Conditional Cash Transfers: Can They End the Cycle of Poverty in Developing Asia and the Pacific?

Jed Saet: I am Jed Saet from the Asian Development Bank and I will be your moderator for this discussion. During the course of the discussion, please send in your questions using the space provided on the bottom part of your screen. Our experts, Ms. Karin Bloom and Mr. Cliff Burkley will answer your questions on CCT.

Jed Saet: Question submitted by Roderick from the Philippines: How can we be sure that the identified people are really the people in need? When targeting the beneficiaries there is a need to consider the power structure at the village level as it affects the way targeting and selection of beneficiaries. That is if selection is based on the recommendation of influential people - usually the elected officials and usually they are the ones who have the voice in community meetings.

Karin Schelzig Bloom: Targeting is one of the most important aspects of a CCT program, and the method has to be robust. It will not only be based on the recommendation of influential people but on a series of targeting method that range from full-scale verified means tests to proxy means tests, community-based and geographic targeting, and demographic (a.k.a. categorical) targeting. Community-based targeting has the advantage of relying on local information and understanding of individual circumstances.

Cliff Burkley: In the Philippine example, ''influential'' people are not part of the process of selection and are deliberately kept out

Cliff Burkley: It (targeting) usually goes through several steps -- from selection of area down to household. Households are subjected to a proxy means test using objectively verifiable criteria

Karin Schelzig Bloom: Outreach is important too. People need to know how the program is targeted, who is eligible and who is not, and why. Most importantly, good CCT programs will have a grievance redress mechanism where complaints can be heard and addressed.

Jed Saet: Question submitted by Mariana from UNICEF: Why do we only discuss Conditional Cash Transfers (CCTs)? To be successful. Is the evidence on CCTs so conclusive for Asia that we are adamant to exploring alternatives, such as Unconditional Cash Transfers (UCTs)?

Cliff Burkley: What makes CCTs particularly attractive is its ability to play double duty as a development instrument: contributing to addressing contemporaneous poverty through the cash transfers and to long-term goals of growth thru better educated and healthier population. In this sense, it is perceived not merely as a consumption instrument but also an investment. It also has immense value in the context of the political economy of redistribution because of the co-responsibilities introduced, making beneficiaries more than just passive recipients of cash.

Karin Schelzig Bloom: To condition or not to condition is a very interesting and huge ongoing debate. There are clear pros and cons on both sides. On the con side: monitoring and enforcing conditions add an administrative layer that requires capacity and costs money. On the pro side: the conditions ensure human capital formation in the next generation.

Karin Schelzig Bloom: There is a nice concise piece summarizing the debate (to condition or not to condition?) along empirical and political lines here: http://www.eldis.org/index.cfm?objectid=786B97C5-DC96-D022-82002CC2CD7558AA. The political popularity of conditonality is pretty important for securing support and sustained financing.

Cliff Burkley: There is also a recently published book on different types of social assistance in the region... http://www.adb.org/Publications/subject-archive.asp?id=226

Jed Saet: Question submitted by Jo from Manila: What measures can be taken to to minimise leakage i.e. where recipients fail to meet the conditions of the transfer?

Karin Schelzig Bloom: Leakage and compliance (meeting the conditions) are actually two quite different things. Leakage is a targeting error, where program benefits go to ineligible people. This is also known as an error of inclusion. Minimizing leakage is the main goal of targeting...There are a number of targeting methods that can be particularly robust when used in combination. Of course the different methods have cost implications, so this involves some difficult choices. Transparency is important. Posting the list of program participants in a public place is one way to minimize leakage.

Cliff Burkley: Most programs have invested in a robust targeting system to minimize leakages. Exclusion and inclusion errors in targeting are also being addressed through the use of household surveys coupled with some proxy means test. The means test identify the poor through a set of verifiable indicators of poverty, which may include power bills, materials used for housing, furniture and appliances in the house, water access) Beyond the targeting system however, what many programs are seeing is the need for reaching out to the traditionally excluded or geographically challenged population.

Karin Schelzig Bloom: Minimizing non-compliance (where program participants fail to meet the conditions, for example a child does not have an 85% attendance rate at school, or the pregnant woman does not have the required pre-natal visits) usually involves a system of penalties that range from warnings to temporary reduction in benefits to permanent exclusion from the program.

Cliff Burkley: The more advanced programs have linked verification systems with grievance and redress mechanism and community assemblies to address issues of non-compliance. But I agree with Karin that sanctions of withdrawal of benefits is what keeps them in the program

Rosel: how do we know when the cash transfer amount is sufficient to incentivise families to comply with the program conditions?

Karin Schelzig Bloom: Setting benefit levels is tricky. A general rule of thumb in determining an appropriate cash benefit level is making sure that the level isn't so high that it generates dependency but at the same time isn't too low so that it has no real impact at the household level.

Cliff Burkley: The amount is somehow calibrated to take into account different factors, such as the cost of transportation and food to send children to school or for pregnant women to visit health facilities or the potential ''loss'' in income from taking children out of work.

