1. a high proliferation of mobile phones in

1.

Introduction

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Even
though poverty reduction has remained the main focus of development
assistance since the 1990s and previously in the early 1970s, poverty
has not significantly decreased in 50 years time in Sub-Saharan
Africa (Riddell, p. 31-35, 2008). In the last 30 years, the idea of
cash transfers has spread across the globe now reaching an estimated
700 millioin people (Shapiro, 2017). In recent years there has been a
movement of NGOs to push for innovative alternatives to traditional
concepts of aid giving (Taylor, 2014, p. 2). Unconditional Cash
Transfers (UCTs), that is a cash transfer to private households under
no condition on spending, have entered the plane against the backdrop
of the availability of money transfer technology and a high
proliferation of mobile phones in developing countries, which makes
UCTs cheap and reliable. Especially in Sub-Saharan Africa, the most
affected region with 41 % of the population living in extreme
poverty, the conditions for UCTs are highly favorable and thus the
concept has blossomed there in recent years, utilized by governments
and NGOs alike (World Bank, 2016; Stephens, 2014).

In
this paper, I will investigate the effectiveness of UCTs in
alleviating poverty by way of a literature review but first, the
paper will elaborate on the supposed advantages of direct cash
transfers vís-à-vís traditional development assistance and
conditional cash transfers and problems associated with UCTs. In the
second part, the paper investigates the effects of UTCs on households
with regard to poverty alleviation, and the NGO effectiveness with
regard to UCTs. Finally, the study concludes with assessing the
question of whether UTCs are indeed successful at alleviating poverty
based on the findings and acknowledges the limitations of the scope
of this paper.

2.

Unconditional Cash Transfers: Background

Unconditional
and Conditional Cash Transfers (UTCs and CCTs), are an integral part
of the social protection scheme in high-income countries in Europe
and North-America. Since the 1990s, several Latin American countries
like Mexico, Brazil and Nicaragua have started to implement CCTs of
their own, targeted specifically at poor households (Schubert &
Slater, 2006). Successful Programs such as Progresa/Oportunidades in
Mexico, made the cash transfer dependent on health and education
conditions. CCTs are therefore well-studied and generally concluded
to have a positive impact on poverty and also on having a sizebale
impact on breaking the intergenerational transmission of poverty
(Todaro, 2008, p. 404). However, a major disadvantage of CCTs is the
high administrative burden that comes with the conditionality of the
transfer and the constant back-checking of criteria It is
interesting to note that a number of low income developing countries
in Africa have in recent years started to implement unconditional
social cash transfer schemes, such as Malawi and Ethiopia, joining
the already well-established child grant in the middle-income country
of South Africa (Niño-Zarazúa,
Barrientos, Hickey, Hulme, 2012).

What
makes UCTs very interesting, is that the concept mitigates several
issues of traditional development assistance by eliminating the
middleman between aid recipients: among others, aid diversion – the
misappropriation of aid money by government officials, rebel groups,
and other political actors- , heavy administrative burden on
oftentimes already weak local institutions , great administrative
cost of monitoring and implementing development aid trajectories
(Moss, Pettersson & van de Walle, 2006) and the overall challenge
of reaching poor households in the first place. Most importantly, as
a social protection scheme, it awards developing countries the chance
to take up a poverty-alleviating policy scheme and awards them some
independence from the usual donor-recipient relationship. In lower
income countries like Malawi and Ethiopia however, the policy is
influenced and partly financed by development aid (Niño-Zarazúa,
Barrientos, Hickey, Hulme, 2012). The NGO approach, exemplified most
successfully by GiveDirectly and which was founded only in 2008,
creates a direct link between private donors and households and
provides a powerful alternative to the wastefulness and
ineffectiveness of large parts of the NGO industry (Klarreich &
Polman, 2012).

On
top of that it avoids the problem of the difficulty of measuring the
effect of indirect poverty alleveation strategies on individual
households and provides the possibility to address a plethora of
problems with one single instrument in that it contributes to all
dimensions in which the household is affected, in the eyes of the
household member receiving the cash transfer. This positive impact of
recipient choice on aid effectiveness, is another vital component of
UCTs 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 in
a more normative sense it empower the poverty-affected individuals
and awards them agency in escaping their own predicament. In sum, has
the capacity to strengthen the overall resilience of households.

3.

