2.5.15. Pay for Results: Conditional Cash Transfers (CCTs) and Social Payments
Arrangements whereby cash payments are made directly to needy households to stimulate investment in human capital upon meeting predetermined con (e.g., ensuring periodic health checks or school attendance).These programs seek to encourage behavior change to resolve social challenges through cash payments to benefit contingent on the beneficiaries meeting certain human capital investment requirements.
- Appropriate capital to meet borrower needs
- Production costs associated with target sector/region
- Rate of return on lending in target sector/region
Cost-effective, relatively easy to implement, and good evidence that this intervention improves the lives of poor people through better access to health and education services, reducing poverty and inequality. However, impact on health and education outcomes is mixed. Augment assets and security of the extremely poor.
- Balancing expanded supply of services vs. improved quality of services
- Leaking benefits to populations outside of the target group
- Potential to create dependency among beneficiaries
- Potential for shifting political winds influencing government expenditures, affecting scale and impact
- Setting the appropriate transfer amount and rules for entry/exit from the program
- Targeting: When in the lifecycle to apply CCTs? Younger children or youth? Pregnant women? Poor? Nearly poor?
- Whether to design CCTs with more focus on outcomes / root poverty causes rather than on increased service use
MUST HAVE’S, CRITICAL POINTS, OR QUESTIONS TO CONSIDER
CCTS/Social Payments are appropriate when development challenge requires behavior change among beneficiaries; market forces are unlikely to incentivize the necessary behavior change; redistribution of resources is politically feasible when conditioned on good behavior; the behavior change sought and metrics to measure it are clear, and data exists to verify compliance; in economies with high inequality, but where poor communities have access to critical social services, such as healthcare and education.
VIGNETTE: BOLSA FAMILIA (BRAZIL)
The Bolsa Familia program of Brazil began in the early 1990s to support school attendance in two regions and was later replicated by local governments and expanded into a federal program.
Today, Bolsa Familia provides financial assistance to poor Brazilian families contingent on their attending school and receiving vaccinations. The goal is to fight short-term poverty through cash transfers, and to counter persistent poverty by upgrading human capital.
Bolsa Familia currently serves 11 million households and costs about 0.5% of Brazil’s GDP. The average benefit per household is only $54, yet for the poorest families, the impact on stabilizing household income and reducing child labor is significant.