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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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98 The Cash Dividend Figure 3.3 Programs That Provide Only Cash Versus Programs That Provide Additional Benefits 70 63%

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Transfer Size: A Delicate Issue All else held constant, larger transfers reach fewer beneficiaries than smaller transfers. However, if transfer sizes are too small, programs will not have their intended effect and the ratio of administrative to benefit costs will be rather high. Factors to consider when determining transfer sizes include the minimal transfer size that will achieve the program’s stated goals, the anticipated pool of eligible beneficiaries, and the program’s budget (Grosh and others 2008). Other important considerations are whether the transfers will be adjusted to keep pace with inflation and how the population of eligible beneficiaries is expected to evolve.

Deciding on transfer levels is often an iterative process in which data projecting how to fulfill the program’s goals meet head to head with the program’s budget constraints (Grosh and others 2008). Difficult decisions must be made: Should benefit sizes be decreased? How would such a decrease affect expected outcomes? Should transfers be given to a smaller group of eligible recipients? If so, who is in this group, and how should such people be targeted? Final factors to consider are whether transfer size should vary by household size, composition, location, gender of the head, or other characteristics, and whether the scheme can be implemented given existing program capacity.

Design and Implementation of Cash Transfers in Sub-Saharan Africa 99 Therefore, decisions about transfer size should be based on empirical work that reflects an understanding of the potential beneficiary population and determines how to maximize transfer effectiveness and achieve program objectives while balancing financial and capacity constraints.

Provided that transfer income is treated the same as other household income (that is, it is entirely fungible), ex ante simulations can help determine what transfer sizes are needed to meet program goals. Strong impact evaluations can inform how effective various transfer sizes are in meeting the program’s specific goals.

Linking of Benefit Composition to Program Objectives:

Transfers and Trade-offs It is important that program benefits align with the program’s specific objectives. For programs with objectives related to food security, including other benefits in addition to cash may be important to ensure that households can achieve this objective. Programs whose objectives include productivity-enhancing activities may include training components or means to increase access to financial services. Programs that seek to increase human capital investments may also relax constraints on households by providing health care free of charge or by giving certain fee waivers to households.

CT programs that aim to eliminate food insecurity in Sub-Saharan Africa have typically tried to set transfers at a level that allows eligible households to meet their nutritional needs. For instance, Kenya’s HSNP selected its transfer level on the basis of the five-year average price of cereals (HSNP 2008), and the Zambian SCTs set transfers to allow households to purchase a 50-pound bag of maize monthly, presumably enough to allow a household of six to eat a second meal each day (Schüring 2010b). Although Ethiopia’s PSNP originally considered varying transfer levels depending on the size of the household’s food gap, capacity constraints led it to provide a uniform transfer (World Bank 2010a).

If the program’s goal is to reduce poverty, an appropriate measure to determine transfer levels is the size of the poverty gap for eligible households. Malawi’s SCT provides an average transfer value of MK 1,700 (US$13) per household monthly, which was deemed large enough to fill the extreme poverty gap in target households (Schubert and Huijbregts 2006).

In line with its objectives specific to the OVC crisis, Kenya’s CT for OVC chose transfer levels that were believed to cover enough of the needs of OVC to help keep them in their households (World Bank 2009d).

100 The Cash Dividend A final way that programs have used transfer size to achieve their objectives is to break the transfers into different components. Nigeria’s COPE CCT envisions providing monthly CTs, known as the Basic Income Grant, in addition to a lump-sum payment that is supposed to be used for major household investments. This component, known as the Poverty Reduction Accelerator Investment, sets aside approximately US$60 monthly for households into a savings account. It is to be given to the household annually only after households have received training to help them create a microenterprise (World Bank n.d.a).

Although larger transfers may result in stronger outcomes, there are also concerns that transfers not be so large as to cause unintended effects.

Lesotho’s Child Grants Programme (CGP) decided to provide a relatively small transfer in response to concerns that a larger transfer would encourage dependency in beneficiary households. The CGP also limited transfer size in light of concerns over the government’s future capacity to finance the grants (PlusNews 2009). This decision reflects the importance of undertaking empirical work to understand how large the eligible population could become and how the expected program budget could cover this population. It also suggests that political economy issues may play a role in transfer size; in this case, smaller transfers were also more politically palatable.

The lack of data about beneficiary households in many programs makes it difficult to make standardized comparisons of transfer size across the identified programs. Ideally, data on the distribution of expenditure or consumption of beneficiary households or another relevant group could be compared to transfer sizes. Because this information is not available, relative transfer sizes are shown in figures 3.4, 3.5, and 3.6.

Figure 3.4 compares the average monthly transfer levels of programs that provide cash at the household level.

The monthly value of the transfers shown ranges from US$8 through US$15. (This range assumes that the transfers are spread evenly over 12 months, which is not true in all cases.) Many other identified CT programs awarded a flat transfer to households, but these CTs were typically one-time or short-term transfers.

