Cash transfers

This is a mechanism for provision of cash payments direct to the very poor. Based on experience in Latin America, and recent experience in Zambia, cash transfers have proved to have a positive effect on both the health and poverty status of the very poor. Depending on the scheme, transfers may be unconditional, or conditional on beneficiary investment in education, health and nutrition.

There is evidence that these schemes encourage investment in strategies that allow the very poor to move out of long-term poverty (e.g. children's education). In some contexts direct cash transfers have proved cheaper, financially and administratively, than other targeted strategies such as food aid. These schemes also offer good potential for scaling up quickly.

Lessons offered by Latin American cash transfer programmes provides an overview of Mexico's Oportunidades, Nicaragua's Social Protection Network, and Zambia's Kalomo Project, three cash transfer schemes that have had positive impacts on health.
Pre-requisites for cash transfer schemes to be a success include:

•  strong evidence base on causes, extent and depth of poverty, and effective systems in place and strong capacity at country level for identifying the poor
• good administrative capacity to manage schemes
• willingness to devise strategies for off-setting political capture of schemes at local level
• strong tax base.

Challenges associated with these schemes include:

• the financial sustainability of cash transfer schemes is an issue in countries reliant on loans or donor aid
• in some countries cash transfers have had the effect of substantially increasing demand for key public sector services. Additional funding may therefore be required to meet this demand
• more research is needed to investigate respective benefits of conditional versus non-conditional approaches. Based on experience in Mexico and Nicaragua the evidence suggests that conditionality may compromise equity goals
• targeting the very poor may prove to be socially and politically unacceptable in cases where assumptions of widespread generalised poverty prevail
• many countries lack a solid evidence base on the nature, severity, and location of poverty, and may therefore need to rely on community-based targeting of beneficiaries. This is prone to elite capture.