1.IntroductionEventhough poverty reduction has remained the main focus of developmentassistance since the 1990s and previously in the early 1970s, povertyhas not significantly decreased in 50 years time in Sub-SaharanAfrica (Riddell, p. 31-35, 2008). In the last 30 years, the idea ofcash transfers has spread across the globe now reaching an estimated700 millioin people (Shapiro, 2017). In recent years there has been amovement of NGOs to push for innovative alternatives to traditionalconcepts of aid giving (Taylor, 2014, p. 2).
Unconditional CashTransfers (UCTs), that is a cash transfer to private households underno condition on spending, have entered the plane against the backdropof the availability of money transfer technology and a highproliferation of mobile phones in developing countries, which makesUCTs cheap and reliable. Especially in Sub-Saharan Africa, the mostaffected region with 41 % of the population living in extremepoverty, the conditions for UCTs are highly favorable and thus theconcept has blossomed there in recent years, utilized by governmentsand NGOs alike (World Bank, 2016; Stephens, 2014). Inthis paper, I will investigate the effectiveness of UCTs inalleviating poverty by way of a literature review but first, thepaper will elaborate on the supposed advantages of direct cashtransfers vís-à-vís traditional development assistance andconditional cash transfers and problems associated with UCTs. In thesecond part, the paper investigates the effects of UTCs on householdswith regard to poverty alleviation, and the NGO effectiveness withregard to UCTs. Finally, the study concludes with assessing thequestion of whether UTCs are indeed successful at alleviating povertybased on the findings and acknowledges the limitations of the scopeof this paper.
2.Unconditional Cash Transfers: BackgroundUnconditionaland Conditional Cash Transfers (UTCs and CCTs), are an integral partof the social protection scheme in high-income countries in Europeand North-America. Since the 1990s, several Latin American countrieslike Mexico, Brazil and Nicaragua have started to implement CCTs oftheir own, targeted specifically at poor households (Schubert &Slater, 2006). Successful Programs such as Progresa/Oportunidades inMexico, made the cash transfer dependent on health and educationconditions. CCTs are therefore well-studied and generally concludedto have a positive impact on poverty and also on having a sizebaleimpact on breaking the intergenerational transmission of poverty(Todaro, 2008, p.
404). However, a major disadvantage of CCTs is thehigh administrative burden that comes with the conditionality of thetransfer and the constant back-checking of criteria It isinteresting to note that a number of low income developing countriesin Africa have in recent years started to implement unconditionalsocial cash transfer schemes, such as Malawi and Ethiopia, joiningthe already well-established child grant in the middle-income countryof South Africa (Niño-Zarazúa,Barrientos, Hickey, Hulme, 2012).Whatmakes UCTs very interesting, is that the concept mitigates severalissues of traditional development assistance by eliminating themiddleman between aid recipients: among others, aid diversion – themisappropriation of aid money by government officials, rebel groups,and other political actors- , heavy administrative burden onoftentimes already weak local institutions , great administrativecost of monitoring and implementing development aid trajectories(Moss, Pettersson & van de Walle, 2006) and the overall challengeof reaching poor households in the first place.
Most importantly, asa social protection scheme, it awards developing countries the chanceto take up a poverty-alleviating policy scheme and awards them someindependence from the usual donor-recipient relationship. In lowerincome countries like Malawi and Ethiopia however, the policy isinfluenced and partly financed by development aid (Niño-Zarazúa,Barrientos, Hickey, Hulme, 2012). The NGO approach, exemplified mostsuccessfully by GiveDirectly and which was founded only in 2008,creates a direct link between private donors and households andprovides a powerful alternative to the wastefulness andineffectiveness of large parts of the NGO industry (Klarreich &Polman, 2012).
Ontop of that it avoids the problem of the difficulty of measuring theeffect of indirect poverty alleveation strategies on individualhouseholds and provides the possibility to address a plethora ofproblems with one single instrument in that it contributes to alldimensions in which the household is affected, in the eyes of thehousehold member receiving the cash transfer. This positive impact ofrecipient choice on aid effectiveness, is another vital component ofUCTs and is without an implication to be investigated further(Shapiro, 2017). Subsequently, it can impact food and nutrition,asset diversification, skills, as well as health and education and ina more normative sense it empower the poverty-affected individualsand awards them agency in escaping their own predicament. In sum, hasthe capacity to strengthen the overall resilience of households. 3. The effects of Unconditional Cash Transfers on poor householdsIn this section, I will look intothe effects of government-administered UCT programs and NGO UCTprograms on poor households and their propensity to reduce poverty byway of several studies on the issue. Thereis a growing consensus that in the fight against poverty, nutrition,health and education are integral complements that further affect theresilience ofhouseholds to poverty(Todaro, 2008, p. 404; Adato & Basset, 2009; Handa & Otchere,2016).
