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«DIREC TIONS IN DE VELOPMENT Human Development Public Disclosure Authorized The Cash Dividend The Rise of Cash Transfer Programs in Sub-Saharan Africa ...»

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Unfortunately, vital registration data, such as date of birth, are often limited in low-income countries, and the poor tend to have lower coverage levels of birth registration. In some countries, the integrity of vital registration systems themselves may be compromised. Strict requirements regarding identification documents may end up excluding the neediest beneficiaries, who ought to be eligible, without providing adequate protection against fraud. Consequently, the stricter such requirements become, the greater they contribute to errors of exclusion that can undermine programs’ objectives.

The strict documentation requirements of Namibia’s cash grant system, for example, have made it difficult for some extremely poor individuals to benefit from certain programs. The system requires potential beneficiaries to present birth documents, identification documents, and proof of marriage, among other items (Republic of Namibia 2007). This system is a significant obstacle to the registration of many individuals who would otherwise be eligible for the programs. This issue also caused problems when Namibia tried to move children out of long-term food aid to cash transfers. Difficulties arose because many of the most vulnerable children targeted for transition lacked formal registration records or proof of parentage. The personnel required for this transition taxed the capacities of Namibia’s existing grant system.

Orphans and vulnerable children may face particular difficulties satisfying formal documentation requirements, especially in countries where large-scale illnesses and deaths from AIDS have left many households headed by children or the elderly, and documents have been lost with the death of parents or the movement of children between homes. Others often vulnerable to inadvertent exclusion from programs include refugees, foreign nationals, and children of those individuals.

Steps Taken to Facilitate Registration Some countries have taken steps to alleviate identification and validation problems. Kenya’s HSNP will use smart cards along with fingerprints to identify beneficiaries. This information can be recorded at a registration meeting, and it does not require beneficiaries to obtain identity cards (HSNP n.d.). Lesotho’s Old Age Pension enrolled beneficiaries using voter registration cards (issued during the 2002 elections), and local chiefs verified identities and ages of individuals (Croome, Nyanguru, and 94 The Cash Dividend Molisana 2007). Malawi’s SCT provides beneficiaries with photo identification cards (Schubert 2007a). Mozambique’s PSA has worked to help potential beneficiaries obtain national identity cards. In lieu of the official cards, the program now increasingly accepts proof of application for identity cards or voter registration cards (Ellis 2007).

Although rolling registration is not practiced in many programs that are not self-targeted, some CTs make clear efforts to continue to identify and register vulnerable households. Frequent retargeting in Ethiopia’s PSNP and Rwanda’s VUP allows communities to identify potential new beneficiaries for the programs (Devereux and others 2006; Republic of Rwanda 2009). Community committees in Zambia’s Kalomo SCT were allowed to identify households to fill newly opened positions twice annually to bring other vulnerable households into the program (Ministry of Community Development and Social Services 2008).

Another important issue in client registration is the time that elapses from when beneficiaries have their first contact with the program until they begin receiving transfers. Client demand combined with capacity constraints can cause this time to be longer than hoped. In Mozambique’s PSA, a decision on program eligibility was supposed to occur within 15 days of the individual’s application. However, in 2007, this process was reported to take months to complete (Ellis 2007). Similarly, it can take up to three months to be registered for a child-related grant in Namibia (Republic of Namibia 2007).

Program Benefits: How Much Was Transferred to Households?

Benefits provided by the reviewed CT programs vary widely.Approximately three in four programs provide only cash transfers. The most common benefits given in addition to cash were in-kind transfers. Some programs, such as Botswana’s Orphan Care Program, primarily provide in-kind transfers and supplement this transfer with a small cash transfer. Other programs provide a mixture of food and cash transfers. Ethiopia’s PSNP recognizes that recipients will sometimes benefit more from food than from cash. Therefore, the program has distributed both kinds of benefits, although it is attempting to transition mainly to cash. For more on the use of food versus cash transfers in an emergency setting, see box 3.3.

Other benefits that have accompanied CTs in the region include health care (Cape Verde’s Minimum Social Pension), fee waivers (Malawi’s Zomba CT and Botswana’s Program for Destitute Persons), and psychosocial support (Botswana’s Orphan Care Program and Design and Implementation of Cash Transfers in Sub-Saharan Africa 95

Box 3.3

Cash versus Food Transfers Potential Advantages of Cash Transfers Whether a program should provide cash or food transfers must be carefully considered, as many factors play into the effectiveness of each type of transfer. From the perspective of delivery agencies, simplified logistics and storage are key advantages of cash transfers over food. Delivery of food aid is an extremely complex enterprise that involves donation or procurement of appropriate stocks (both nutritionally and culturally); contracting of transportation (in some cases, both internationally and locally); maintenance of temporary storage at each end;

assurance of timely delivery; and finally, physical distribution of the stocks, in appropriate quantities, to the right beneficiaries. All these steps require ongoing monitoring to ensure quality, safety, and security throughout the entire chain of delivery. At the recipient’s end, the beneficiary receives a good that may be lifesaving during extremely dire circumstances but, at some point in the crisis, may need to be traded at a discount to allow the beneficiary to buy something even more desperately needed.