Karin Schelzig Bloom: Benefit levels vary widely across countries and programs, depending on the context. The 'generosity' of benefits can be determined by looking at the transfer as a percentage of household income, or as a percentage of the national poverty line.

Cliff Burkley: Comparing the transfers across several programs would indicate some 10 - 20% of the poverty threshold in the country. Some models have introduced factors that will increase the amounts due to inflation.

Karin Schelzig Bloom: Good point, Cliff, indexing to inflation makes sure that benefits don't erode over time.

Sonomi Tanaka: Can CCT work in any countries or are there any specific factors that affect the likelihood of success of CCT?

Karin Schelzig Bloom: CCTs are clearly complex programs that require administrative capacity to implement. But there is evidence that they can be effective in low income settings. The key issue is that the supply side has to be robust, i.e. the supply of education and health services.

Cliff Burkley: Not in all countries. CCTs are demand-type interventions and without sufficient supply (schools or health centers), the transfers will not be effective.

Karin Schelzig Bloom: You also want the education and health services to be of sufficient quality, with trained staff.

Cliff Burkley: Common pre-requisites to a good CCT program include: good targeting, a verification system, reliable and transparent payment systems and rigid monitoring and evaluation

krisana: How important is extending conditional cash transfers for countries like the Philippines especially during post-crisis?

Karin Schelzig Bloom: Ideally you want to have a strong social safety net system in place, including CCTs, that can be scaled up quickly during a crisis.

Karin Schelzig Bloom: You don't want to start quickly designing a CCT because of a crisis -- they take time to set up.

Cliff Burkley: As you may guess from the previous answers -- CCTs require time and capacity to implement and is rarely a good instrument when no infrastructure for implementation exists

Cliff Burkley: But for scaling up existing programs, CCTs may work. This is what the Philippines is planning to do by expanding coverage from an initial 350,000 household to 1M households

Karin Schelzig Bloom: Indonesia started small and expanded as well.

Guest: I think that CCTs are difficult to scale up during a crisis precisely for their inherent complexity of administration and the requirement for pre-ID

Guest: I see then a trade-off between investing in improving supply of services vs. CCTs in a resource-constrained environment. wouldn't then UCT make more sense?

Cliff Burkley: There are definitely going to be trade-offs in deciding which package to adopt. I agree that designing and implementing CCTs are resource intensive. But these design components are mostly borne out of learning from past transfer programs to address leakages, absence of reliable and verifiable information to assess progress and impact and political capture. Evidence emerging from long-running programs and the new ones in Asia seem to indicate that while unconditional transfer works, conditional ones work better.

Karin Schelzig Bloom: CCTs are politically easier to defend as well, because there is co-responsibility.

Karin Schelzig Bloom: But there absolutely are trade-offs and decisions to be made all along the way... UCT or CCT? supply side or demand side?

Cliff Burkley: These are all very important considerations in a country's decision to undertake a social protection program - whether it be CCT or labor market intervention or UCT. Ultimately the consideration for any government to take on a program or advance a system is not simply asking whether these program yield positive benefits but whether they yield larger net benefits than alternative uses of resources. Questions such as the size of population unserved or in most need and the benefits of investing in a sector over another are difficult questions but must be asked and answered in a world of scarcity.

Jed Saet: Question submitted by Camilla from the Philippines: Are there any examples to date where an exit strategy has been successfully designed and implemented, i.e. where there has been a strategic effort to facilitate beneficiary households' ability to escape poverty after the program and/or direct them to other complementary support programs? If yes, what is a successful strategy?

Karin Schelzig Bloom: Exit or graduation strategies are an interesting issue. A test of how well your CCT program is working is families' ability to graduate from the program and exit out of poverty.

Cliff Burkley: Many CCT programs are not well placed for a deliberate exit strategy and experience is scarce. Most exit strategies either use a fixed term limit (of say 4 - 5 years) or are age-based. Some are starting to use exit plans based on educational cycle, ensuring graduation and better equipped beneficiaries

Cliff Burkley: An example in Chile might be informative although this is also time-bound. Support is provided from2 years and for the succeeding 3 years, exit phasing sets in with payments still being made but frozen to the point of graduation from school

Karin Schelzig Bloom: Of course poverty reduction is not contingent only on access to a CCT, but depends on households' ability to participate in the wider economy - the healthier, better-educated young people who benefit from the CCT still need access to productive opportunities. Rural development, credit, and labor markets are important here. A CCT would ideally link to complementary programs. Chile set up something called the Programa Puente (Bridge Program) for this purpose. Brazil's Bolsa Familia tries to foster synergies with local development initiatives and microcredit and business development

Karin Schelzig Bloom: . There's some really interesting work being done on linking CCTs to household savings, including child and youth accounts (see Mexico and Peru), facilitating relationships between beneficiaries and formal financial institutions.

Cliff Burkley: complementary action will be needed to escape poverty permanently. And forcing the issue of escaping poverty will not do justice to the explicit objectives of a CCT of improving human capital accumulation.

