The political economy of cash transfers: A comparative analysis of Latin American and Sub-Saharan African experiences

Margherita Scarlato and Giorgio d'Agostino
2016

Summary

Conditional cash transfer (CCTs) programmes became popular throughout Latin America during the 1990s and have since been launched in several other emerging and developing countries, generally without conditions. This paper compares the consolidated experience of CCTs in Latin America (LA) with a variety of models of cash transfers (CTs) in middle- and low- income countries in sub-Saharan Africa (SSA). It highlights how the different political and institutional conditions have influenced the specific models and trajectories of CT policies that have emerged in LA versus SSA.

Unlike cash transfers in Latin America that aim to reduce intergenerational transmission of poverty over the long term, programmes in SSA deal with short-term measures against poverty, involving guaranteed extra-money to cover the lack of minimum income and to support other basic needs. More recently, new CT programmes have been introduced as a result of food, financial and fuel crises in several sub-Saharan African countries. The AIDS crisis is another factor driving the expansion of CTs in SSA.

Literature on the impact evaluation of CCT and unconditional cash transfer programmes confirms their positive effect on the education, health and nutrition of the beneficiary children and their families in both LA and SSA. Critical issues that affect programmes in both LA and SSA, include: financial sustainability, administrative capacity, and social services provision.

Upper-middle-income countries in SSA have followed a model of social protection based on non-contributory pension schemes and child support grants, with a rationale that it provides support to poor households that have lost members of working age as a consequence of internal migration, family disruption and the spread of HIV/AIDS. Although Latin American countries have been making significant efforts toward solidarity-based social policies, they are far from reaching a comprehensive social protection system. The case of South Africa reveals that increasing the social protection budget is not sufficient to address structural causes of poverty, despite a rights-based rhetoric.

CT programmes in lower-middle-income and low-income countries in SSA can be understood in three categories: large-scale emergency assistance, human capital focus and pilot projects. Rwanda’s Vision 2020 Umurenge Programme is a leading element of the country’s long-term poverty reduction strategy. Conversely, Malawi’s Mchinji Social Cash Transfer Pilot Scheme, based on a long-term view of poverty reduction, is the result of national and international interests. However, a lack of national resources and heavy dependence on donor funding constrain the ability for it to be scaled up.

International agencies and donors in low-income SSA countries often support small-scale, pilot CT projects but are fragmented and/or – both politically and financially – unsustainable in the long term. For example, Zambia’s pilot projects since 2005 have had very precarious institutional and financial arrangements and largely reflected the interests of donors.

The review notes that attention also needs to be given to empowering poor people (through social transfers relating to public works, ancillary services and training) and specific measures to improve employment and gender equality in the labour market. It recommends catalysing domestic interests towards a pro-poor agenda embedded in a broader debate on public policies. Further, it suggests that sponsoring the production and diffusion of reliable data and impact evaluation studies could be critical for technocratic rationale, and to help trigger a political process aimed at building nationally owned social protection systems.

Source

Scarlato, M. and d’Agostino, G. (2016). The political economy of cash transfers: A comparative analysis of Latin American and Sub-Saharan African Experiences. Bonn: German Development Institute.