Thus, to analyze the effectiveness of UCTs for the reductionof poverty, I am basing my assessment on the aforementioned areas aswell as the direct impact on the economic and labour dimension. Dueto the fact that Sub-Saharan Africa is the most adversely affectedregion, I will restrict my argument to mainly studies conducted onUCTs in the region. In the first part, I will consecutively look atfindings through the lense of the economic and labor dimension,health and education while taking into consideration the resilienceaspect. In the second part of the assessment, the paper highlightsthe NGO approach to UCTs and the impact of UCTs on households in thatcontext by way of one research paper.a.Resilience, Economic and Labour Dimension, Health & Education. The concept of resiliencedescribes the capacity of households to withstand shocks andstressors to their livelihood.
Sub-Saharan Africa being a regionthat is especially prone to droughts and other climate change-relatedissues but also diseases and natural disasters, resilience is anextremely important determinant for poverty reduction. It encompassesaspects of household income generating capacity and diversification,ownership of agricultural and nonagricultural assets, access tosafety nets and basic services as well as household stability andadaptive capacity to shocks” (Adato & Basset, 2009, p. 1). Impacton economic situation and labor Astudy on UCTs in Uganda, the governmen handed out a lump sum ofroughly a yearly salary ($382), to young applicants aged 18-34 withno condition being placed on the use of the money and no compliancemonitoring, an integral part of CCTs. The study found that after twoyears, the studied group experienced a 49% increase in earnings and a41 % increase after four years due to the fact that they invested thegrant in “skills and business assets”.
Overall they were 65 %more likely to possess a trade in comparison with the control groupwho had not received the UCT. The study thus found that a UCT servedas a “bridge to economic opportunity” (Blattmann, Fiala &Martinez, 2013), that return on investment is indeed high can notonly lead to a short-term increase in earnings but can impactlong-term income (Blattmann, Fiala & Martinez, 2013). Amajor concern with the unconditionality of UCTs in comparison toCCTs, is that the money would first of all, be squandered on alcoholand tobacco and not invested in poverty-alleviating activities andassets and especially finding work.
However, every single studyevaluated in the scope of this paper repudiates these assumptions,with labor supply commonly increasing upon receiving a UCT. The casestudy by Blattman et al on Uganda showed that the number of hourseworked even by 17% (Blattmann, Fiala & Martinez, 2013; Handa &Otchere, 2016).Healthand Education To increase health and educationis not only pivotal with regard to being able to acquire work andescape power in that way, it is also essential in the fight againstthe AIDS epidemic for example, that is a major disruptor oflivelihood systems and the propensity to avoid poverty (Adatao &Basset, 2009).Onebody of research from the New Zealandic University of Otago, studiedthe effectiveness of UCTs on the use ofhealth services and health outcomes in vulnerable children and adultsin lower and middle income countries (Pega, Walter, Liu, Pabayo,Lhachimi & Saith, 2014). It concluded that UCTs may improve somehealth outcomes such as the likelihood of having been food secure,the level of dietary diversity and the likeliness of having had anyillness while also improving the likelihood of having attendedschool, a social determinant of health, yet, the overalleffectiveness of UCTs on health outcomes remained uncertain (Pega etal, 2014). Acomprehensive study by M.
Adato and A Bassett (2009) on the impact ofCCT (Latin America) and UCT (Sub-Sahran Africa) on education andhealth, found that the impact in Africa is underresearched. Thehealth impact in Malawi was measured to be an decrease of 13 % ofillness in the past month among children, an improved overall healthfor household members when income is pooled and in Zambia, the datashowed reduced incidences of illness by 12 and 14 percentage pointsfor children and the elderly and increases in enrolment in secondaryeducation ranging from 5-10 % (Adato & Bassett, 2009). Studiescomparing UCTs and CCTs with respect to their impactin education and health showthat CCTs are far more successful at increasing welfare in these twoareas. A study in India on the impact of conditionality on schoolenrolement showed a difference of 43 %, even though UCT groupparticipants also displayed an increase in school enrolment (Baird,Macintosh and Özler, 2011).Connectingresilience and the above illuminated factors, theresearchers Handa & Otchere from the University of North Carolinaset out to assess the impact of the Malawi Cash Transfer Program(SCTP) on the resilienceof households and found that it had positively impacted “householdproduction, asset ownership, income diversification andstrengthening” (Handa& Otchere, 2016).As already referenced in the paragraph on the economic and laborimpact of UTCs on households, the program has not led to a decreasein labor supply by members of households receiving the grant and thatoverall, the SCTP effected an increase in “food consumption,dietary diversity and food security (Handa& Otchere, 2016).
