Social Cash Transfer Programs in Africa: Rational and Evidences

Solomon Asfaw

Food and Agricultural Organization (FAO)Agricultural Development Economics Division (ESA)

Rome, Italy

Outline of the presentation

1. Background of CT programs in Africa

2. Why do we expect growth linkages?

3. What does the evidence say?

Expansion of government-runcash transfers in Sub Saharan Africa

Approximately half of the countries of SSA have some kind of government-run CT program

– And others have multilateral/NGO-run CT programs Some programs are national

– Others scaling up– Some pilots beginning this year

Beneficiaries predominately rural, most engaged in agriculture

Cash transfers national scale up (as of end 2010)

% of population covered by cash transfer program

South AfricaNamibia Ethiopia Swaziland Botswana LesothoMozambique Kenya Rwanda Malawi Ghana Zambia Tanzania0

5

10

15

20

25

Number of households covered

Burkin

a

Zambia

CG

P

Zambia

MCP

Lesoth

oZim

Mala

wi

Ghana

Rwanda

Zambia

SCT

Kenya H

SNP

Kenya C

T-OVC

0

50000

100000

150000

200000

250000

5

Transfer values(share of recipient consumption)

Burkina Kenya CT-OVC

Lesotho RSA CSG

Ghana Zim Zambia CGP

Zambia MCP

Malawi0

5

10

15

20

25

30

35

40

45

50Transfer share of consump-tion

6

What’s particular about cash transfers in SSA--context

HIV/AIDS– Economic and social vulnerability

Widespread poverty Continued reliance on subsistence agriculture and

informal economy– Exit path from poverty is not necessarily through the

labor market– Less developed markets and risk, risk, risk

Hig

her r

isk

and

vuln

erab

ility

Wea

ker i

nstit

ution

s

With exception of Southern Africa, less fiscal space---donors play a strong role

Still missing consensus among national policy makers Weak institutional capacity to implement programs Weak supply of services (health and education)

Wide range of designs Universal programs

– Old age pensions, child grants

Targeted programs – Focus on ultra poor, labor constrained; OVC and

other specific vulnerabilities

Cash for work for able bodied A few cash transfer programs are explicitly

linked to productive activities Prominent role of community in targeting Unconditional (for the most part)

– “Soft” conditions and strong messages

Labor-constrained and OVC criteria select unique households: Malawi

0.0

1.0

2.0

3.0

4D

ensi

ty

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100age

0.0

2.0

4.0

6D

en

sity

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100How old is [NAME] (years)?

Malawi SCT Households Rural Ultra-Poor IHS3 9

Labor-constrained and OVC criteria select unique households: Zambia

Zambia (Monze) SCT Households Rural Ultra-Poor LCMS 2010

0.0

1.0

2.0

3.0

4.0

5.0

6D

ensi

ty

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100105agey

Age Distribution of Monze, Zambia SCT Beneficiaries

0.0

1.0

2.0

3.0

4.0

5.0

6D

ensi

ty0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

agey

Age Distribution of Rural Severly Poor: Zambia LCMS 2010

10

5 (+1) ways in which cash transfer programs have

productive/economic impacts and lead to improved

resilience

Why do we expect economic impacts (growth linkages) from

SCT programs?

1. Improve human capital

• Nutritional status• Health status• Educational attainment

Typically core objectives of CT programsUnderlying rationale for CCTs in LAC

enhance productivity

improve employability

2. Facilitate change in productive activities

By relaxing credit, savings and/or liquidity constraints—and/or constructing community assets

Investment in productive activities– Allocation of labor, inputs

Accumulation of productive assets– Farm implements, land, livestock, vehicle, inventory

Change in productive strategies– New crops, techniques– New line of products or services– New activities (off farm wage labor, migration?)

