In the process of defining the target group for the Malawi Social Cash Transfer Scheme (SCTS) the Government had to choose between universal targeting and poverty targeting and between categorical concepts and inclusive concepts. The paper analyses eight target group options ranging from categorical schemes like universal social pensions or child grants to inclusive schemes targeting ultra poor households.

Each option is analysed against a set of criteria including annual costs in USD and in percent of GDP, percentage of programme funds allocated to ultra poor households, percentage of ultra poor households reached. All options are also discussed with regard to the danger of creating a dependency syndrome. As a result of assessing the eight options against these criteria, “ultra poor households that are at the same time labour constrained” appeared to be the most appropriate target group.

The eight different social cash transfer options assessed include:

• universal old age pension
• universal child (0-3) grant 
• combination of universal old age pension with universal child grant
• means-tested old age pension
• means-tested child grant
• combination of means-tested old age pension and means-tested child grant
• programme targetting all ultra-poor households
  
• programme targetting all ultra-poor households that are at the same time labour constrained.

Three years of piloting in seven districts has verified that an inclusive social cash transfer scheme implemented by the District Assemblies is feasible, cost-effective and has a high impact on poverty reduction. By focusing on ultra poor households that are labour constrained, and improving the targeting mechanism (ensuring the inclusion error and the exclusion error are less than 20%) the programme should ensure that 80% of the target group will be lifted permanently out of ultra poverty.

Please also see separate document: Response to 'Targeting Social Cash Transfers' comment.

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