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The concerns for inclusive growth have gained attention we approach post 2015 agenda. The reason for this has been because of rising inequalities in many countries (ADB, 2011). A closer scrutiny of the emerging market economies such as China and India reveals a worrying trend of growth marked with increasing inequalities. Therefore experts, researchers and International institutions have devote efforts to try and find a growth path that is more inclusive. The ADB has proposed three pillars of inclusive growth: ‘High, efficient and sustained growth; Social inclusion enhancing equal access to opportunities; Social safety nets to protect most vulnerable’ (ADB, 2012).Therefore social safety nets or social protection programs have been promoted as one way to help the marginalized, the poor and often vulnerable groups to overcome poverty and inequality.

Social safety nets vary in scope and objective and they include social protection, labor rating, social security on health and government expenditure on social security and welfare (ADB, 2012). The programs take different forms- pensions, cash for work, fee waivers, food aid, conditional cash transfers and microcredit.

Cash transfers (CTs) as one of social assistance programs have been widely used in many countries. CTs are a form of social assistance, whether developmental or humanitarian that is intended to smooth out consumption of goods and services provided through the market such as materials or through public provision such as education and health (Farrington and Slater, 2006). CTs can be conditional, unconditional.  The choice of which CTs to use is always dependent upon a number of factors. Conditional cash transfers (CCTs) are generally appropriate in two conditions. First attaching conditions to the transfers is necessary for winning political and tax payer’s support for the CTs where the perception is that they are mere redistributive tool. Secondly, they are a good policy option when there is low private household investment in the education and health of children (Bernd and Slater 2006; WB, 2009). 

The CTs usually provide noncontributory cash to the target groups to satisfy basic consumption needs of the households. In many instances the source of these transfers is the state, NGO or other international Institutions such as the World Bank. CTs are usually implemented with development goals as the ultimate aim. Emergency CTs are given to smooth out consumption, while CTs for development are given at regular interval for long time with development objectives in mind (Garcia and Moore, 2012). Well-designed CTs are accompanied by clear targets and objectives, monitoring and evaluations as prerequisite for the payments. Similarly, effective CTs should have entry and exit strategy that helps to reduce manipulation and adverse effects on labor market participation (Garcia and Moore, 2012). While unconditional cash transfers (UCTs) are usually given to all eligible households without putting further responsibilities on them, conditional cash transfers (CCTs) are provided only to those who have fulfilled required conditions, usually called co-responsibilities. Conditions for education include requiring beneficiary to attend school 80-85% of the time or a certain level of performance. In regard to health household heads may be required to take children for vaccination or routine clinics, meet or attend seminars covering nutrition topics (Linkert et al, 2007).

CCTs have become one of the largest social assistance programs. They aim mainly to reduce inequality and to help the poor break the intergenerational cycle of poverty (Santos et al). CCTs vary in scope, objective and often depend on each country’s goal. In Sub-Saharan Africa they are used mainly to meet basic survival (Garcia and Moor, 2012). However the following things are common to all: 1) Establishing a means to transfer the cash to the recipients, 2) strong monitoring and evaluation of both the system and of compliance with the conditions accompanying the transfers (WB, 2009).

In developing countries, literature suggests that the program should have a simple procedure and be accompanied with clear targets and objectives. In addition the method of delivery must be as reliable as possible (Bernd and Slater, 2006). Furthermore, low income countries can implement the CCTs in stages, starting with pilot programs targeting small groups and gradually enlarging them as evidenced in the cases of Mexico’s PROGRESA/ Oportunidades, the South Africa Child Support Grant and Bangladesh female secondary school stipend (Chapman, 2006).

Generally CCTs become the pioneer programs for modernizing other social assistance programs because they demand the use of cutting edge technical systems especially for monitoring and evaluation. In most cases they use community based vetting to enlist eligible recipients and to enhance transparency. At the early stages of their conception, their focus is mostly on access to education and health services. However, with time, policy makers begin to think about improving the quality of services; redefine conditionalities and linking them to complimentary services such as professional trainings (WB, 2009).

