|Project Rationale and Linkage to Country/Regional Strategy
ADB's Country Partnership Strategy (CPS) for Nepal (2005 ? 2009) rests on three pillars of which fostering inclusive social development is one. The three sub-sectors prioritized under this pillar are (i) education, (ii) water supply, sanitation and urban development, and (iii) social protection. While the strategy emphasizes on building social protection initiatives within the project design, it also identified the need to build capacity in social protection institutions in Nepal. The CPS is in line with ADB's Strategy 2020, which places emphasis on promoting greater access to opportunities by expanding human capacities through investments in education, health and basic social protections; as well as with the government's development strategy which has been increasingly expressing its deep commitment to social justice and equity and is striving to expand its safety net and social protection coverage. Nepal has had in place an old-age pension scheme and benefits to widows and the disabled since 1994. Since the current fiscal year, the government has expanded this coverage by lowering the age limit and expanding its cash-transfer scheme to certain caste/ethnic groups. The allowance has also been increased.
However, there are no child centered cash-transfer schemes at the moment despite strong evidence that child protection measures can have significant impacts on the health of children and their consequent contribution to society. Many studies on early child brain development, including a study done by ADB shows that child development is at the core of human development theory and that the most critical period of brain development is in the first three years of life, proper nutrition being a critical factor in healthy brain development. It is estimated that more than half of Nepal's under-five children are stunted for their age, and despite significant decrease in infant mortality rates, over 40,000 under-one children are still dying in Nepal every year. A study conducted in 1999 revealed that of the 95,000 under-five child deaths in Nepal every year, about 54% were attributed to moderate and severe malnutrition, with the "moderates" responsible for most of the deaths. It has been proven that mental stunting resulting from malnutrition is irreversible and the World Bank estimated in 2007 that malnutrition in children in Nepal causes a GDP loss of around 3% per year. Thus, studies have shown that the highest human capital rates of return can be achieved from social protection targeting pre-school children. Confounding to these problems is a recent food alert by the World Food Programme in Nepal, warning of an impending food shortage, particularly in the mid- and far-western hills of Nepal due to low winter precipitation. Undoubtedly, children would be impacted the most.
In 2008 UNICEF and WFP conducted an exploratory survey to see how child benefit cash transfers would be used by households. The study revealed that more than 40% of the money from cash transfers to mothers would be spent on supplementary food for children, around 30% on children's education and 11% or more on health care. Evidence from another ADB project also demonstrated that women who were provided cash transfers did have control over the money, and most of the allowance provided to cover "basic needs" was spent on food, house maintenance, medicine, education, clothing and household supplies, in that order of priority. Thus, the justification to provide a monthly cash allowance and its direct relevance to poverty reduction is more than evident for this project.