, the conflict ended in 2011, soon after the election of Alassane Ouattara. Since then, Cote d’Ivoire has been one of the fastest-growing countries in the world. However, its growth has failed to reach large portions of the population as the country still struggles with a 46.1 percent poverty rate while an additional 17.6 percent of the population lives on the edge of poverty. In 2014, the World Bank Group started working to initiate digital cash transfers in Cote d’Ivoire to assist the poorest and most disconnected.

The Rise of Mobile Money in Cote d’Ivoire

From 2012 to 2018, the number of active mobile money users grew from less than 1 million to more than 9 million. Of note, the number of mobile cellular subscribers increased from 18.1 million to 33.81 million during the same time frame. With a population of less than 28 million, it is evident how popular the use of technology is becoming in the country. Ivorians have adapted to using mobile money for several reasons:

  • Person-to-person cash transfers in Cote d’Ivoire are easy to operate.
  • Due to high fees and the historic failure of several banks in the country, more Ivorians are turning away from licensed financial institutions. In 2017, 34 percent of Ivorians had mobile money accounts compared to 15 percent with bank accounts.
  • There is a rising trend in the digitalization of secondary school feels.
  • Migrants are digitally transferring remittances back home.
  • Paying bills digitally is growing.

How the Cash Transfer Program Works

According to the World Bank, the program operates as follows: “(i) a targeting system for cash transfers; (ii) a social protection household registry; (iii) a cash transfer payment system using digital mobile money technology; and (iv) management information system and capacity-building.”

For the actual transferring of money, the government of Cote d’Ivoire has partnered with the digital financial service organization, Orange. The Account of the Ministry of Social Protection sends a wire transfer to Orange. Then, it creates e-money and puts it into the digital accounts of the intended recipients. The recipients can then access and use their money electronically or cash-out.

Initial Constraints of the Program

Despite the widespread use of mobile devices in the country, there are a few issues with the implementation of the program. Many beneficiaries already owned mobile phones. However, others are given a device through which the program struggled to adapt. Financial literacy has been another issue as some beneficiaries are unsure about how much to withdraw and how much to save. Moreover, the lack of understanding of the importance of the PIN number resulted in some beneficiaries sharing sensitive information, thus compromising their accounts. Regulatory issues such as the requirement of a state-issued ID also created challenges in ensuring beneficiaries are eligible to continue to receive their transfers.

Successes of the Program

Peer-to-peer and community-oriented training focus on increasing knowledge surrounding the operation of devices and building awareness about security best practices with accounts. Those without a proper state-issued ID have been informed on how to obtain one. In addition, exemptions have been provided which allow beneficiaries to designate a trusted transfer recipient within the household or community. This led to 100 percent of beneficiaries receiving their payments in 2018.

By going digital, administrative and transactional costs are limited. As of April 2019, 300,000 poor individuals have benefitted from the program, more than half of whom are women. Additionally, as of the same date, 720,000 individuals have been registered with the social program’s registry. This expands the number of potential future social program beneficiaries.

Overall, the implementation of cash transfers in Cote d’Ivoire is an excellent example of how technology can assist those who are most financially vulnerable and most disconnected from the rest of society.

– Scott Boyce
Photo: Flickr

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Dispelling the Myths of “Charity”: Social Safety Nets in Asia

Social Safety Nets in Asia
Regardless of its title—alms, gifts, handouts, welfare, aid—the true meaning of social safety nets is not universally accepted in the developing world. As a useful form of poverty reduction, there are several purported reasons as to why “charity” is regarded as wasteful spending. One is the belief that social assistance programs diminish incentives to work and create dependency on the program’s benefits into the foreseeable future.

The Issues with Social Safety Nets in Asia

The myth of “crutch economies” being the bane of current work ethic and the cause of further, more established and resilient poverty, appears to be losing its already slippery empirical footing. Recent studies conducted by the World Bank in countries such as Mexico, Indonesia and the Philippines have found no evidence that workers who receive assistance go on to work less. Instead, social safety nets routinely form a stable barrier for further slides into economic degradation in developing countries.

But spending on them still appears to be minimal. Although the levels of spending as a percentage of GDP varies across countries, spending on social safety nets in Asia, South and East Asia especially, is relatively low. The developing world on average spends 1.5 percent of its GDP on some form of welfare programs. South Asia, meanwhile, spends only 0.9 percent of GDP on social safety nets.

In lieu of more conventional welfare programs, the region has relied instead on more customary and time-tested economic assistance programs. A mix of ample growth, a youthful population and a devoted and helping family has filled the void of official government social safety nets in Asia.

While an admirable economic support system, there are more modern social safety net programs that do not become victim to the “crutch economy” fears. A unique pension plan in Mexico is disproving both the myth of diminishing work ethic and future drags on the economy due to dependency.

The Older Adults Program in Mexico

Pension plans provide better well-being later in life, as they allow people to project their current earnings into the future. But the regency of informal labor in developing countries has made large-scale worker contribution plans rather toothless in practice. Instead, Latin American countries are trying a pension program that targets age and income and does not rely on the contributions of workers. This form of social security could encourage Asian countries to provide a more substantial safety net at home.

Removing the fear of falling into abject poverty, or burdening close relatives once workers are removed from the labor market, is the goal of the Older Adults Program (OAP) in Mexico. The OAP is a noncontributory universal pension system for elderly Mexicans living in small towns. Initiated in 2007, the program took only four years to cover 2.1 million elderly people in 76,000 communities in Mexico. A recent study of the OAP by the International Development Bank (IDB) helps dispel the myth of crutch economies.

One concern of social safety nets in Asia is that they instill a sense of complacency in the younger population. Expecting to receive future income from the program’s benefits, the pension warps the savings and work ethic of the younger generations. The IDB’s study, however, found no evidence of such dependence. These “anticipation effects” that are widely feared and cited by critics of social safety nets were not backed up with any empirical findings. Negative labor supply effects of working age citizens was not a side effect of the pension plan for the elderly.

Work ethic among the elderly was not negatively affected either. Although beneficiaries working for pay in the official labor force dropped, this was more than compensated for by the rise in informal, unpaid family business employment. Rather than sapping their willingness to work, the pension program transferred those efforts to where families deemed most urgent.

The Coming of Age in Asia

But despite the lack of spending, there is hope that social safety nets in Asia will soon grow in usage and acceptance. This is already the case in Indonesia and the Philippines, even if they are outliers in the region.

A cash-transfer scheme in the Philippines, having covered four percent of the population in 2009, increased coverage to 20 percent in 2015. A similar scheme in Indonesia has grown in coverage from two percent of the population in 2009 to nine percent in 2016 with help from the World Bank.

In Indonesia, the payments from the Family Hope Program provide benefits to those in the bottom 10 percent of income distribution. Benefits are available to households with a pregnant mother or a child between the ages of zero to 18. Assistance focuses on promoting education and health of the family. The cash payments are made only if beneficiary households keep children enrolled in school and respond to health issues by taking children to clinics.

As promising as the Family Hope Program is, other countries in Asia have yet to adequately address welfare programs relative to other regions of the world. A fear of diminishing labor supply motivation and perpetual dependency on benefits should not deter the acceptance and administration of social safety nets.

Other than evidence-based research, there is one persuasive reason for adopting more widespread social safety nets in Asia: human kindness. Harry Truman, commenting in 1946, said, “The word ‘charity’ has regained its old, true meaning—that of goodwill toward one’s fellowman; of brotherhood, of mutual help, of love.” Until that is realized, the world will have to rely on empirical arguments to persuade decision makers that social safety nets are necessary.

– Nathan Ghelli
Photo: Flickr