Food transfers can also create distortions in local markets that undermine production incentives for local farmers, thereby initiating a cycle of increasing dependency on imports that have a dampening effect on economic growth.

Cash, on the other hand, has the ability to stimulate local markets—a benefit that has both short- and long-term positive effects. The infusion of cash into local economies may have multiplier effects: it can help farmers reestablish local food production more quickly and efficiently by using some cash for productive inputs, and it can improve their prospects of finding buyers of their produce in local markets.

Where markets are operating efficiently, cash transfers are argued to be the superior choice. They leave almost all the logistic and security functions to competing private sector and state entities that specialize in those functions and give the beneficiary power to choose what and how much to buy and eat.

Despite the many positive aspects of cash transfers, major potential pitfalls can be associated with using cash. The most obvious problem with cash is that its value will erode in a high-inflation environment. Care should also be taken when distributing cash in environments with limited markets, because cash infusions may temporarily increase local prices until supply can adjust to keep up with new demand.

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Box 3.3 (continued) Programs That Provide Both Cash and Food Transfers Some programs are not dogmatic about their use of cash or food; they value what works best, including a mix of food and cash within the same program. Ethiopia’s PSNP has taken such a flexible approach. The decision of when and where to provide food aid is based on the program’s mix of available food and cash, the community’s preferences, the local availability of food and markets, and the capacity of districts to distribute cash. In practice, limited district-level capacity to administer cash has often driven decisions of which locations should receive cash or food (World Bank 2010a).

The PSNP’s flexibility has allowed it to address local needs as they evolve and to use a mixture of food and cash to help households manage spatially or seasonally based risk. Balancing food and cash transfers, as the PSNP has done, also requires officials to differentiate seasonal price changes from the price volatility that results from idiosyncratic shocks and market failures and to consider the effect of their decisions on local production systems (Sabates-Wheeler, Devereux, and Guenther 2009).

The cash transfers distributed in Ethiopia’s PSNP lost significant purchasing power between 2006 and 2008, leading to an increasing proportion of beneficiaries who stated that they preferred food transfers to cash (Sabates-Wheeler and Devereux 2010) and increasing requests by districts for food transfers. To deal with this issue, the PSNP negotiated its resource mix and provided cash transfers for three months, followed by food transfers for three months, thereby allowing households to better deal with price fluctuations and food insecurity.

If it had the available resources to do so, the PSNP could have dealt with the price volatility and eroding purchasing power by increasing the size of CTs along with price increases and adjusting transfers for local prices (World Bank 2010a). This practice would not have been new to the continent: Malawi’s Food and Cash Transfers and the Dowa Emergency Cash Transfers successfully experimented with indexing CTs to food prices to avoid this problem (Davey 2007; Mvula 2007). Other solutions could have included temporarily providing vouchers that were guaranteed to cover the cost of certain commodity bundles and increasing the duration of the cash transfers (Sabates-Wheeler and Devereux 2010).

Although some programs can transition between food and cash, that approach may present significant challenges if the existing system is not prepared to do so.

(continued next page) Design and Implementation of Cash Transfers in Sub-Saharan Africa 97

Box 3.3 (continued)

The transition from emergency food aid to regular CTs, in particular, can be a longterm endeavor that requires significant coordination to ensure that no gaps in coverage occur.

Outside of the PSNP, other programs have found that many households in food crisis situations prefer a combination of cash and food transfers. Such a combination ensures that they can meet their nutritional requirements but gives them the flexibility of spending cash in the ways most profitable to them.

In 2007 and 2008, the United Nations World Food Programme worked with World Vision to test the value of food and cash transfers during a drought in Lesotho. Analysis of the program showed that more beneficiaries preferred the combination of cash and food aid, followed by those who preferred strictly cash.

The program evaluation found the effect of the CTs would have been greater still had the transfers been properly indexed to the price of food (Devereux and Mhlanga 2008).

In Swaziland’s Emergency Drought Response Program, 9 out of 10 respondents to a postprogram survey said that they preferred transfers of both food and cash to one modality only. Preference for food aid, the common transfer modality, decreased as a result of the program (Devereux and Jere 2008). Beneficiaries’ favorable opinions of cash transfers suggest that CTs may become an important, but not always appropriate, solution for future emergency aid, provided that market conditions are appropriate.

Further Reading This brief discussion is not intended to be exhaustive. For an overview of the issues involved in deciding whether to use food or cash transfers, see Barrett and Maxwell (2005) and Gentilini (2007).

Senegal’s CCT for OVC). Before enrolling in Namibia’s Old Age Pension and Disability Pension, beneficiaries must purchase a life insurance policy to cover funeral expenses. Most additional benefits provided by the programs are used to enhance the effect of the cash and to help beneficiaries graduate from the program and move into productive activities. The appropriateness of these benefits depends on the program’s objectives, the beneficiaries served, and the opportunities for beneficiaries once outside the program. See figure 3.3 for a breakdown of types of program benefits distributed in the identified programs.

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