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...Will conditional cash transfers yield the expected The policy question, however, is whether or
outcomes on education, nutrition, and health? Will the not the 4Ps constitutes an efficient and
expected human capital investment outcomes be effective instrument for providing subsidies.
realized? The budgetary implications of this program More importantly, will conditional cash
are staggering and more so if funded by borrowing. transfers yield the expected outcomes on
education, nutrition, and health? Will the
expected human capital investment outcomes
be realized? The budgetary implications of
degrees of success with respect to attainment this program are staggering and more so if
of the program’s objectives. Recently, the funded by borrowing. In the next five years,
Philippine government has designed its own the government hopes to transfer cash to
version called “Pantawid Pamilyang Pilipino 500,000 poor households. It cannot do this,
Program” (4Ps), allocated a budget and though, without passing the hat to donors
knocked on the doors of donors such as the since it simply does not have the resources to
World Bank for supplemental funding. fund the envisaged massive program of
conditional cash transfer.
The 4Ps will provide cash to targeted poor
households on condition of regular school Taxpayers will naturally be interested to know
attendance by the households’ children and whether the 4Ps is a worthy use of public
visits to health centers by family members. funds or not. Taxpayers should thus be
The 4Ps are based on the following rationale: assured that the expected benefits would be
realized and that ignoring programs such as
z Investment in human capital (e.g., basic the 4Ps would lead to a great opportunity loss
education, health) leads to long-run poverty in making a difference in the lives of the poor
alleviation. Early interventions provide much households.
higher returns over the lifecycle, and
z Cash transfers have immediate impact This Policy Notes provides some cursory
on poverty situation. comments on the 4Ps based on available
information on its design and coverage. While
That poor households—which do not have the it is too early to make an indepth assessment
means to improve their education and health of this program because it is still in its initial
status—need some form of subsidies is stages of design, assessment of the program
undeniable. That cash transfers provide should be periodically done during its life-
immediate relief, especially to poor house- time. This Notes will thus raise outstanding
holds suffering from hunger and various issues that may inform policy decisions on
deprivations, is obvious. program design and implementation.
PN 2008-09
Policy Notes
3
Conditional cash transfers have an intuitive z Brazil: Bolsa Familia, Bolsa Escola, Bolsa Alimentacao, and
appeal because poor households are given the Programa de Erradicaçao do Trabalho Infantil (PETI)
choice on the composition of their consump- z Colombia: Familias en Acción
z Honduras: Programa de Asignación Familiar (PRAF)
tion bundles. They can choose what they
z Jamaica: Program of Advancement through Health and Edu-
think is best for them in contrast to a price cation (PATH)
subsidy for commodities such as rice or other z Nicaragua: Red de Protección Social (RPS)
z Ecuador: Bono Solidario
staple food, where the state assumes it knows
z Mexico: Oportunidades (formerly known as Progresa)
what the poor need. A generalized price z Chile: Subsidio Unico Familiar
subsidy may suffer from leakages where
benefits may also accrue to the nonpoor.
Vouchers, another form of subsidy that are means for verification of actual receipt of the
quasicash, are superior to a generalized price cash are in place.
subsidy and are intended for the purchase of
an identified commodity or service, e.g., basic CCT outcomes in Latin America
education. The implementation of a voucher In terms of impact and outcomes, there is a
system, though, may be too complicated for growing literature on conditional cash trans-
poor households. On the other hand, cash fer programs and their impacts in many
transfers are simpler to administer and do not developing countries, especially in Latin
compete with private commercial effort or America. The general observation is positive:
even with small-scale producers of food, e.g., CCTs have led to the improvement of health
small rice farmers in the target areas. They and educational outcomes and have a large
are also transparent and easily understood by potential as an instrument in the fight
the taxpayers because the budget for such against poverty because of the improvement
transfers would have to be deliberated in in human capital in poor areas where such
Congress. The taxpayers know the cost of a programs have been implemented and sus-
conditional cash transfer subsidy quite unlike tained. Some examples of CCTs are shown in
the cost of nontransparent programs such as Box 1.
fertilizer or rice subsidies, which may be
hidden under so-called lumpsum items or Some of the positive outcomes observed by
congressional insertions. Because cash Briere and Rawlings (2006)2 are the following:
transfers are directly given to poor house- ______________
holds, there may be little chance of leakage 2
Briere, B. de and L. Rawlings. 2006. Examining conditional
provided there is an effective targeting cash transfer programs: a role for increased social inclu-
sion? Social Safety Nets Primer Series, Social Protection,
mechanism, and the cash delivery system and World Bank.
