Breaking the Poverty Cycle with Cash

BACK TO SCHOOL Social cash programs in Cambodia have reduced the dropout rate among grade-school students.
Photo by AFP

A recent World Bank study shows that giving poor families cash to keep their children in school is improving school enrollment rates in low-income countries.

Reviews of Conditional Cash Transfer (CCT) programs, as they are known, have been positive across the Asia. They are being used to reduce the gender gap in schools in Bangladesh and Pakistan by increasing the number of girls who stay in school. Likewise, two pilot programs in Cambodia have reduced the dropout rate by 20% to 30% among sixth and seventh grade students.

“The opportunity that CCTs offer—to break the poverty cycle from parents to children—is very compelling,” said Norbert Schady, a senior economist at the World Bank and coauthor of Conditional Cash Transfers: Reducing Present and Future Poverty.

“There’s solid evidence that CCTs boost consumption and reduce poverty,” he adds.

CCT also increases the use of health services but “the evidence is less clear-cut than with school enrollment,” the study says. The study also noted that CCTs need to be complemented by higher-quality education and health services. In Cambodia, for example, higher school enrollment rates have not been matched by better scores in exams.

The World Bank defines CCT as money given directly to poor families via a “social contract” with the beneficiaries.

“CCT is a developmental program that invests in people; it is not a dole-out,” says Social Welfare and Development Secretary Esperanza Cabral, who presented a paper on CCT implementation in the Philippines. “The program encourages parents to invest in the future, in particular in the health and education of their children and in the nutrition and food for their families.”

In response to the food and financial crises, the World Bank expects to lend about $2.4 billion this year to start or expand CCT operations in Bangladesh, Colombia, Kenya, Macedonia, Pakistan, and Philippines. •