The effects of Unconditional Cash Transfers on poor households

In this section, I will look into
the effects of government-administered UCT programs and NGO UCT
programs on poor households and their propensity to reduce poverty by
way of several studies on the issue.

There
is a growing consensus that in the fight against poverty, nutrition,
health and education are integral complements that further affect the
resilience of
households to poverty
(Todaro, 2008, p. 404; Adato & Basset, 2009; Handa & Otchere,
2016). Thus, to analyze the effectiveness of UCTs for the reduction
of poverty, I am basing my assessment on the aforementioned areas as
well as the direct impact on the economic and labour dimension. Due
to the fact that Sub-Saharan Africa is the most adversely affected
region, I will restrict my argument to mainly studies conducted on
UCTs in the region. In the first part, I will consecutively look at
findings through the lense of the economic and labor dimension,
health and education while taking into consideration the resilience
aspect. In the second part of the assessment, the paper highlights
the NGO approach to UCTs and the impact of UCTs on households in that
context by way of one research paper.

a.

Resilience, Economic and Labour Dimension, Health & Education.

The concept of resilience
describes the capacity of households to withstand shocks and
stressors to their livelihood. Sub-Saharan Africa being a region
that is especially prone to droughts and other climate change-related
issues but also diseases and natural disasters, resilience is an
extremely important determinant for poverty reduction. It encompasses
aspects of household income generating capacity and diversification,
ownership of agricultural and nonagricultural assets, access to
safety nets and basic services as well as household stability and
adaptive capacity to shocks” (Adato & Basset, 2009, p. 1).

Impact
on economic situation and labor

A
study on UCTs in Uganda, the governmen handed out a lump sum of
roughly a yearly salary ($382), to young applicants aged 18-34 with
no condition being placed on the use of the money and no compliance
monitoring, an integral part of CCTs. The study found that after two
years, the studied group experienced a 49% increase in earnings and a
41 % increase after four years due to the fact that they invested the
grant in “skills and business assets”. Overall they were 65 %
more likely to possess a trade in comparison with the control group
who had not received the UCT. The study thus found that a UCT served
as a “bridge to economic opportunity” (Blattmann, Fiala &
Martinez, 2013), that return on investment is indeed high can not
only lead to a short-term increase in earnings but can impact
long-term income (Blattmann, Fiala & Martinez, 2013).

A
major concern with the unconditionality of UCTs in comparison to
CCTs, is that the money would first of all, be squandered on alcohol
and tobacco and not invested in poverty-alleviating activities and
assets and especially finding work. However, every single study
evaluated in the scope of this paper repudiates these assumptions,
with labor supply commonly increasing upon receiving a UCT. The case
study by Blattman et al on Uganda showed that the number of hourse
worked even by 17% (Blattmann, Fiala & Martinez, 2013; Handa &
Otchere, 2016).

Health
and Education

To increase health and education
is not only pivotal with regard to being able to acquire work and
escape power in that way, it is also essential in the fight against
the AIDS epidemic for example, that is a major disruptor of
livelihood systems and the propensity to avoid poverty (Adatao &
Basset, 2009).

One
body of research from the New Zealandic University of Otago, studied
the effectiveness of UCTs on the use of
health services and health outcomes in vulnerable children and adults
in lower and middle income countries (Pega, Walter, Liu, Pabayo,
Lhachimi & Saith, 2014). It concluded that UCTs may improve some
health outcomes such as the likelihood of having been food secure,
the level of dietary diversity and the likeliness of having had any
illness while also improving the likelihood of having attended
school, a social determinant of health, yet, the overall
effectiveness of UCTs on health outcomes remained uncertain (Pega et
al, 2014).

A
comprehensive study by M. Adato and A Bassett (2009) on the impact of
CCT (Latin America) and UCT (Sub-Sahran Africa) on education and
health, found that the impact in Africa is underresearched. The
health impact in Malawi was measured to be an decrease of 13 % of
illness in the past month among children, an improved overall health
for household members when income is pooled and in Zambia, the data
showed reduced incidences of illness by 12 and 14 percentage points
for children and the elderly and increases in enrolment in secondary
education ranging from 5-10 % (Adato & Bassett, 2009).

Studies
comparing UCTs and CCTs with respect to their impact
in education and health show
that CCTs are far more successful at increasing welfare in these two
areas. A study in India on the impact of conditionality on school
enrolement showed a difference of 43 %, even though UCT group
participants also displayed an increase in school enrolment (Baird,
Macintosh and Özler, 2011).

