Customized cash transfers: financial lives and cash-flow preferences in rural Kenya

We examine the preferences of low-income households in rural Kenya over the structure of cash transfers they receive. We have three key findings. First, most prefer large, lumpy tranches, and many prefer some delay before receiving funds. These structures are quite different from those commonly used in public safety net programs, but coherent with other evidence on the financial lives of households in extreme poverty. Second, poverty itself affects choices over the timing of cash transfers: just a little financial slack (cash on hand) at the time of decision-making increases recipients’ willingness to delay the cash transfer. Finally, financial slack pays back: some delay in transfer increases recipients’ income (via better alignment with the seasonal agricultural cycle), improves deliberation over the use of funds (through time for planning) and progress towards their goals. Adapting the design of cash transfers to the decision-making environment of recipients has the potential to improve their financial choices and outcomes.