Cash transfers can reduce childhood poverty

Forty percent of children in developing countries struggle to survive on less than one US dollar a day, according to the United Nations Children's Fund (UNICEF). Childhood poverty often leads to long term vulnerability. It is associated with lower educational attainment and schooling which affects future earning potential and well-being. Cash transfers can protect people's well-being as well enable them to invest in their future.

Research from the University of Manchester in the UK suggests that a new generation of cash payment or transfer programmes recently introduced in Latin America has the potential to alleviate childhood poverty by ensuring children's development and reducing future vulnerability. Poor households' responses to poverty, such as withdrawing children from school or not accessing health care worsens poverty cycles. These programmes recognise this and provide cash transfers to improve household consumption and support key investments in education and health.

Cash transfers have a number of advantages. Beneficiary households know best how to use their resources to improve their standard of living. Cash transfers have a positive impact on the local economy when the money is spent. Compared to benefits such as school lunches, cash transfer programmes are less demanding in terms of administration and are easier to budget.

Cash transfers need not be conditional. South Africa's Child Support Grant, which provides an unconditional cash transfer to the parents or guardians of children in poor households, is effective as it is well-targeted. Extending these programmes to very poor countries may pose difficulties, but Bangladesh's Food/Cash for Education programme, Honduras' Programa de Asignación Familiar and Nicaragua's Red de Protección Social show these are not insurmountable.

Policymakers have to be aware that cash transfer programmes:

• are more effective in reaching out to orphans and vulnerable children in child-headed households when they are combined with child rights issues than when implemented in isolation
• need to be take into account how households allocate resources among different members in response to specific social and economic conditions
• cannot be effective on their own and need by significant investment in basic services such as water, health, transport, housing and education.

Cash transfer programmes focussing on child poverty have mostly been financed by loans or grants from international organisations, so far. Donors must consider continued support for child-targeted cash transfers as an important part of poverty reduction strategies to tackle child poverty effectively.

Armando Barrientos
Institute for Development Policy and Management
University of Manchester
Oxford Road
Manchester M13 9QH
UK
T +44 (0)161 275 2811
armando.barrientos@manchester.ac.uk

Views expressed on these pages are not necessarily those of DFID, IDS, id21 or other contributing institutions. Copyright remains with the original authors but (unless stated otherwise) any article may be copied or quoted without restriction, provided both source (id21, insights) and authors are properly acknowledged and informed. Copyright © 2004 id21. All rights reserved.