3. Better ability to deal with risk and shocks

By providing insurance via regular and predictable CTs

Avoid detrimental risk coping strategies– Distress sales of productive assets, children school

drop-out, risky income-generation activities Avoid risk averse production strategies

– “Safety first” or “eat first” Increase risk taking into more profitable crops

and/or activities– Specialization or diversification

• Higher value crops or ….. migration

4. Relieve pressure on informal insurance mechanisms

By regular and predictable CTs to the poorest and most vulnerable

Reduce burden on social networks– Local networks of reciprocal relationships

• In SSA, often weakened and over burdened in context of HIV/AIDS

Rejuvenate social networks Allow beneficiaries to participate in social

networks Allow non beneficiaries to redirect their

resources

5. Strengthen the local economy

Immediate impact of transfer will raise purchasing power of beneficiary households.

As beneficiary households spend cash, impacts immediately spread outside beneficiary households to others inside and outside treated villages.

Trade and purchases within village may set in motion income multipliers inside treated villages.

Periodic markets and purchases outside village will shift income effects to non-treated villages, potentially unleashing income multipliers there.

In longer run, as program is scaled up, transfers will have direct and indirect (or general equilibrium) effects throughout the region of implementation.

How do local economy effects work?

Transfer

Control

Treatment

Transfer

Control

Treatment

Transfer

Rest of Lesotho

Rest of World

Control

Treatment

Transfer

Rest of Lesotho

Rest of World

Control

TreatmentTransfer

Transfer

Rest of Lesotho

Rest of World

Treatment

Control?

What does the evidence say?

Lots of evidence on human capital– Poverty, food security and food consumption– Nutrition, health and education

Relatively few studies on risks and shocks Very few studies on

– Productive activities– Multiplier effects– Social networks– Climate change adaptation

1st and 2nd generation cash transfer program impact evaluations in SSA (19 in 13)

• Malawi SCT – Mchinji pilot, 2008-2009– Expansion, 2012-2014

• Kenya– CT-OVC, Pilot 2007-2011– CT-OVC, Expansion, 2012-

2014– HSNP, Pilot 2010-2012

• Mozambique PSA– Expansion, 2008-2009

• Zambia– Monze pilot, 2007-2010– Child Grant, 2010-2013

• South Africa CSG– Retrospective, 2010

• Burkina Faso– Experiment, 2008-2010

• Ethiopia – PSNP, 2006-2010– Tigray SPP, 2012-2014

• Ghana LEAP– Pilot, 2010-2012

• Lesotho, CGP– Pilot, 2011-2013

• Uganda, SAGE– Pilot, 2012-2014

• Zimbabwe, SCT– Pilot, 2013-2015

• Tanzania, TASAF– Pilot, 2009-2012– Expansion, 2012-2014

• Niger– Begins in 2012

Summary of results on social outcomes

Schooling Morbidity Health care Anthro.

Burkina x

Ghana LEAP x NS X

Kenya CT-OVC x x* X* NS

Lesotho

Mlw Mchinji X X X ?

RSA CSG X NS

Zam CGP

Zam Monze x NS NS

Zam MCP

Not collected x=significant empty=pending NS=not significant24

Summary of results on economic outcomes

Not collected x=significant empty=pending NS=not significant

Consumption Food security Assets Production

Burkina

Eth PSNP x x x x

Ghana LEAP NS X NS NS

Kenya CT-OVC X X x NS

Lesotho

Mlw Mchinji X X x x

RSA CSG X

Zam CGP X X x x

Zam Monze NS NS x x

Zam MCP x x x x

25

Comparison of secondary school impacts of CCTs and SCTs

Impact of Cash Transfers on Secondary School Enrollment (percentage points)

Mexico Progresa CCT 6

Colombia Familias CCT 6

Turkey CCT 5

Bangladesh (females only) CCT 12

Ecuador CT, announced as CCT

10

Kenya SCT 8

Zambia (Monze) SCT 9

Ghana LEAP SCT 6

Our websites

From Protection to Production Projecthttp://www.fao.org/economic/PtoP/en/

The Transfer Projecthttp://www.cpc.unc.edu/projects/transfer