The studyconcluded, that even though resilience was not an intended outcome ofthe UCT, the SCTP positively affected most markers of resiliency asdefined in the beginning of this section. b.NGO approach to UCTsIn2010, the NGO GiveDirectly was founded with the aim of identifyingpoor households and giving them UTCs as a new charity model todirectly increase the income of poor households and reduce barriersto getting out of poverty. The NGO operates in Kenya, Rwanda andUganda, and is conducting studies on the impact of the UCTsregularly.
In a study, using data from GiveDirectly, the researchfocused on the question ‘How do households respond to incomechanges?’ with the sample of the relatively poor region of WesternKenya and a one-time, unanticipated large cash transfer (Haushofer &Shapiro, 2016).Findingsof the study included the increase in consumption and savings “inthe form of durable good purchases and investment in theirself-employment activities” and an increased expenditure on foodbut no increase in spending on temptation goods such as tobacco andalcohol and oftentimes even a decrease. Money was invested in cattleand one-off measures such as a metal roof. All in all, theseinvestments led to an increase in income arising from agriculturaland business activities. Thefindings also suggest that there is no significant spill-over effectat the community level into non-recipient households and thateducation (secondary school) and health outcomes were only slightlyincreased. Thus, in this model of UCTs, the cash transfer is foundto have an impact on poverty only directly on the targeted household(Haushofer & Shapiro, 2016). The sum of the findings, is verymuch in line with studies conducted on UCTs as part of agovernment-administered policy scheme and thus NGOs could play avital and independent role supplementing social protection incountries where UCT policy schemes are still a long way off. ConclusionI conclude that in manycircumstances, especially where development assistance administeredby state actors has failed to reach households, it can provide acheaper, more efficient alternative for developing countries and NGOsalike to alleviate poverty by way of providing money directly to thepoor.
By providing a predictable source of income that isunconditional, the household members can plan ahead, spend thecapital according to their self-identified needs and are able to takerisks, such as investing in a business, that they would not have beenable to do before.UCTS in the form of a lump havein several studies shown to have not only positive effects on theshort-term economic situation of households but also impact overallresilience to shocks and a limited impact on health and education. The latter two aspects are, according to research on Latin Americancash transfer schemes, better served by a CCT policy. Furtherresearch could look into the effect of conditionality versusunconditionality of cash transfers to assess the advantages anddisadvantages of the schemes. The repeated finding that UTCsindeed decrease poverty for the selected households in adverse waysand the absence of notable negative effects on their welfare, leadsme to conclude that they are effective at alleviating poverty at themicro level of the household not only guided by policy-makers butalso NGOs, not least due to the technological advancements ofinternational transfers and mobile phones.There is a prevailing preferenceby policy-makers for indirect poverty-alleviating measures such as in-kindor skills transfers. However, most studies observed in this paperexplicitly demonstrated that the expected perverse effects of UCTssuch as conflict in the household, disincentivation to pursue otherpoverty-mitigating behaviours and strategies and a negligible overalleffect of UCTs on poverty reduction, have not occurred and are insome cases even the opposite (Haushofer & Shapiro, 2013; Handa& Otchere, 2016; Blattmann, Fiala & Martinez, 2013). Mostrelevant in this regard is the finding that UCTs increase thepropensity to work (Blattmann, Fiala & Martines, 2013).
Due to the limitation in scope ofthe paper, the selection of sources does not reflect the wholespectrum of findings on UCTs. On top of that, most studies have beenconducted on the short-term effects and it remains to be seen whetherthe results achieved for the households will be maintained in thelong-run. Furthermore, many questions in relation to UCTs have notbeen answered in the scope of this paper relating to multipliereffects of UCTs in economic and other dimensions, externalities ofUCTs and the impact of recurring UCTs on poverty reduction.