February 10, 2009.- Demand for well-designed safety net and cash transfer programs to assist poor families is growing across the world, as 2009 develops into a year of tough economic challenges-especially for households already hit by the recent food and fuel crises, and for governments concerned that the financial crisis could turn into a humanitarian one, according to a new World Bank report released today.
The report, Conditional Cash Transfers: Reducing Present and Future Poverty, evaluates CCT programs that offer qualifying families cash in exchange for commitments such as taking babies to health clinics regularly or keeping children in school. It finds that these programs—where the responsibility for breaking out of poverty is shared by the state and poor households—can reduce poverty both in the short and long term, particularly when supported by better public services.
In response to the food and financial crisis, the World Bank expects to lend about $2.4 billion this year to start or expand CCT operations in Bangladesh, Colombia, Kenya, Macedonia, Pakistan, and the Philippines. Total World Bank lending support for CCT operations now covers 13 countries, with technical support to both national governments and donors.
After early successes in South Asia and Latin America, CCT programs are now found on every continent. They operate in more than two dozen developing countries, as well as in several developed countries, including the United States. In countries such as Mexico and Brazil, CCT programs were introduced as part of larger efforts to make safety nets more effective, replace badly targeted subsidies, or integrate smaller programs. Colombia's nationwide Familias program has generated important and positive evaluation results and has received sustained support from the World Bank.
CCTs have also grown tremendously within countries. Mexico's Progresa began in 1997 with 300,000 households; its successor Oportunidades now reaches 5 million households. Positive evaluations by researchers encouraged this scaling up. In economic terms, the program's transfers account for about one-fifth of the consumption of the median recipient household.
"With their focus on mothers and young people and their ability to deliver critical health and education services, conditional cash transfers are a vital safety net for countries seeking to help those hardest hit by the financial crisis," said Justin Lin, World Bank Chief Economist and Senior Vice-President, Development Economics.
Good allies in fight against crisis
Despite recent record economic growth averaging five percent per year, the Latin American and Caribbean region has not escaped the effects of the global financial crisis now roiling the economies of developed countries. Growth rates are declining and in some countries unemployment and poverty rates are starting to increase.
To mitigate the effect of the crisis, the Bank is supporting efforts by several countries to strengthen and expand social safety net programs to protect hard-wrought social gains resulting from improved macroeconomic policies and social spending focused on the poorest segments of society over the past decade..
The capacity of core social protection systems before a crisis hits plays a key role in a country’s ability to help the poor in times of crisis. In countries in which basic systems are in place, safety nets can help protect the poor. When these systems are not in place, a country’s options for effective response are far more limited and risks emerge that policy makers could adopt less efficient interventions out of political need to demonstrate action.
Conditional Cash Transfer programs (CCTs) have become the prevalent model for income support in the region. They provide income support to poor households with children, while requiring the children’s participation in health, nutrition and education services. CCT programs have helped millions of people improve their social and economic status in recent years. These programs can temporarily increase the benefit levels or coverage to protect the poorest in the midst of a crisis.
“The Bank has been supporting safety nets in some countries for several years, starting after the crises of the late 1990s and early 2000s, and when the capacity is in place countries are better-positioned to protect vulnerable groups of the effects of the economic downturn,” said Helena Ribe, sector manager for LAC’s Social Protection division.
CCTs Produce Tangible Results
Rigorous external evaluations of some CCT programs have measured tangible achievements in education and health outcomes among children participating in the program. Mexico’s vanguard Opportunidades program, established in 1997 on a trial basis, now serves five million families, or 25 percent of the population of the country. Results show that in rural areas, the probability of entering secondary school rose by 33 percent and enrollment rates in tertiary schools nearly doubled. In urban areas, the dropout rate among students 16-19 years fell by 20 percent while enrollment rates increased for children six to 18 years old. Meanwhile, families increased their health visits by up to 35 percent nationwide. Anemia in children under two fell by 12.8 percentage points and rural children from 0-5 had 20 percent fewer sick days.
Similar results were found in Colombia’s Familias en Accion program. Familias increased attendance rates for secondary school students by seven percentage points in rural areas and five percentage points in urban areas. Birth weight and nutrition levels in children also have increased, the result of increased food consumption, particularly in rural areas, reflected in greater protein intake and additional spending on food for children generally. Preventive health visits increased, vaccination coverage expanded and disease rates have fallen.
“Results tend to be greater in the upper levels of school, or in the transitions from primary to secondary. There is also evidence of a reduction in school dropout rates, better retention rates, and better transition rates,” said Theresa Jones, lead operations officer with LAC’s social protection unit. “CCTs also have had a positive impact on health services utilization and improvements in child nutrition and food consumption are significant,” she added.
Evaluations in Latin America have also convincingly shown that CCT programs have reduced poverty levels. In the four countries for which data are available, CCT programs reduced the national headcount poverty rate by eight percent in Ecuador and Mexico; 4.5 percent in Jamaica and three percent in Brazil.
Expanding Existing Projects, Launching New Operations
Four new Bank operations are supporting the initiation of new activities in Argentina, Guatemala, Nicaragua and Honduras. These projects will support programs to finance household transfers with a focus on improving, nutrition, school completion and access to skill development and employment opportunities. LAC also is supporting development policy lending to enhance safety net programs in El Salvador, the Dominican Republic, Jamaica and Panama.
LAC is preparing to expand existing programs in Argentina, Brazil, Colombia, Haiti and Jamaica. As part of this expansion of activities, in December the World Bank Board approved a $636.5 million loan to Colombia to expand Familias, the fourth loan supporting the program. The program now will cover 1.7 million families through 2010.
In May, the Board approved a $40 million loan for Jamaica’s Program of Advancement Through Health and Education (PATH), Jamaica’s flagship social assistance program that will, among other things, pilot Steps-to-Work, a “second-generation” CCT program to refer adults from eligible beneficiary families to support services to enable them to seek and retain employment.
“We are looking at the needs of the entire family, we want the whole family to advance,” said Cornelia M. Tesliuc, the Jamaica program’s task team leader.
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