Malawi:  Study sheds light on cash transfer debate

Malawi: Study sheds light on cash transfer debate

by / Comments Off / 71 View / 14th August 2010

The findings of a World Bank study, which examines the effects of giving Malawian girls money to stay in school, have reignited the contentious debate on cash transfers. For decades economists have been embroiled in polemical discussions, regarding the pros and cons of conditional cash transfer (CCT) and unconditional cash transfer (UCT) models. The former aims to tackle poverty by offering welfare programmes that give money to people if they agree to take on such responsibilities as enrolling the children into schools and taking care of their health, while the latter offers money to the impoverished without contingencies.

Those arguing in favour of CCT say the model significantly reduces poverty while improving education and health outcomes for children. Furthermore, they appease those tax-payers who are reluctant to see the poor receiving hand-outs. However there are many who assert that such conditions are an insult, as they suggest the poor are unable to make their own decisions. On the opposing side are those advocates for UCT who believe that women are disproportionately burdened with the task of following through on conditions and also that the recipients of government money tend to invest some of it in education and health anyway, so it is paternalistic and unnecessary to force them to do so. [protected]

The Malawi experiment, which began in January ‘08, makes a case for the argument that the success of cash transfer models stems from an ‘income effect’ and not from the conditions imposed on the recipients. The study was spearheaded by Berk Özler, senior economist at the Development Research Group, Sarah Baird of George Washington University and Craig McIntosh at the University of California, San Diego who selected three groups of girls aged between 13 years old and 22 years old for observation in the country’s impoverished Southern region, Zomba. A stipend of up to USD15 was given to two of the groups: one group was offered the stipend unconditionally and the other received it on the condition that they attended school 80 percent of the time. A control group received nothing.

No discernable distinction could be made between the effects of conditional and unconditional stipends on school attendance. In both cases the girls participating in the study are reported to have attended school 80 percent of the time, while the drop-out rate declined by 40 percent in both groups.

Biomarker data illustrate that HIV infection rates among the girls receiving money was 1.2 percent compared to 3 percent in the control group. According to the World Bank’s report, this translates to 60 percent lower prevalence. Özler says the provision of a stipend is likely to have led to an ‘income effect’ that saw the young women having less sex and when they did they were choosing safer partners.  Additionally, the receipt of cash transfers may have caused a decline in the number of young girls having ‘transactional sex’ – that is sex for financial assistance or gifts. The study is receiving widespread praise for its singularity: investigations into cash transfer models rarely use these three groups.

 However, the findings of the study have not brought academics any closer to finding a resolution to the contentious debate. That little difference has been found between the effects of receiving conditional and unconditional cash transfers in Zomba does not necessarily mean that these findings are applicable to other countries. In Latin America the CCT model has successfully led to improved health and education prospects for children in recipient households. ‘A CCT in Latin America can (give money) to mothers on condition that they go to the clinic, but many parts of Africa are not well-serviced — there may be no clinic or school for miles around,’ says Shiela Sisulu, the deputy director of the World Food Programme.

Yet one thing is clear, the experiment highlights the need for individual governments, in Africa and around the world, to be aware of the full implications of the welfare programmes they wish to implement: in doing so they will be better able to assist the poor, while ensuring the most effective use of limited funds. [/protected]