Jed Saet: Question submitted by Gerard from Manila: How do you assess the impact of CCT on poverty? What indicators can be used to measure outcome and impact of a CCT program?

Karin Schelzig Bloom: One of the cornerstones of a CCT program has to be a rigorous monitoring and evaluation system that measures results across a range of input, output, outcome, and impact indicators.

Karin Schelzig Bloom: Poverty is one of these, but there are many others.

Karin Schelzig Bloom: Program managers are interested in consumption and poverty reduction, education outcomes, nutrition and health outcomes, and so on. A very useful reference is the list of sample M&E indicators for typical safety net interventions in appendix 6.1 of Grosh et al (2008) For Protection and Promotion: The Design and Implementation of Effective Safety Nets

Cliff Burkley: Attribution will be a critical concern but a good Monitoring and Evaluation system. IFPRI has done a lot of these for the latin american experience

Karin Schelzig Bloom: IFPRI has done great work. Being able to show solid results with M&E also helps garner future support.

Karin Schelzig Bloom: Social programs are often discontinued when new administrations come in...

Karin Schelzig Bloom: But for CCTs to have real impact they need to be a long-term investment. M&E supports this.

Jed Saet: Question submitted by Cindy from Department for International Development: What are the critical benefits and disadvantages of CCTs as opposed to non-conditional transfers - particularly for women - in helping people graduate from chronic poverty, using transfers to build assets and manage risk? (South Asian examples most helpful)

Karin Schelzig Bloom: I'm glad someone has brought up the gender angle. Most CCT programs are designed specifically with empowerment in mind, by paying benefits directly to mothers or by allocating higher education benefit levels to girls, possibly differentiated by age. Women with greater control over household resources are more economically empowered and can have greater decision-making power in the household. There are some interesting evaluations, although few from South Asia, of CCTs and gender issues.

Cliff Burkley: Many Asian programs focus on educating girls. Bangladesh has had a CCT-type program since 1990s to improve female literacy rate that was half that of males. The program offers cash incentives with the conditions that the girls attend secondary school regularly, achieve passing grades, and remain unmarried. There have been noticeable increases in enrollment and attendance, and decreases in drop outs and early marriages.

Guntur Perkasa: How do you get CCT to peuple living in far away places. Many countries in Asia are very big and spread out. How can the poor get their transfer in remote rural places?

Karin Schelzig Bloom: Payment mechanisms are evolving with new technology, and especially mobile banking.

Karin Schelzig Bloom: Indonesia uses its extensive post office system.

Karin Schelzig Bloom: But of course there are still programs where cash is delivered to remote households. I think mobile/cellphone banking is very promising.

Cliff Burkley: The Philippines uses mostly ATM cards and is forcing the linkages among bank networks. We've also been told of stories of helicopters landing in difficult to reach places to ensure the transfer.

Cliff Burkley: Most improtant I think in the transfer system is that these are given directly to beneficiary households, headed by women, and do not pass through any level of government or intermediary

Karin Schelzig Bloom: Agree!

Karin Schelzig Bloom: The explicit delivery of cash to mothers can change intra-household power relationships and distribution. And mothers are much more likely to invest in the well-being of their children, particularly where CCTs also encourage attendance at nutrition, hygiene or parenting seminars.

JV Bautista: CCTs are used mainly in poor to middle income countries. Is there a point at which a country should move on from the use of CCTs and instead rely on other forms of social protection to address chronic poverty, and social risk and vulnerability?

Karin Schelzig Bloom: If you look at OECD countries there is clearly a larger reliance on contributory side of the social protection coin -- unemployment insurance, pensions, health insurance. But even in richer countries there are pockets of poverty. New York City recently experimented with a CCT, learning from the Latin American experience.

Cliff Burkley: Each country will have to set priorities, according to the type and extent of vulnerabilities of the people and its own resources, no single scheme will probably work. CCTs, for example, will probably not be able to addres discrimination that causes exclusion; or social insurance in times of catastrophic events.

Jed Saet: We are almost out of time for the discussion. We will no longer accept new questions from the audience, but Cliff and Karin will answer some of the questions submitted earlier.

Jed Saet: Question submitted by Mariana from UNICEF: What would be an optimal mix of sources of financing for to satisfy a number of minimum requirements, such as i) sustainability ii) fiscal prudence iii) non-crowing-out of other social sector investments

Karin Schelzig Bloom: Affordability and sustainability are key, of course. Many CCTs are development partner financed in conjunction with governments' own resources. Budgets have to be assessed for where they will have the most impact.

Karin Schelzig Bloom: In Indonesia the government reduced the regressive (non-targeted) fuel subsidy and used it for a UCT and then a CCT.

Karin Schelzig Bloom: Other countries will surely have less efficient expenditure from a poverty reduction point of view.

Cliff Burkley: Added info on affordability -- In the social floor initiative of ILO, social protection programs at 2% of GDP have been shown to be affordable for most developing countries.

Cliff Burkley: Apologies that we do not have sufficient time but I enjoyed the interaction and hope to respond to the others

Karin Schelzig Bloom: Thank you for all the interesting questions and comments!