The success of CCT program in Latin America Countries has led to their adoption in many other countries. However, the results have been mixed across regions between CCTs and UCCTs. While in Latin America conditionalities have better results, in Malawi for example CCTs are effective in improving school outcomes, while UCCTs attained better results in reducing teenage pregnancy and marriage than CCTs. This means that the choice of what to use depends on who the policymakers are focusing and what they intend to achieve (World Bank, 2012).

Nevertheless, CCTs have particularly helped developing countries to make progress towards achieving Millennium Development Goals and caring for orphaned children (Bernd and Slater, 2006: Chapman, 2006). To the poor the availability of basic public services such health, education and nutrition programs do not always mean access to them because they usually involve opportunity costs. Thus in order to encourage the poor to access these services the government compensates them for the opportunity costs they would potentially lose when they take up the social services. These programs have ability to solve short term poverty by bridging consumption deficits, while creating conditions necessary for investment on human capital needed for long term growth (Garcia and Moore). But the effect of CCTs in reducing inequalities is expected to take long time, partly due to the challenges of implementing related policies (Santos et al. 2011), and because they need to be complimented by other programs to bear inclusiveness (Bernd and Slater, 2006; ADB 2011, WB, 2009).

Currently, CCTs have had success in two areas they presently focus on in many countries: reducing consumption poverty and encouraging investment in education and health (Honda and Davis, 2006). But their impact is greatest when there is proper infrastructure for governance and accountability that increases targeting of the poor and monitoring of both service providers and beneficiaries (Clinton and Holmes, 2005). On the contrary they can fail to have intended effect when there is weak provision of public goods such as health or education. In fact CTs that target children are effective when they are complimented by the provision of those services (Farrington and Slater, 2006). This implies that policy makers should focus on supply side as much as they focus on demand side. Likewise, their impact on welfare programs is dependent on the size of the transfers.  When the amount transferred to the households is larger, they are able to spend more not only on food but on nutritious food stuffs (Bernd and Slater, 2006, WB, 2009). In Malawi an extra $1 received by girls above the basic minimum increased enrollment rates by 1% point and also improved test scores(Bernd and Slater).

The cost of implementing CCTs depends on the coverage, type of targeting, size of transfer and the program’s administrative costs. The most effective CCT can cost ‘as little as 0.021 per cent of GDP’ like in Nicaragua (ILO, 2004). However, even countries where they have been successful like LACs there has been no cost-benefit analysis and little is known whether CCTs are the most cost effective or sustainable way of addressing the inequalities (Handa and Davis). Nonetheless what makes CCTs an appealing strategy is their ability to reduce both the present and future poverty (World Dev’t report, 2006). They are also be more beneficial when the transfers are targeted and conditional (Kakwani, Soares and Son, 2005). In addition they are effective where the demand for child labor is high or when discrimination against girls or other disadvantaged leads to low levels of schooling among these groups (Chapman). Indeed literature suggests that where CCTs are linked to girl child education the result is positive. They lower incidences of early marriages in many communities in Africa, including Kenya. This shows that income has direct effect on the behavior of girl child. (Shaban, 2012)

ISSUES AND DEBATES

Despite its significance, there is a major debate among experts on whether developing countries, especially in Africa, with poor technology infrastructure are ready for conditional cash transfers. Countries that have successfully implemented CCTs like Brazil have majorly depended upon cutting edge technology system to facilitate data collection, monitoring and evaluation and transfers. Critics have rightly pointed out that Africa lacks the basic technological infrastructure needed to implement CCTs.Thus scholars have suggested that instead UCCTs would work well for Africa since it requires less of technology than CCTs.

It has been argued that CCTs require large administrative and institutional capacity than UCCTs which Africa does not have. Critics point out that many African countries that have attempted to implement CCTs have faced capacity constraints. For example, in Zambia primary schools had no capacity to absorb increased enrolments. Another case in Malawi and Zambia, a district with a population of 200,000 to 500,000 had only two social workers who lacked experience and result oriented management. Some point to low salaries and wages paid to the social workers as a disincentive to their motivation to implement the programs (Bernd and Slater).