The one-time transfers tended to be larger than the transfers shown in figure 3.4, with values ranging from approximately US$40, in the case of the Burundi UNHCR (Office of the United Nations High Commissioner for Refugees) Cash Grants, to several hundred dollars, in the case of cash grants to ex-combatants in Liberia and Côte d’Ivoire.

Other transfers are given at the individual level (see figure 3.5). These transfers are often social pensions, although some CCTs directed to adolescents or young adults are also included in this category, as in the Design and Implementation of Cash Transfers in Sub-Saharan Africa 101 Figure 3.4 Monthly Average Size of Cash Transfers Given at the Household Level

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Source: Authors’ representation.

Note: Transfer size was calculated using the average exchange rate during the time of program implementation.

102 The Cash Dividend Figure 3.6 Monthly Average Size of Cash Transfers, Variable Transfers

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Source: Authors’ representation.

Note: Transfer size was calculated using the average exchange rate during the time of program implementation.

case of Nigeria’s Kano CCT for Girls’ Education. These transfer values vary substantially. The wealthiest countries provide the largest transfers through their social pensions, which are US$100 monthly or more in some cases. The size differences in part reflect cost-of-living differences between the less wealthy and wealthier countries.

Still other programs award cash transfers on a graduated system. This design provides households with a base transfer that is supplemented according to the number of household members. The marginal increase in transfers often decreases from the first to the second and subsequent household members, usually with a cap on the total possible transfer size. Many of the CT programs reviewed, outside of social pensions, used this strategy to link household size to transfer values. The range of minimum and maximum monthly transfers for several programs that use this graduated system is found in figure 3.6. As the figure shows, the range of transfers varies greatly among different programs; for some transfers, the maximum amount is less than double the minimum transfer, whereas for many others, it is approximately three times the minimum transfer value.

Design and Implementation of Cash Transfers in Sub-Saharan Africa 103 Ad hoc descriptions of transfer size. Additional information on the value of CTs is also available. For instance, the following comparisons have been

made in terms of households’ consumption or expenditures:

• Kenya’s CT for OVC equals approximately 20 percent of poor Kenyan households’ expenditures (World Bank 2009d).

• Kenya’s HSNP is between 30 percent and 40 percent of beneficiary households’ food expenditures (HSNP n.d.).

• Ghana’s LEAP (Livelihood Empowerment Against Poverty) transfers are equal to 20 percent of the bottom quintile’s average household consumption (World Bank 2010c).

• Malawi’s Zomba cash transfer was set to equal approximately 15 percent of eligible households’ total monthly consumption (Baird and others 2010).

In size, those transfers are comparable to transfers in other CT programs around the world.

In terms of wages or income, information on transfer size includes the


• Mauritius’s Old Age Pension was worth approximately 20 percent of the average wage in the country in 2008 (Central Statistics Office 2007).

• Mozambique’s PSA equaled between 4 percent and 6 percent of the country’s minimum wage in 2007 (Ellis 2007).

• South Africa’s Old Age Pension and Disability Grant each equal

1.75 times median income. South Africa’s Foster Care Grant is 1.15 times median per capita income, and the Child Support Grant is 0.4 times the value of the median per capita income (Woolard and Leibbrandt 2010).

These statistics can obscure the transfers’ relative value to beneficiaries. Despite the apparent low value of Mozambique’s PSA, a 2008 evaluation determined that the average benefit received by beneficiary households equaled 21.8 percent of the households’ current consumption levels, a number comparable to those found in similar programs.

However, the transfers were still low in comparison with the minimum value of the monthly food basket outlined by the government of Mozambique (Soares, Hirata, and Rivas n.d.).

104 The Cash Dividend

In terms of gross domestic product (GDP) per capita, the followingwas found:

• Transfers in Burkina Faso’s Pilot CCT-CT do not surpass 7.5 percent of GDP per capita in one household with one child in the oldest group (de Walque 2009).

• Nigeria’s Kano CCT for Girls’ Education was set to equal approximately 20 percent of GDP per capita in 2007 (Ayala 2009).

Several programs outline transfer size in relation to poverty or food poverty, which is appropriate if the program has food security or related

goals, as follows:

• Ethiopia’s PSNP-DS household transfer equals approximately 10 percent of the basket represented by the 2007/08 national poverty line (World Bank 2010a).

• Senegal’s CF-SCT transfer equals about 14 percent of the average food basket value in households with four adults (World Bank 2009a).

• Tanzania’s CB-CCT provides benefits that equal half of the food poverty line for each child and benefits that equal the food poverty line for the elderly (Evans 2008).

• Lesotho’s Old Age Pension was originally set to cover the cost of meeting 75 percent of the minimal caloric needs of a household of five (Croome, Nyanguru, and Molisana 2007).

• Zambia’s Kalomo SCT base transfer of approximately US$10 per household was considered insufficient to cover the poverty gap but enough to pull people from extreme poverty (Ministry of Community Development and Social Services and German Agency for Technical Cooperation 2007).

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