Cash transfer (CT) is a form of social assistance that occurs in three forms. It can be cash given to individual households, cash grants or cash for work and voucher programmes, and cash as an alternative to in-kind transfers such as agricultural inputs or non-food-items (Farrington et al. 2006). These three forms of CT are intended to address risk, and reduce chronic poverty and vulnerability. Cash transfers have proven to be a cost effective intervention for poverty alleviation. Although they have a positive impact on poverty reduction, mainly education and health outcomes, evidence remains inconclusive on the sustainability of such approach especially on sustainable economic growth and development (Arnold et al. 2011). This paper argues that offering cash to the poor is not enough to reduce and alleviate poverty. It proposes that CT should be matched with basic social services like free and compulsory government funded education, free public health system, and low cost housing for the poor. Structurally, the paper analyses and synthesizes the advantages and drawbacks of CT, and recommends free public education and health as well as low cost housing for the poor as a supplementary basic social service package that should be matched with cash transfers if poverty must be contained and alleviated.
Cash transfer (CT) programmes provide basic social protection by giving a set minimum cash amount to vulnerable groups facing significant risks of remaining in or falling into the poverty trap. Such programmes increase poor households' real income as a response to chronic poverty and food insecurity or other development challenges. Cash assistance takes variant forms, such as periodic or occasional needs-based transfers, non-contributory pensions and family allowances in the form of regular or occasional benefits paid to families with children under a certain age, amongst others. This practice has become widespread mainly in developing countries where social cash transfers are linked with certain behavioral requirements. In this regard, cash transfers can be used to increase school enrolment of children from poor families, or encourage poor families to do regular medical check-ups. Such cash transfers are called conditional cash transfers (CCT).
Another positive aspect of CT is the impact of non-contributory pension programmes on poverty households. These pension programmes have reduced poverty amongst older people by 19 per cent in
For recipients, cash transfers present a more practical and cost effective solution, as cash is easily carried compared to food that must be transported from the distribution site thus placing additional burden on them. Beneficiaries sometimes trade the commodities at cheaper prices in return for cash to meet their priority needs. This provides beneficiaries with economic freedom, whereby they can decide to ration the utilization of their cash based on equally competing households' needs and preferences.
Despite these recorded gains of social cash transfer programmes, there are a number of drawbacks and challenges limiting CT impact on poverty alleviation. First, it has pitfalls and errors in resource allocation to individuals outside of the targeted population and sometimes excludes legitimate households (Lomeli 2008). These targeting errors normally occur due to wrong programme design and implementation, corruption, fraud, and deficient targeting methodologies. Beneficiary lists are sometimes manipulated through false reporting, bribery, deliberate exclusion of eligible or inclusion of non-eligible households (Van Stolk & Tesliuc 2010). For example, while in the Mexican CCT scheme some of the poorest households and qualified communities were denied health and education services, the Brazilian experience unveils concocted and deliberate targeting errors (UNDP 2006,
Second, cash transfers sometimes create inflationary risks that undermine the intended benefits of the program. The injection of cash into the local economy at times causes inflation thereby diminishing beneficiaries' purchasing power, although cash transfers programmes in 15 Southern and Eastern African states show less proof of the causal link between cash transfers and inflation in targeted communities (Devereux et al. 2005).
Third, cash transfer programs are expensive to administer during the start-up, implementation and monitoring stages. However, administrative costs quickly decrease in subsequent years of implementation and reduce the average annual costs over the entire period of implementation. For example, in
Lastly, CT programmes are associated with security risks and corruption (Grimes et al. 2009). For instance, in
Using this analysis on CT, and drawing insights from its merits and demerits, poorer households benefiting from CT programmes experience a significant leap in reducing poverty (Kunnemann et al. 2008). However, cash transfers cannot singularly alleviate poverty because recipient families usually divert the cash received to other pressing problems instead of the purposes for which the cash is intended (Ahmed 2006). Social cash transfers therefore have to be supplemented and matched with the provision of basic social services like free and compulsory public education, free public health and low cost housing for the poor. With these essential social services, efforts to lift poor households out of poverty through cash transfers will be sustained and poverty will be alleviated in the long run.
Education grants to poor households and school feeding programmes make a significant impact on school enrolment in poorer communities (Arnold et al. 2011), but such programmes are not sustainable because they are cost intensive and short run due to scarce resources. Such interventions therefore occur in emergencies and conflict or post-conflict settings and are cut off once conditions stabilize. These schemes are therefore not the most appropriate right based approach to address illiteracy amongst the poor (Kunnemann et al. 2008). Governments in developing countries should therefore provide free and compulsory public education for vulnerable children whose parents cannot afford the high cost associated with education. With compulsory and free education public school system, governments could ensure that most, if not all, poor parents sent their children to school on a compulsory basis since there would be no fees and tuition payment as prerequisite for enrolment. The enforcement of such policies should entail punishments and sanctions on poor parents who refuse to send their children to school. Sanctions and penalties will incentivize poor parents' decision to implement the government's free and compulsory education policy. Matching cash transfer with free and compulsory public education would thereby guarantee that the cash given poor households is mostly used on feeding, essential goods and income generating initiatives from which the families can gradually get out of entrenched poverty.
Although free and compulsory public education complimented with cash transfers might boost school attendance amongst children of poorer households thereby decreasing illiteracy and ultimately increase living standards of poor families as education empowers the weak, vulnerable and poor health could constitute one of those services on which cash given to poorer families is spent since they often do not live under healthy conditions and can contract various infectious diseases, like malaria in the case of
In addition to lack of affordable access to education and health amongst poor households, the lack of affordable housing is usually one of the major problems poorer families face. Poorer households hardly have the means to construct decent homes to live in. Most of them in urban areas live in slum communities amidst poor sanitary conditions and thus risk contraction of infectious diseases leading to premature deaths. Lack of or poor and inadequate housing for poverty households is execrated by lack of money to pay for education and health related costs (Kunnemann et al. 2008). Poor and destitute families consequently live unhealthily in squalors, bear their children who grow up in poor environment and in turn are themselves entrapped in poverty. These children grow up without gaining affordable access to education, thus perpetuating the vicious circle of illiteracy amongst the poor. They are entrapped in a poverty web such that public policymakers have initiated the transfer of cash to support the poor meet basic livelihood supplies insufficient for alleviating poverty. These social cash transfer programmes therefore need to be accompanied by a comprehensive social service scheme to include construction of low cost housing in addition to free public health and education systems for poorer households (Arnold et al. 2011). With decent low cost housing facilities, free public health care service, and free and compulsory education system, destitute and very poor families will become better off using their cash on food and possibly investment in income generation activities that will create sustained growth, increase wealth and raise living standards amongst the poor.
To conclude, cash transfers to poorer households substantively reduce poverty and pave the way to poverty alleviation (Arnold et al. 2011). However, such programmes are inadequate to alleviate poverty because cash transferred to beneficiaries is used for various competing alternatives and imperatives. Cash transfers alone therefore cannot sustainably reduce curb or alleviate poverty. In lieu of this, developing countries should design and provide an additional assistance through the provision of free education and health care system, and low cost housing to compliment CT. A combination of social cash transfers and this basic social service package (free public education and health system, and low cost housing) will permit poorer households make trade-offs and direct their cash to productive ventures like agricultural activities for food sufficiency and purchase of essential goods to lift them out of poverty. Offering cash to the poor is therefore not enough. This needs to be complemented with basic social services to get the poor out of poverty.
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