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Lessons Offered by Latin American Cash Transfer Programmes: Mexico's Oportunidades and Nicaragua's SPN

Author: G Nigenda and L Gonzalez-Robledo
Date: 2005
Size: 50 pages (362 KB)

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Summary

Cash transfers are part of a new generation of programmes oriented towards mitigating the most negative consequences of poverty. This paper by the DFID Health Systems Resource Centre analyses the specific cases of 'Mexico-Oportunidades' and 'Nicaragua Social Protection Network' and looks at cash transfers in Malawi and Zambia. It discusses possible implications of the Latin American experience on the development of cash transfer programmes in Africa.

Cash transfer programmes in Latin America have been extensively studied. They have used a range of strategies and have varied in terms of their objectives. In the cases of 'Mexico-Oportunidades' and 'Nicaragua Social Protection Network', direct cash transfers were made to women in poor families. A package of regular health and nutritional interventions were provided on the condition of children and youth enrolling in education. The aim of 'Mexico-Oportunidades' was to enhance the capabilities of poor people and broaden their alternatives to reach better levels of wellbeing by giving them better options in education, health and nutrition. The Nicaragua Social Protection Network was a government-prompted programme which aimed to promote a better quality of life level for households living in extreme poverty by investing in their human capital.

Although successful, Nicaragua's package of health interventions was small to cope with the potential demand, and lacked an explicit policy to promote gender equity. The programme in Mexico did result in the improvement of poverty indicators, most significantly among the poorest households. Furthermore:

• Mexico Oportunidades is generating a virtuous circle of improved nutrition, health and school performance. The educational demand-side subsidies were substantially more cost-effective than supply-side expansion (of the school system). Higher subsidies for women's education saw greater beneficial effects for women. Problem areas were demand surpassing institutional capacity, beneficiaries not getting enough information, lack of channels for complaints and risk of political mishandling.
• Zambia's pilot scheme was effectively targeted by using local voluntary committees, and rational use of funds. However, more households were eligible than the 10 per cent who could be assisted.
• Challenges in Malawi are that needy groups are often unregistered or unable to travel to a bank or post office, and the country has little cash distribution capacity. Success depends on community support and has to be well planned not to create perverse incentives.

The following are lessons offered by the Latin American cash transfer programmes to African countries:

• Targeting requires sophisticated data about populations. Targeting the extreme poor is difficult, since families need to be close to both a school and a health centre.
• There is not enough evidence to determine whether conditionality should be part of cash transfer programmes. The Latin American projects argue it is key to their effectiveness, but this reflects paternalistic attitudes. The Zambian project requires no such compliance but its impact has not yet been assessed.
• The coordination of the cash transfer programme with other public and private institutions depends on the latter's capacity to provide services. To cope with increasing demand and public sector limitations, SPN has contracted NGOs.
• Public funds are the best option to guarantee long term sustainability, but countries such as Zambia and Malawi rely on aid or bank loans. The challenge is to guarantee sustainability by a combination of internal and external resources.
• Transferring cash to families has more advantages than disadvantages, but using banks or financial agencies to distribute cash can lead to problems of access or discrimination.
• A baseline assessment is needed prior to programme launch to evaluate the value of cash transfer programmes. Evaluation should be an intrinsic part of the programme, not a sideline process.

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Source: Nigenda, G. and Gonzalez-Robledo, L.M., 2005, 'Lessons Offered by Latin American Cash Transfer Programmes, Mexico's Oportunidades and Nicaragua's SPN: Implications for African Countries', UK Department for International Development's (DFID's) Health Systems Resource Centre (HSRC), London