Direct Cash Transfer: Part 3

SUGGESTIONS

 1. Increase bank’s efficiency– Partial withdrawals by beneficiaries would leave something in the banks, and thus keep the banks’ incentives intact. However, in other cases, if the UID platform were used for identification then the basic investment required by the banks for identification would not be necessary. If the banks do not have to incur these fixed costs, they would be more inclined to be conduits for direct cash transfers. Once banks enter the rural area, they can also attract some of the rich farmers whose deposits could generate substantial profits.

2. Enable the postal system to deliver Aadhaar linked payments– Since post offices are more rampant in rural areas than ATMs, it will be more beneficial to enable postal system for Aadhaar-linked payments. This would require an amendment of the Postal Act that limits the disbursement by a Postmaster to Rs. 20,000 in a single day. Moreover, it would entail equipping the postal network with the infrastructure needed to carry out electronic fund transfer. The rural post offices should be equipped to deal with sophisticated technological changes.

3Transfer of cash subsidy-To expedite the implementation, bank accounts can initially be opened for one member per household. The withdrawal can be done at bank branches and ATMs through debit cards and through the business correspondent model using smart cards, PoS devices, etc.

4. Vulnerability to fluctuating market prices-Prices can be averaged out yearly based on forecasts. Cash subsidy should allow flexibility in the choice of commodity to the beneficiary. The amount of subsidy should be calculated based on the number of individuals per household rather than assuming an average household size.

5      Identification of beneficiaries– The selection criteria for identification of the beneficiaries should be kept broad-based and inclusive. Lessons can be learnt from the successful implementation of Brazil’s Bolsa Familia Program.

Some other suggestions are:

-Mandate adequate compensation to business correspondents, agents and other agencies.

-Simplify and automate important front-end processes.

-Undertake training, skill building, and refreshers.

-Undertake policy interventions.

-Invest extensively in beneficiary education and financial literacy.

-Enhance network connectivity in rural areas and North-Eastern States.

CASE STUDY: THE BOLSA FAMILIA PROGRAMME, BRAZIL

NEED FOR THE SCHEME

•  Widespread belief in Brazil that people are poor due to the “fault of an unjust society”.

• The 1988 Constitution established a legal foundation of social assistance as guaranteed rights for the needy – and also an obligation of the state to provide health and education services, among others, the access to which is established as a basic right of all citizens.

In January 2003 President Lula promised to eradicate hunger and fight poverty in his inaugural speech and in fact, conferred high priority to the Zero Hunger strategy. This strategy included several interventions / programs, including the Bolsa Familia Program (BFP).

AIMS

In Brazil, the BFP seeks to use financial incentives to change certain attitudes and behavior among impoverished families. It aims, specifically, to:

• Keep families from entering children under 14 years old in the labor market (forbidden by law);
• Motivate families to ensure their children complete a secondary education
•  Motivate these families to use health services, especially the pregnant women and children under 7 years of age.

In the long run, the aim is to break the intergenerational poverty cycle. The effects of the BFP on economic inclusion are not seen immediately due to the complex variables influencing economic inclusion and the challenges in implementing specific policies.

IMPACT

• The Gini index, an indicator of income distribution, remained stable in Brazil for many decades but has dropped consistently since 2001; almost one quarter of the drop is attributable to the BFP.
• Larger family expenditures among enrolled families than in the comparison group, especially on food (US$ 172 more a year on food items).
• Enrolled families spent a full 100$ more than the families in the contrasting comparison group.
• Families in the BFP aspire to consume healthier foods, such as vegetables and fruits.
• Propensity scores showed lower rates of school evasion and less engagement in the labor market among children from families enrolled in the BFP; however, these children went through school more slowly.

FUTURE PROSPECTS

Responding to the need to decrease the economic disparities, a wide-reaching program known as “Next Step” (Próximo Passo) was launched in 2008–2009. The program, which involves three ministries and the private sector, aims to provide technical training for adults from families in the BFP and to guarantee them jobs in government construction projects. At the time of this publication, 65 thousand adults from BFP families have already concluded their training and 20 thousand are now attending training sections. A total of 229 municipalities are already running the program.

All in all the Bolsa Familia programme worked due to it wired pre conditions, regular checking and efficient implementation. Around 25% of the population of Brazil benefits from this programme. India, being a country which has in absolute and relative terms more poverty clearly good do with a successful programme like the Balso Familia Programme.

 

 

 

 

 

CONCLUSION

There is a broad agreement that the relative efficacy of cash transfer, in whatever forms, is highly context dependent.

In-kind transfers make sense for a large class for food and health related interventions. There also appears scope to use “cash – assisted kind” transfers for agricultural inputs, such as fertilizer in the form of vouchers. However, it is evident that these inherit the problems of targeting and the corruption associated with the traditional forms of subsidization. Tackling these would be crucial if they achieve their goals and at the same time be cost effective.

