Four concerns
In last week’s consideration of the pros and cons of conditional cash transfers as a policy tool for fighting the increased poverty and economic distress occasioned by the global economic crisis I referred to the results of impact evaluations of these schemes, mainly in Africa and Latin America. Overall, these showed that there were strong positive short-term and long-term impacts on the poor. The positive short-term impacts flowed from the early injection of cash directly into the hands of poor people. This placed them in a better position to manage the negative impacts and short-term risks associated with the crisis.
The positive long-term impacts on poverty varied with the type of conditional actions required of individuals and/or households in order to qualify for cash support under the programme. In the instances of health, education and nutritional conditional requirements, there has been noticeable improvements in the health status, educational and training levels, and nutritional outcomes for the designated beneficiaries.
Added to this, there have been other significant benefits. For example, the impact of increased spending by poor persons from their cash transfers, at a time of economic recession, has injected buoyancy into the economy. Similarly, their impact on the distribution of income and assets has helped to reduce gaps between the poor and non-poor.
Taking these positive results into account, I would still argue that four crucial concerns need to be properly addressed if these schemes are to be consistently fruitful and beneficial to the poor. First, these schemes need to be carefully structured with clear unambiguous criteria and rules for establishing the eligibility of beneficiaries, the attainment of exit requirements for those no longer eligible, and the fulfilment of the conditional undertakings attached to the schemes. This places a strong premium on professional and competent staff, best-practice socio-economic databases, and capability in social engineering. Second, the schemes have to be independently monitored, reviewed and verified (MRV). This requires a strong regulatory/oversight/ institutional framework so as to ensure good governance in these schemes and that there are clear and severe penalties against persons engaged in illicit activities.
Corruption
Third, without doubt in my mind, the single biggest threat to these schemes is corruption. This can come from two sources. One is from those individuals/households who try to ‘smart’ the arrangements. Usually this is attempted through falsifying the required socio-economic information and concealment of sources of income and access to assets. The other type of corruption is usually politically-inspired. This can take many forms, but the most typical are nepotism, political cronyism and ‘pork-barrelling.’
Indeed corruption of these types is possible in all social protection schemes. In-kind benefit schemes have multiple opportunities for abuse. For example 1) in the purchase of items 2) in the storage/inventorising of items 3) in their distribution and 4) in their ultimate consumption. Conditional cash transfers have one major opportunity for wrongdoing. That is when the cash-payments are made. However these can be done through bank transfers to beneficiaries (debit cards!). Of course there is also the opportunity arising from the requirement of beneficiaries to fulfil their undertakings.
Finally, a major difficulty facing these schemes is the sustainability of their financing. In developing countries the two main sources of funding are 1) the international community and 2) national governments. In the United States, (New York) where Mayor Bloomberg pioneered a conditional cash transfer mechanism for poor New Yorkers, the scheme was funded with private donations.
In developing countries, the international community has not committed to long-term indefinite funding. When the resources they offer to these schemes come to an end, the schemes are usually terminated. When national governments finance them, they too often see the schemes as bringing them political benefits so that their duration is limited to the political/election cycle. These two considerations have led to some worthwhile schemes being terminated. Because of this I would argue very strongly that the success of conditional transfer programmes depend on both the political will of governments to start them, and a broad political consensus in support of them, as enduring aspects of the efforts to fight poverty and underdevelopment.
T&T’s experience
In conclusion it would be useful to note briefly the Trinidad and Tobago Targeted Conditional Cash Transfer Programme (TCCTP) as it has been named, because it has been the subject of much attention by the regional media over the past two weeks.
This conditional cash transfer programme started in 2007 just prior to that country’s general elections. The suspicion is that it might have had more to do with political cronyism and electioneering than with a genuine concern for the plight of vulnerable persons and households in that country. Be that as it may, over US$10 million (G$2 billion) has already been allocated to the programme. The programme provides cash to the vulnerable through debit cards issued to them, for the purchase of basic food items.
A recent independent review of the programme noted that about 20 per cent of the persons receiving the cash payments (about 6,000) did not qualify as they did not meet the criteria for receiving support.
To its credit the government has vowed to remove these persons from the programme. However, it has also pledged additional funding for the programme in this year’s national budget, to the tune of 35 per cent, on account of the pressures already created by the global economic crisis and its local impacts.
This episode clearly reveals both the strengths and weaknesses of conditional cash transfers as a tool for fighting poverty and increased economic distress in the Caricom region.
Next week I turn to the third and final lesson to be learnt from experiences in dealing with the present global crisis. That is, where does trade fit in with national efforts to stimulate the economy and help the poor at times of global economic crisis.