PN 2008-09
Policy Notes
4
(a) in education, a decrease in grade repeti- Geographic and household targeting. When the
tion from 37 percent to 33 percent in Mexico, CCTs were first announced and implemented
and from 18 percent to 13 percent in Hondu- in pilot areas, certain quarters complained
ras; a decrease in school dropout rates from that these were nothing but dole-outs, and
13 percent to 9 percent in Mexico, from 7 the transfers would only lead to a mendicant
percent to 2 percent in Nicaragua, and from 9 attitude among the recipients and could be
percent to 5 percent in Honduras; (b) in child (mis)channeled by politicians for self-serving
labor, a reduction in labor participation of interest. The government, however, explained
boys in Mexico as large as 15 to 25 percent that the targeting mechanism it uses will
relative to the probability of participation ensure that only the worthy poor households
prior to CCT; and (c) in household consump- will be enrolled in the program.
tion and nutrition, average consumption in
the treatment group was higher by 13 percent How effective is the government’s targeting
than that of the control group in Mexico, and system? The Department of Social Welfare and
15 percent higher than the control group in Development (DSWD) is receiving expert
Colombia. advice and guidance from some academics
and donors in developing an effective target-
Need for ‘deliberate’ haste ing system. This is good because it gives an
Notwithstanding the merits and advantages of assurance that inclusion in the 4Ps will
a CCT program as cited above, there is a need depend on merit and need and not on politi-
for the government to make ‘deliberate’ haste cal whim. The large-scale survey to identify
in rolling it out to all the target areas. It is target households that will be launched in
after all, a new program and admittedly an early 2009 would equip the government with
expensive one to maintain. Thus, before an instrument to ward off any attempt to
expanding coverage of the program, it may be politicize what seems to be an effective way
worthwhile to pause for a while and consider to help the poor as reported by studies on
the following concerns: similar programs in Latin America.
PN 2008-09
Policy Notes
5
identified through a means test that will While national government agencies may be able to
enable the government to limit the cash secure the required funding from budgetary
transfer to households in most need of appropriations, the partner LGUs, which presumably
assistance. Information on the selected will be the lower-income municipalities and provinces,
geographic areas and households should be may find it difficult to produce counterpart funding.
made available not only to the bureaucrats Program design has to take this into account because in
who will implement the program but also to the past, some LGUs, undoubtedly the poorer ones, had
policymakers and their constituents. wavered in their commitment to produce counterpart
funding in foreign-funded projects, thereby eventually
Presence of requisite infrastructure in targeted leading to implementation failure.
areas: schools, rural health units. The 4Ps will
be a collaborative effort by the Department of
Health (DOH), Department of Education attention to the availability (or lack) of
(DeptEd), DSWD, National Anti-Poverty requisite infrastructure such as schools and
Commission (NAPC), and local government rural health units, among others, in the target
units (LGUs). While national government areas. “Infrastructure” here means not only
agencies may be able to secure the required the presence of these hard infrastructure but
funding from budgetary appropriations, the also the availability of trained medical staff,
partner LGUs, which presumably will be the teachers, materials, and supplies. This is a
lower-income municipalities and provinces, supply-side problem. While the demand for
may find it difficult to produce counterpart those services is there, is the infrastructure,
funding. Program design has to take this into i.e., schools and rural health units, ready and
account because in the past, some LGUs, in good condition to deliver services?
