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Are Conditional Cash transfers effective in the midst of low or absent capabilities and conversion factors?

Conditional Cash Transfer (CCT) has become ubiquitous in many nations in Africa in the last decade because of its success in tackling poverty and mitigating vulnerability in Brazil and Mexico. The Capability Approach by the Noble Laureate Amartya Sen, asserts that social interventions will be effective if they are able to positively affect beneficiaries' ability to achieve what they want to be and do (Capability). Also, the conversion factor of beneficiaries - the extent to which a given resource can be used effectively without impediments - is also critical for the success of any social intervention. Therefore with a wide variation in the capabilities and conversion factors of the urban and rural poor in Africa, will CCT be as effective in ameliorating poverty and vulnerability among the rural poor vis-à-vis urban poor? For instance with the long distance travels to school and hospital, as well as, low physician-patient ratio in rural Africa, could CCTs in itself as a demand driven intervention force the improvement of the capabilities and conversion factors of the poor because of the conditionalities?

Dear Godwin, tough question! A colleague and I have attempted to address aspects of it within this paper, 'Does One Size Fit All? The Conditions for Conditionality in Cash Transfers': see http://www.opml.co.uk/sites/default/files/Does%20one%20size%20fit%20all%... .

I paste some extracts here... would be interesting to hear what you think!

Why were CCTs selected as an 'ideal' policy option in Latin America?

There are two particular aspects of the Latin American experience that clarify the policy rationale of CCTs there. First, the Latin American administrations had set a very clear policy objective for their actions: poverty reduction via the accumulation of human capital. Second, the choice of the most adequate instrument to achieve this objective was grounded on a thorough understanding of the supply- and demand-side barriers that Latin American societies (and public administrations) were facing in the struggle to increase investment in human capital. Specifically, in Latin America, substantial investments were made within the education system in the early 90s, including significant improvements in school infrastructure and staffing,  fee abolitions for primary and secondary schools, the integration of complementary services such as school canteens, the provision of school supplies and materials, and the stimulation of more coordination and competition between public and private schools. Despite these efforts, however, the structural problems of low enrolment and low retention of the poor in the education system had not been solved by the beginning of the new century. The logic underpinning CCTs thus took stock of the failures of supply-side interventions, hypothesising that they had not been sufficient because of barriers to education on the demand side.

What is the ideal institutional context of a country or region that chooses to undertake a poverty reduction strategy involving CCTs? 

First of all, an important prerequisite for the effective implementation of CCTs is the presence of an adequate supply of public services. Policy interventions aimed at stimulating the demand for services (like education) are based on the assumption that these services are of a satisfactory quality and hence are ‘desirable’ from the beneficiaries’ standpoint. However, this is not always the case. Services such as schooling in poor countries are often of low quality and inequitably distributed. At a micro level, conditioning a programme on non-existent or low-quality services can be extremely counterproductive, especially if there are no alternate ways for recipients to meet conditions until public supply improves. It excludes those most marginalised from the transfer. It can also create a perverse incentive that forces households to embark on an investment that is ‘unprofitable’ compared to other market alternatives, thus in fact making a sub-optimal choice. From a macro point of view then, spending public money on CCTs may not be the most effective use of resources when basic services still need to be developed (UIS, 2006).

Second, it should be pointed out that the capacity for scaling up these public services and maintaining quality is also an important prerequisite, as even if there is an adequate supply of public services at present, CCTs may in themselves put additional pressure on existing services.

Third, the cost-effectiveness of ‘explicit’ conditionalities (compared to other types of conditioning) depends on the public and private costs of monitoring and enforcing compliance with explicit conditionalities in CCTs (a cost that is not faced with UCTs). On one hand, the additional public cost can either be sustained in the absence of any severe budget constraints or in the presence of preexisting infrastructure/human capital that can be used to take on this role (e.g. a network of social assistants or well administered health centres). On the other hand, the private cost – the burden on beneficiaries of proving their compliance – can be lowered by streamlining the certification process or shifting the burden to institutions (e.g. schools) rather than households. Only countries with the physical and institutional capacity to meet these two objectives can pursue CCTs without the concern of incurring problems at a later stage of implementation.

Finally, linked to the point above, the political feasibility of imposing explicit conditionalities will depend on the relative power of the middle class within a given country and the overall political orientation of governments (and the donor community). In countries where providing a safety net for the poorest and most vulnerable households is viewed as a ‘right’ to be guaranteed and the middle classes do not have too much political clout, it is unlikely that imposing explicit conditionalities will be deemed as acceptable, necessary or feasible, and vice versa.

To conclude, we stress the importance of recognising that conditionality is a multidimensional concept that can be implemented to many different degrees. While UCTs and CCTs often share various forms of behavioural conditioning, they mainly differ in the way the contract between provider and recipient is framed: for CCTs the payment of the cash is contingent upon the adoption of a set of ‘desired behaviours’ which are explicitly monitored, while for UCTs recipients are generally left with more formal freedom to spend their transfers. There are two main implications stemming from this distinction. First, that a comparative assessment of CCTs and UCTs should be based on the relative benefits – but also costs – of introducing, monitoring and enforcing this ‘explicit contract’. Second, that countries wishing to adopt CCTs should carefully consider their feasibility based on overall priorities for policy design and institutional context. The success of CCTs in Latin America was precisely linked to an assessment of this type (i.e. a clear policy objective to address problems of low human capital and a thorough understanding of supply and demand for key services such as education), but was also grounded in a specific political economy environment in which the argument of co-responsibility had a receptive audience. If sub-Saharan African countries want to reap the benefits of CCTs they should first understand whether similar conditions apply to them, and decide accordingly. 

Great and very interesting piece, Valentina! The first and second ideal situations for implementation of CCTs as you highlighted are very much in sync with the need to improve conversion factors so recipients could effectively satisfy conditionalities. Therefore with many African countries still facing supply and demand side problems relating to education, the rhetoric question is, could they (African countries) be copying blindly? Or perhaps, the particular situation in Africa offers something more that allows CCTs to be effective even in the virtual absence of these ideal situations you have highlighted. I guess an in-depth look ought to be made in this direction.

such a very interesting discussion here, CCT in the Philippines was also patterned in the Latin America experience however, one of the additional conditionalities is hte conduct of Family Development Sesions. The sessions are geared towards improvignt he perspectives and behaviors of parents on parenting style, increase financial management acumen of parents and so on, I am just wondering if "attitudinal problem" or behavioral proble is seen in CCT benificiaries and how does duty bearers and program managers deal with this.



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