Connecting
resilience and the above illuminated factors, the
researchers Handa & Otchere from the University of North Carolina
set out to assess the impact of the Malawi Cash Transfer Program
(SCTP) on the resilience
of households and found that it had positively impacted “household
production, asset ownership, income diversification and
strengthening” (Handa
& Otchere, 2016).

As already referenced in the paragraph on the economic and labor
impact of UTCs on households, the program has not led to a decrease
in labor supply by members of households receiving the grant and that
overall, the SCTP effected an increase in “food consumption,
dietary diversity and food security (Handa
& Otchere, 2016).

The study
concluded, that even though resilience was not an intended outcome of
the UCT, the SCTP positively affected most markers of resiliency as
defined in the beginning of this section.

b.

NGO approach to UCTs

In
2010, the NGO GiveDirectly was founded with the aim of identifying
poor households and giving them UTCs as a new charity model to
directly increase the income of poor households and reduce barriers
to getting out of poverty. The NGO operates in Kenya, Rwanda and
Uganda, and is conducting studies on the impact of the UCTs
regularly. In a study, using data from GiveDirectly, the research
focused on the question ‘How do households respond to income
changes?’ with the sample of the relatively poor region of Western
Kenya and a one-time, unanticipated large cash transfer (Haushofer &
Shapiro, 2016).

Findings
of the study included the increase in consumption and savings “in
the form of durable good purchases and investment in their
self-employment activities” and an increased expenditure on food
but no increase in spending on temptation goods such as tobacco and
alcohol and oftentimes even a decrease. Money was invested in cattle
and one-off measures such as a metal roof. All in all, these
investments led to an increase in income arising from agricultural
and business activities.

The
findings also suggest that there is no significant spill-over effect
at the community level into non-recipient households and that
education (secondary school) and health outcomes were only slightly
increased. Thus, in this model of UCTs, the cash transfer is found
to have an impact on poverty only directly on the targeted household
(Haushofer & Shapiro, 2016). The sum of the findings, is very
much in line with studies conducted on UCTs as part of a
government-administered policy scheme and thus NGOs could play a
vital and independent role supplementing social protection in
countries where UCT policy schemes are still a long way off.

Conclusion

I conclude that in many
circumstances, especially where development assistance administered
by state actors has failed to reach households, it can provide a
cheaper, more efficient alternative for developing countries and NGOs
alike to alleviate poverty by way of providing money directly to the
poor. By providing a predictable source of income that is
unconditional, the household members can plan ahead, spend the
capital according to their self-identified needs and are able to take
risks, such as investing in a business, that they would not have been
able to do before.

UCTS in the form of a lump have
in several studies shown to have not only positive effects on the
short-term economic situation of households but also impact overall
resilience to shocks and a limited impact on health and education.
The latter two aspects are, according to research on Latin American
cash transfer schemes, better served by a CCT policy. Further
research could look into the effect of conditionality versus
unconditionality of cash transfers to assess the advantages and
disadvantages of the schemes.

The repeated finding that UTCs
indeed decrease poverty for the selected households in adverse ways
and the absence of notable negative effects on their welfare, leads
me to conclude that they are effective at alleviating poverty at the
micro level of the household not only guided by policy-makers but
also NGOs, not least due to the technological advancements of
international transfers and mobile phones.

There is a prevailing preference
by policy-makers for indirect poverty-alleviating measures such as

in-kind
or skills transfers. However, most studies observed in this paper
explicitly demonstrated that the expected perverse effects of UCTs
such as conflict in the household, disincentivation to pursue other
poverty-mitigating behaviours and strategies and a negligible overall
effect of UCTs on poverty reduction, have not occurred and are in
some cases even the opposite (Haushofer & Shapiro, 2013; Handa
& Otchere, 2016; Blattmann, Fiala & Martinez, 2013). Most
relevant in this regard is the finding that UCTs increase the
propensity to work (Blattmann, Fiala & Martines, 2013).

Due to the limitation in scope of
the paper, the selection of sources does not reflect the whole
spectrum of findings on UCTs. On top of that, most studies have been
conducted on the short-term effects and it remains to be seen whether
the results achieved for the households will be maintained in the
long-run. Furthermore, many questions in relation to UCTs have not
been answered in the scope of this paper relating to multiplier
effects of UCTs in economic and other dimensions, externalities of
UCTs and the impact of recurring UCTs on poverty reduction.

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