undoubtedly the poorer ones, had wavered in
their commitment to produce counterpart By definition, the selected municipalities/
funding in foreign-funded projects, thereby barangays are among the poorest in the
eventually leading to implementation failure. country and thus, are unable to put up or
The national government cannot expect a maintain such infrastructure. On the other
uniform cost-sharing by the LGUs simply hand, the lack of infrastructure has contrib-
because municipalities and provinces that uted to the growth constraints of those areas
would be selected for the 4Ps do not face the or localities. A vicious cycle thereby exists.
same income capacities. Some are poorer than The 4Ps, which will require poor households
the others.3
______________
3
This will be an opportune time to revisit the policy on
Apart from an equitable policy on cost-
national government-local government cost sharing (50:50)
sharing, policymakers should also pay equal in social and environmental projects.
PN 2008-09
Policy Notes
6
...Even if the national government and LGUs want a rapid expansion of the 4Ps, infrastructure
bottlenecks may stand in the way of a successful implementation. As such, should the national
government not lay down the requisite infrastructure first before it distributes cash to hundreds of
thousands of poor households?
Size of the grant. Related to this is the Readiness of management, administrative, and
determination of the appropriate size of the delivery structures. There is no doubt that
educational and health grant. In Latin good-hearted men and women of the bureau-
America, Rawlings and Rubio (2003) pointed cracy have the best of intentions to imple-
out that the methodology to calculate the ment the 4Ps soonest. However, the govern-
ment has to admit that a program of the scale
______________ and scope of the 4Ps may strain the present
4
Rawlings L. and G. Rubio. 2003. Evaluating the impact of capacity of government agencies that also
conditional cash transfer programs: lessons from Latin
America. Policy Research Working Paper 3119, The World
have other programs to implement and
Bank. services to deliver. There are limited resources
PN 2008-09
Policy Notes
7
and personnel who still have to be oriented Again, to its credit, the government is
and trained to implement a different type of developing a computer-based system for
subsidy program. Would other programs of the verification of compliance but it should
government be made to give way to accom- ensure that an effective, user-friendly system
modate the 4Ps? What is the funding strat- will be installed in CCT areas. The government
egy? How can this be sustained? Can govern- must be sure that the LGUs collaborating in
ment and Congress make a long-term commit- this program would have the necessary
ment to this innovative program? hardware, access to the internet, and electric
power to support the verification and moni-
To the government’s credit, it has piloted the toring apparatus once this has been devel-
implementation of the 4Ps in a few barangays oped, tested, and rolled out.
prior to the present plan for a massive roll out
in 2009. Still, it would be best to move slowly Graduation of beneficiaries from the program.
at first to test and try systems and proce- It is important to monitor, evaluate the
dures, train staff, and establish an effective impact of the program, and make adjustments
verification and monitoring mechanism. In in the life of the program in order to develop
other words, making ‘deliberate’ haste is guidelines or policies for the graduation of
prudent and responsible. There is really no beneficiaries from the program. If the 4Ps
need to expand sooner when the manage- would be effective, then in some future time,
ment, administrative, and delivery structures there should be graduation of households
are not really prepared for a full-scale imple- from the program. Whether or not the 4Ps will
mentation of this innovative subsidy program. lead to behavioral change and ultimately to
the expected human capital impact is an
Verification of compliance and monitoring empirical matter. It will depend on the
mechanisms. Households may receive the cash willingness of households to adhere to the
but not comply with the conditions. This is an
obvious problem in CCT programs. To ensure
that the cash subsidies will lead to the It is important to monitor, evaluate the impact of the
desired health and education outcomes, the program, and make adjustments in the life of the
government has to establish an efficient and program in order to develop guidelines or policies for
cost-effective verification and monitoring the graduation of beneficiaries from the program. If the
system. For example, the government should 4Ps would be effective, then in some future time, there
be able to monitor and verify whether chil- should be graduation of households from the program.
dren beneficiaries actually attend classes and Whether or not the 4Ps will lead to behavioral change
whether mothers do bring their children to and ultimately to the expected human capital impact is
health units for checkup and immunization. an empirical matter.
PN 2008-09
Policy Notes
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PN 2008-09
Policy Notes