The cash mantra

Conditional cash transfers" (CCTs) are a new buzzword in policy circles. The idea is simple: give poor people cash conditional on good behaviour such as sending children to school. This helps to score two goals in one shot: poor people get some income support, and at the same time, they take steps to lift themselves out of poverty.

CCT enthusiasm, however, is often based on a superficial reading of the Latin American experience. In Brazil, Mexico and other pioneers of this approach, CCTs were used to bring into the fold of health and education services a fringe of marginalised households, in a situation where a large majority of the population was already covered by extensive social insurance systems. CCT is basically an incentive and, predictably enough, it often works: if you pay people to do something that benefits them anyway, they tend to do it. It is the same principle as scholarships for disadvantaged children. Incidentally, there is no evidence that scholarships — that is, conditional cash transfers — work better than "conditional kind transfers" like school meals or free bicycles for girls who complete Class 8. In fact, I submit that the latter would win hands down in any sensible and sensitive evaluation of the two approaches. Be that as it may, I am not questioning the potential effectiveness of CCTs in their limited capacity of "incentive".

What is remarkably dangerous, however, is the illusion that CCTs can replace public services by enabling recipients to buy health and education services from private providers. This is not how CCTs work in, say, Brazil or Mexico. In Latin America, CCTs are usually seen as a complement, not a substitute, for public provision of health, education and other basic services. The incentives work because the services are there in the first place. In India, these basic services are still missing to a large extent, and CCTs are no substitute.

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