Is cash the best way to assist poor and vulnerable people?

In the face of chronic poverty, food insecurity and increasing HIV and AIDS in eastern and southern Africa, there is growing recognition of the importance of cash transfers for reaching vulnerable children and households. A variety of cash transfer schemes are being piloted. Should they be scaled-up?

A report from Save the Children UK, HelpAge International and the Institute of Development Studies documents the use of unconditional cash transfers and lessons learned from initiatives in Ethiopia, Lesotho, Mozambique and Zambia. Evidence is presented that regular and predictable cash schemes are a feasible option in low-income countries.

International donors and non-governmental organisations are supporting cash transfer schemes in response to unmet need for social protection and in reaction against institutionalised food aid. Cash transfers give people more choice than just food and benefit children. This applies even to pensions targeted at older people, since grandparents are increasingly caring for orphans and other vulnerable children. Other cash transfers targeted at the ‘working poor’ stimulate local economies.

Even tiny amounts of cash are divided among many people apart from the primary beneficiary. Cash transfer income is used for a wide variety of purposes: purchase of staple foods (maize-meal, vegetables and meat); household groceries (soap, paraffin, matches, candles); blankets and clothes; health, transport and education; income-generating assets such as chickens and pigs; capital for farming and trading; funerals; membership of social groups and for savings.

Pensions in Namibia, Botswana and Lesotho reach vulnerable children because large numbers of young people live with grandparents. The pension is simple and cost effective because it is targeted at a group that is universally identifiable without the costly administrative problems of income testing.

The four schemes examined in detail are:

• Ethiopia’s Meket Livelihoods Development Project: helping families nominated by communities to pay for essential food expenses in bad years and to invest in assets that can improve employment opportunities in better years.
• Lesotho’s National Old Age Pension: financed out of domestic resources, without support from international donors, it accounts for seven percent of total government spending.
• Mozambique’s Food Subsidy Programme helps one percent of the country’s poorest and most vulnerable families buy food and other essential items: criteria for eligibility are strict and dependants are not registered if they do not have appropriate identification but this is a relatively long running scheme financed by the national budget.
• Zambia’s Kalomo District Pilot Social Cash Transfer Scheme: provides cash transfers for AIDS-affected, incapacitated and destitute households now in the process of being scaled up.

The authors offer recommendations to ensure the success of transfer programmes, minimise management costs and make them attractive to donors and political elites. In order to ‘make cash count’, it is important to:

• recognise that cash is not a cure to all problems and may not always be the most pro-child intervention: there may be occasions when transfers of goods or services are more appropriate
• appreciate that a cash scheme does not have to specifically target vulnerable children in order to have positive impacts on their well-being – although cash transfers are an important component of a package that could significantly improve child wellbeing
• link the value of cash transfers to changes in food prices, and find innovative and sustainable ways for the poorest families to access the transfers
• improve information and monitoring systems to track who is benefiting and who is not and to divide the information by age, gender and wealth
• not underestimate the investment needed in management systems to try to prevent corruption and other problems
• remember that for cash to make a difference to vulnerable children and their communities in the long term, social protection programmes need to be large scale, comprehensive, institutionalised into national plans and budgets, and recognised as an entitlement not a luxury.

Source(s):
‘Making Cash Count: Lessons from Cash Transfer Schemes in East and Southern Africa for Supporting the Most Vulnerable Children and Households’, Institute of Development Studies, University of Sussex, by Stephen Devereux, Jenni Marshall and Jane MacAskill, 2005 Full document.

Funded by: UNICEF

id21 Research Highlight: 20 July 2006

Further Information:
Stephen Devereux
Vulnerability and Poverty Reduction Team
Institute of Development Studies
University of Sussex
Brighton BN1 9RE, UK

Tel: +44 (0) 1273 678773
Fax: +44 (0) 1273 621202 or 691647
Contact the contributor: S.G.Devereux@ids.ac.uk

Institute of Development Studies uk

Jenn Yablonski
Poverty Policy Advisor
Save the Children UK
1 St John’s Lane
London EC1M 4AR, UK

Tel: +44 (0) 20 7012 6400
Fax: +44 (0) 20 7012 6967
Contact the contributor: j.yablonski@savethechildren.org.uk

Save the Children, UK

Mandy Heslop
HelpAge International
PO Box 32832
London N1 9ZN, UK

Tel: +44 (0) 20 7278 7778
Fax: +44 (0) 20 7713 7993
Contact the contributor: mheslop@helpage.org

HelpAge International

Other related links:
'Special gift: social transfers for health and education'

'http://www.dfid.gov.uk/pubs/files/social-transfers.pdf' DFID

'Non-contributory pensions – costly luxury or weapon against poverty?'

''Poverty and Social Transfers in Hungary' ELDIS

'The Distributional Impact of Social Transfers in the European Union: Evidence from the ECHP', European Research Institute'