The ripple effects of cash transfer

Typically, households that receive cash transfers use them to benefit the family. (Photo: Derek Davey)

Typically, households that receive cash transfers use them to benefit the family. (Photo: Derek Davey)

The book From Evidence To Action: the Story of Cash Transfers and Impact Evaluation in sub-Saharan Africa, to be launched in Johannesburg next week, evaluates the impact of cash transfers in a number of African countries. The project, a collaboration between the United Nations Children’s Fund (Unicef), the Food and Agriculture Organization of the United Nations (FAO), Save the Children UK, the Department for International Development, UK (DFID), as well as the University of North Carolina at Chapel Hill (UNC), includes data on cash transfer experiments in Ethiopia, Ghana, Kenya, Lesotho, Malawi, South Africa, Zambia, and Zimbabwe. The Mail & Guardian discussed the book and its findings with two of the lead researchers, Benjamin Davis (FAO) and Sudhanshu Handa (UNC and Unicef).

What prompted the cash transfer evaluation project?

Sudhanshu Handa: When the idea was first hatched at the Unicef regional office in Nairobi around 2006/7, cash transfers were barely visible in the region, but countries were beginning to look at the idea. However, there was a great deal of skepticism around cash transfers, with a suspicion that beneficiaries would simply waste the money. Unicef felt cash transfer could be an important tool to address poverty, so in collaboration with the FAO, we developed a systematic approach to generating evidence to show governments.

Benjamin Davis: The real merit of studies such as these is their ability to link to programme implementation. So at the outset, we decided to make sure that government had ownership over the process of evaluation, and to broaden the focus beyond the impact of cash transfers on individuals and families, to the income generated for the broader communities as a result of cash transfers.

What were the most important findings?

SH: Essentially, beneficiaries did not misuse the cash transfers, but typically used them a variety of ways for the benefit of the family. Regular cash grants allowed them to think beyond tomorrow, and the grants were used in productive ways, with long-term benefits for households and their communities. In addition to looking at basics such as nutrition, we also evaluated impacts on young people and adolescents who were not the direct beneficiaries of child care grants, but who are caregivers. Across the board, we found benefits to them. These included staying in school longer, improved mental health and social status, and reduced risky sexual behavior. This is very exciting, since there has never been any evidence around cash transfers linked to long-term adolescent benefits.

BD: We found that in many countries, programmes designed by social welfare ministries gave people liquidity, so they invested more money in agricultural inputs and productive activities in general. One unexpected result was the impact of these programmes on traditional informal social networks to manage risk. Historically, these social networks have been quite strong, but recently they have come under strain because of economic modernisation and the HIV pandemic. We found that cash transfer programmes had a strong positive impact on informal networks because the transfers allowed beneficiaries to move from being on the receiving end to participating as equals again in these networks. A finding that startled skeptics was the multiplier effects benefiting local economies. In Ghana, the study found every dollar in cash transfer could generate $2.50 for the local economy.

What is the optimal cash transfer?

SH: We found the optimal grant is in the region of 20% of a household’s income. Another enormously important factor was the predictability of the grant — where grants were paid sporadically or every three months or less, the positive impact on food security was not as great. Long-term benefits were most apparent where grants were paid regularly and amounted to 20% of household income.

What are the implications when beneficiaries no longer receive grants?

SH: The research began in Zambia, where a five-year study was carried out focused on the early childhood grants. We intend to begin addressing this “graduation” issue — what happens after the grant period ends — by revisiting the households in Zambia that have now left the grant programme.

What was the impact of the research?

BD: The project clearly shows the power of this kind of research, but only if it forms part of ongoing policy processes.

This kind of research needs to be owned by governments and must feed back immediately into policy.

What’s interesting about this study is its role in terms of influencing policies; the studies were appropriated by the stakeholders in-country.

Governments have welcomed the insights, and in almost all the cases the advocates of these programmes were able to use the results to influence political support and to improve programme implementation.