Another problem pointed out is the quality of services. In some remote places in Africa, teacher absenteeism is very high, and children walk very long distances to get the nearest schools and these in turn affects quality of the services. Similarly, women some time have to travel long distances to get a stamp to prove that they attended clinics before they qualify for the next transfers. Thus CCTs becomes like a tax burden on households. Africa countries also face budget constraints yet CCT require substantial investment (Bernd and Slater).  However, the challenges Africa is facing are not unique since many developing countries face the same challenge at the beginning of the program. At the same time evidence shows that the program is working in the few African countries that are implementing it.

Secondly, questions also abound on whether CCTs are better than UCCTs. There is however a general consensus that the use of CCTS is appropriate on two conditions:  First, CCTs should be used when there is low private investment on the human development of children. Secondly, CCTs are desirable when it is necessary to win political support. For example in South Africa there was strong argument against simply transferring cash on the basis that it creates dependency. To make the program more politically acceptable the government linked them Millennium Development Goals (MDGs) (Bernd and Slater). Again when the conditions are seen as co-responsibility, they treat beneficiary as an adult capable of solving his or her own problem and the government as just partner and this motivates beneficiaries (WB, 2009). However CCTs are not a panacea and cannot solve all problems. They should complement rather substitute other forms of transfer (Garcia and Moore, 2012).

Third is the debate whether social assistance in-kind is preferable to CTs. Proponents of in-kind transfer point out that they do not allow recipients to spend money on unintended purposes such as drinking (Harvey et al. 2005). But in some cases the cost of distributing in kind transfer like food subsidies is higher than the value of the food distributed, making them inefficient (WB, 2003). Furthermore, CCTs maximize utility, giving the beneficiaries the choice to spend the money in the way they think is most useful to them. However, in-kind and food aid would be preferred in times of famine or drought when it is evident that cash transfers would further drive up food prices or fail to protect local consumption. In addition in times of high inflation cash transfers may not be appropriate if the amount to be transferred does not take into account such economic down turns (Garcia and Moore).

Fourth, there are also concerns on the opportunity costs of CCTs and the economic rationale for investing in CCTs rather than other policy options. But evidence shows that CTs can lessen market failures.  In instances where there is low esteem towards investment in girl child education, CTs linked to conditions requiring parents to keep girls in schools help in overcoming inefficient and inequitable gender disparities(Chapman). This makes CCT s an attractive policy for Africa where Gender parity in education is still skewed in favor of boy child in most communities still stuck by the patriarchal hierarchies that relegates girl child to the periphery Mokua, 2013).In addition when compared with food distribution CTs are more cost efficient (WB, 2003). They allow the beneficiary to make purchases he would otherwise not make given the market imperfections. Predictable transfers can help the beneficiary manage risks.

Fifth, some researchers argue that cash payments are ‘money down the drain’, with pure consumption effect while bearing no impact on production (Farrington and Slater). However available evidence suggests that the CTs have impact on production by raising demand for goods in the local market (Lindert et al). Even when it is not intended CTs always results in positive impacts in production. An objective assessment should look at their overall impact in the wider productive economy (Farrington and Slater).Finally, some literature point out that CCTs creates dependency and has adverse effects on labor participation as some adults may want to remain beneficiaries of the CCTs. However there has been no proof to confirm that point of view. Instead literature shows that in countries such as Brazil, Cambodia, Ecuador, Mexico and Nicaragua where CCTs, CCTs have significantly reduced child labor, but have not reduced labor participation by adults (WB, 2009).

Africa like many other developing countries continues to experience growing inequalities. However the trends of inequalities is not unique to Africa but one that needs to be addressed if the continent’s population has to benefit from its growing opportunities. But the past few years have seen a tremendous increase in the use of CCTs as a strategy to promote inclusive growth. Even though they were most common in LACs in the early time, CCTs are now being implemented in many countries. As the debate heightens for the pursuit of an inclusive growth, CCTs may not go away soon. Their growing importance has been because of a recent trend where growth in many countries has been accompanied with increasing inequalities. Brazil’s case especially provides us with deeper insights of how a good CCT program should be designed and implemented. How a country that had a Gini coefficient of 54.2 until 1990 could overcome this chronic inequality through CCTs is case to learn from for developing countries (ODI, 2011).
In the next article we look at Brazil’s CCTS and compare it with CTs in Malawi, Africa.