The strongest case for cash transfers appears to be for social protection of the elderly or as supplementary income to support children. The clearest evidence of benefits from cash transfers pertains to the field of education and access to health services, especially when these are associated with conditionality’s. Most of these remarkable successes have been in contexts where there is extensive public provisioning of services, so that CCTs have been designed as demand-side incentives for human capital investment, complementing supply-side, public provisioning of services. Brazil’s Bolsa Familia, for instance, was explicitly linked to a rights-based Zero Hunger Programme, which included expansion of school meal programmes, people’s hotels, food pantries and workers’ meals programmes, among others. It would be erroneous to use the success of CCTs in such contexts to make a case for cash transfers replacing existing supply-side initiatives in India. If anything, experience elsewhere in the world offers cautionary tales that advance the case for treating cash transfers as part of a menu of options, if at all, and as complementary demand-side interventions, and nothing beyond. Currently, the discussion on cash transfers in India stands polarized, rather unnaturally, between proponents and opponents of cash transfers. It would make sense to redraw the contours of our contentions by explicitly recognizing that both cash and in-kind transfers can take many, often overlapping, forms, and that it does not make sense to speak of cash transfers in simplistic terms. It is also important to recognize that those who stand opposed to cash transfers in food-related schemes do support and recognize the importance of certain cash transfers such as social security pensions and maternity entitlements. The middle ground, where cash transfers are seen to reinforce supply-side initiatives, offers the richest possibilities for policy in India. A reframing of the cash transfer debate in India is essential so as not to undermine the promise of such a middle ground.

CITATIONS

1. Bold, Chris, Piteous, David and Rotaman, Sarah, 2012. “Social Cash Transfers and Financial Inclusion: Evidence from four countries,” CGAP Focus Note No. 77

2. Case, Anne and Angus Deaton, 1998. “Large cash transfers to the elderly in South Africa,” Economic Journal 108(450), 1330-61

3. Case, Anne, Hosegood, Victoria & Lund , Frances , 2005. “The reach and impact of Child Support Grants: evidence from KwaZulu-Natal,” Development Southern Africa Vol. 22, No. 4.

4. Duflo, Esther, “Grandmothers and Granddaughters: Old-Age Pensions and Intrahousehold Allocation in South Africa,” World Bank Economic Review, Vol. 17, no. 1, (June 2003): 1-25

5. Dutta, Puja, Howes, Stephen and Murgai, Rinku, 2010. “Small but Effective: India’s Targeted Unconditional cash transfers,” ASARC Working Paper18

6. Edmonds, Eric V. & Schady, Norbert, 2008. “Poverty alleviation and child labor,” Policy Research Working Paper Series 4702, The World Bank.

7. Edmonds, Eric V. 2006. “Child Labor and Schooling Responses to Anticipated Income in South Africa, ” Journal of Development Economics, Vol. 81, pp. 386-414

8. Gangopadhyay, Shubhashis, Lensink, Robert and Yadav, Bhupesh, “Cash or Food Security through the Public Distribution System? Evidence from a Randomized Controlled Trial in Delhi, India” (October 1, 2012). Available at SSRN: http://ssrn.com/abstract=2186408 or https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2186408&rec=1&srcabs=1073702&alg=1&pos=2. doi.org/10.2139/ssrn.2186408

9. Sarah Baird & Craig McIntosh & Berk Özler, 2011. “Cash or Condition? Evidence from a Cash Transfer Experiment,” The Quarterly Journal of Economics, Oxford University Press, vol. 126(4), pages 1709-1753.

10. Schady, Nobert and Aruajo, Maria Caridad, 2006. “Cash transfers, conditions, school enrollment, and child work : evidence from a randomized experiment in Ecuador,” World Bank Policy Research Working Paper Series 3930

11. Yanez-Pagans, Monica, 2008. “Culture and Human Capital Investments: Evidence of an Unconditional Cash Transfer Program in Bolivia,” IZA Discussion Paper No. 3678

12. Veras Soares F, Perez Ribas R, Guerreiro Osório R, 2007, Evaluating the Impact of Brazil’s Bolsa Família: Cash Transfer Programmes in Comparative Perspective IPC Evaluation Note No. 1. International Poverty Centre, Number 1 December, 2007, Brasilia

13.Gondim Teixeira C, 2009 What Is the Impact of Cash Transfers on Labour Supply? International Policy Centre for Inclusive Growth (IPC-IG) IPC One-Pager Number 85, July 2009, Brasilia

14. Ravallion M, 2008, Bailing Out the World’s Poorest, World Bank Working Paper Series, World Bank, Washington DC.

15. Chen MA, 2001 Women and Informality: A Global Picture, the Global Movement SAIS Review 21.1 p71-82

16. ILO, 2009, Recovering From Crisis: A Global Jobs Pact http://www.ilo.org/public/libdoc/ilo/2009/109B09_101_engl.pdf

17. Barrientos A, and Santibanez, C, New Forms of Social Assistance and the Evolution of Social Protection in Latin America. Journal of Latin American Studies 41. 1-26 Cambridge University Press References and useful links: The literature on CCTs is large and rapidly growing. The World Bank Policy and Research Report (2009) Conditional Cash Transfers – Reducing Present and Future Poverty by Fiszbein A, Schady N at al. 2008, Washington, DC: The World Bank provides a major review. Grosh M, Del Ninno C, Tesliuc E, Ouerghi A, 2008, For Protection and Promotion: The Design and Implementation of Effective Safety Nets Washington, DC: The World Bank, offers a shorter discussion. Readers will find further resources at the links below as well as at the references quoted in the endnotes. Readers will find further resources at these links: ILO: United Nation’s Children Fund (UNICEF) – Social Protection: http://www.unicef.org/socialpolicy/index_48560.html UNDP: http://www.in.undp.org/. org/cctafrica.do The World Bank: http://www.worldbank.org/sp Issue 01 February 2010 MDG INSIGHTS – February 2010 5 Issue 01 February 2010