For decades, a global aid industry has relied on large, complex projects in an effort to help poor countries develop. Designed by international agencies and charities, these projects are often tied to conditions that recipient countries must meet. Aid effectiveness is the subject of much debate. But there is no question that hundreds of millions of people worldwide remain trapped in poverty.
Now some countries in the global South are challenging the conventional wisdom on development. Governments of at least 30 countries are experimenting with cash transfer programs, giving small amounts of money to poor people directly and letting them decide how to spend it. Given some resources to work with, advocates of the plans say, poor people themselves can find the most effective way out of poverty. The development “experts” don’t necessarily know best.
Cash Transfers Are Used for Food, Medicine, and Children’s Needs
Recent experiences with cash transfer programs are described in a new book titled Just Give Money to the Poor: The Development Revolution from the Global South (Kumarian Press, 2010). Authors Joseph Hanlon, Armando Barrientos, and David Hulme look at programs in countries ranging from Mexico and Brazil to South Africa, Namibia, and India.
They find that, in general, cash transfer programs do work. If poor people have a small stream of income they can count on, they usually use it productively. They don’t waste the money. Most of the cash is spent on necessities — food, medicine, children’s clothing, and school supplies. Families also invest in income-earning ventures, buying seeds to plant on their farms or goods to resell at a profit.
Brazil’s Bolsa Família, Mexico’s Oportunidades, and South Africa’s Social Pensions
Some countries, such as Brazil and Mexico, impose conditions on recipient households, such as sending children to school. Others, notably India and Ethiopia, require manual labor in exchange for cash. Still other programs are unconditional.
In almost all the programs, the cash is given to women in the household, because women are more likely than men to spend the money on food and children’s needs.
- In Brazil, about 11 million poor households receive grants through the Bolsa Família program. Families are required to vaccinate their children and enroll them in school. The monthly grant is worth about US$12 per child. Since the program started in 2003, poverty levels in Brazil have fallen, and Brazil’s severe inequality has eased somewhat. Studies suggest that Bolsa Família is contributing to these positive trends.
- In Mexico, over 5 million households receive family grants under the Oportunidades program. The program carries conditions, such as requiring women to attend meetings about health and nutrition. Families receiving the benefit eat more proteins, fruits, and vegetables.
- In South Africa, 8 million children receive a child benefit of about US$27 a month. About 2 million older or disabled people receive a social pension. There are no conditions, but recipients must be poor. Children living in participating households are better nourished and more likely to attend school.
Long-Term Development Effects of Cash Transfer Programs
Research suggests that cash transfer programs are indeed reducing poverty, for individual families and for communities. When poor households have money to spend, they tend to buy locally produced goods. So the infusions of cash help stimulate local economies.
The transfers may also help prevent future poverty by improving children’s nutrition and education. Across countries, children in beneficiary households are more likely to attend school and less likely to be in the workforce than other poor children. The authors note, “Quite small amounts of money reduce the intense pressure on cash-poor families, and this has longer term implications. Children can go to school instead of walking the streets selling sweets or single cigarettes.”
There is wide agreement that cash transfers work best when they are fair (in terms of who receives money) and assured (families can depend on receiving the grant regularly). However, there is still debate about how grants should be targeted and whether recipients should have to meet conditions.
The authors of Just Give Money to the Poor stress that cash transfers are not a “magic bullet” and cannot work in isolation. Other actions by governments and donors remain essential, such as steps to increase the minimum wage, create jobs, and build schools and health clinics.
Just Give Money to the Poor: The Development Revolution from the Global South can be purchased through the online AfricaFocus Bookshop.
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