Conditional cash transfer (CCT) as a model for international aid

One of the Latin American innovations touched upon by Smith and Sells in their chapter “State Capacity and Policy Performance” is “conditional cash transfer” or CCT. Smith and Sells credit CCTs with playing an important role in poverty alleviation in Latin America in the decades following the economic crisis of the 1980s. CCTs are direct transfers of cash to poor families in exchange for their commitment to various criteria, such as sending their children to school or providing healthy meals at home. CCTs, therefore, seek to improve the human capital of those in the poorest sectors of society by incentivizing education and healthy practices. This is accomplished by ameliorating the financial constraints of recipient families, who may lack the means to give proper attention to their children’s education and health. The first such program was launched in Mexico in 1997 under the name “Progresa.” Over time CCTs spread to other Latin American countries, such as Brazil (in the form of President Lula’s “Bolsa Família”), Honduras, and Chile. CCT programs can now be found all over the world, from Nigeria to New York City.

The idea that direct cash transfers can help alleviate poverty has expanded from state-operated programs into the realm of international aid. In an Atlantic article from last year about the changing ways charities are thinking about distributing their resources, Benjamin Soskis asks “why not cash?” Soskis explores how direct cash transfers are often the most efficient and effective way of providing for people’s needs. Soskis writes that in-kind aid, aid where goods or services are provided, is often wasted or sold when it does not match the needs of the people it is going to. Soskis argues that cash transfers are more cost effective, because the recipients use it for exactly what they need, which also promotes autonomy by “reprioritizing the discretion of the beneficiary, as opposed to that of the benefactor.” The success of CCTs in Latin America is cited as a key factor in their application around the world and in the practices of international aid organizations.

In a New Republic article called, “Want to Save the World? Try Using Cold Hard Cash,” Nikita Lalwani and Sam Winter-Levy also credit Latin American CCTs as the driving force behind the growth of the direct transfer movement in international aid. Lalwani and Winter-Levy write that giving cash directly to people in need used to be a “logistical nightmare,” but today with mobile banking and mobile cash transfer technology it is far easier to facilitate direct cash transfers. However, direct cash transfers do not work when combating issues of scarcity, such as drought or famine, or in areas suffering severe civil disorder. In these cases food aid is more effective. In urban areas where a market is in place, but where many lack the money to buy basic needs and provide for their children, direct cash transfers can be highly effective.

While CCT programs may have emerged in Latin America to address specific poverty-related issues, these two articles from The Atlantic and the New Republic explore the wide-ranging applicability of direct cash transfer programs in different countries and contexts. Direct cash transfer programs have their limitations, but in many cases they can be a highly effective and efficient way to alleviate the conditions of poverty and provide people with the ability to provide for themselves.

Image source: http://www.borgenmagazine.com/conditional-cash-transfers-latin-america-fight-poverty/