UNCONDITIONAL CASH TRANSFER –WHAT IS IT AND DOES IT WORK?

I will try to represent some of the structural points regarding Unconditional cash transfer in order to propose an answer to the question of general efficiency when it comes to the need of the above mentioned action. It will be shown the major actors in the case and what their work has achieved till today. However, looking more general regarding the topic it shall be exposed the policy issues, the context of evaluation, details of the intervention and finally the results. In order to start we need to explain the nature of unconditional cash transfers – which from now on we are going to also call UCT’s for short. Unconditional cash transfer projects aim, without conditioning the actions of the recipients, to reduce poverty by launching welfare programs (Cochrane Collaboration.2016:1-2).This is the main difference between UCT’s and CCT’s (conditional cash transfers) where the structure that is providing the funds, transfers them only to the recipients that meet certain criteria (Cochrane Collaboration.2016:2-3). The UCT as an idea is founded on the basis that allowing citizens the access to free money flow enables them to have more independence (Cochrane Collaboration.2016:4-5). There are certain types of unconditional cash transfers that in general generate the most reflection in the media and public sectors. First of all they could be one-off or recurring. One-off unconditional money transfers include a literal one-off transfer or short-term transfer designed to provide people with money that they could use for long-term costs (McKenzie.2013). On the other hand, ongoing or recurring money transfers offer periodically a small amount of money, allowing people to save more or spend more. In general, unconditional money transfers are more likely to be one-off than recurring (McKenzie.2013). UCT’s could be also given to all individuals or households in specific territory. This is the so called means-tested on individual/household level UCT (McKenzie.2013). They could be means-tested on village level or dispersed to all villages in a given geographical region (McKenzie.2013). The amount of the fund could be calculated also on the amount of people part of one household and it could be also fixed or variable based on those same criteria (McKenzie.2013). Major actors and specific cases In order to lay out all the substantial issues that are concerning the topic of unconditional cash transfers and do they actually work it should also be given attention to the major actors. The programs and organizations playing crucial role in the realizations of the many projects are probably the foundational factors for the unconditional cash transfers today. They are many; however the most accumulative of them are GiveDirectly, The Cash Learning Partnership (CaLP), South African Old Age Pension Scheme, Bono de Desarollo Humano, South Africa's means-tested, unconditional child grants (Prasad.2012). Starting with the last ones – The South African Old Age Pension Scheme is means-tested unconditional cash transfer scheme in South Africa to women over the age of 60 and men over the age of 65 (Prasad.2012). According to Edmonds (2006), these retirement transfers are related to a drop in the hours worked per day for a child living with an adult. A further increase in school attendance is also seen among these children (Edmonds. 2006: 386-414). Another one is Bono de Desarollo Humano, an unconditional cash transfer scheme in Ecuador (Edmonds & Schady. 2008). Edmonds and Schady (2008) find that children in households that receive Bono de Desarrollo Humano (BDH) payments reduce their time spent in economic employment by 78% and unpaid economic activity inside their home by 32% (Edmonds & Schady. 2008). In addition the South Africa's means-tested, unconditional child grant is provided to the primary care giver or to the family if existing. The study found that the average child for whom the grant was received had parents who were less educated, less likely to be hired, and possessed fewer assets and luxury goods (Case & Hosegood & Lund. 2005). Using data from a longer period, the study found that there was a significant positive link between receiving the transfer and enrolling in school (Case & Hosegood & Lund. 2005). As we are going through the major UCT actors we should also regard here the The Cash Learning Partnership (CaLP). CaLP is a partnership of over 150 organizations and over 5,000 people in the humanitarian sector, where they combine expertise and knowledge in the field of remittances and their effects. The site includes a number of studies on unconditional money transfers, transfers made as a result of natural disasters [9]. CaLP cooperates with many international organizations in the sector of aid giving and helps to bring them together in order to bring balance and build a network of interdependent actors working for the poor. As part of this conglomerate of companies and foundations the next organization in the sphere of unconditional cash transfers is GiveDirectly [9]. First of all we have to point out that the largest organization devoted exclusively to remittances is GiveDirectly (Faye. 2015). GiveDirectly was founded by economics students in Cambridge, Massachusetts, with two main insights: growing evidence that remittances could work, as well as the growth of cheap and credible money transfer technologies (Faye. 2015). GiveDirectly's activities were initially limited to Kenya, where the m-Pesa remittance system is well established. In November 2013, the organization expanded to Uganda (Faye. 2015). To be more précises in explaining what actually GiveDirectly is doing we should expose the manner of their procedure. GiveDirectly is actually sending funds directly to households which are below the poverty line (Haushofer & Shapiroz. 2013). Giving the fact that this organization is the biggest in this field of work we are going to take her experience and achievements in order to make an evaluation on wetter unconditional cash transfers are working or not. Sustainable economic development or countless money transfers – the missing link Discussing the process of making unconditional cash transfers and the decision making involved we should also involve the long term economic benefits that are to be achieved. There are many goals that have been met during the time programs like GiveDirectly launched their projects and without a doubt they have contributed to the wellbeing of many households. If we are to follow the thread of how the UCT’s started to develop and what is their impact we should adhere to some empirical data combined together by some scholars. During the time the organization (GiveDirectly) maintained its work many scholars decided to evaluate it. Some of them – Johannes Haushofer and Jeremy Shapiro, actually found out that there is increase in household assets, consumption, and food security because of UCT’s (Haushofer & Shapiroz. 2013). Their base study was grounded on the aftermath of the UCT effect in Kenya in 2013. It is stated in their study that GiveDirectly reduces the scale of the model and thus influences the global debate on effective charitable disbursement and universal basic income. To be precise the program managed to disperse cash transfer projects to 60,000 households in rural Kenya, Rwanda, and Uganda (Haushofer & Shapiroz. 2013). That number roughly comes around to 280,000 people within these households that have been reached (Haushofer & Shapiroz. 2013). Efficiency targeting (about 90 cents per dollar donated to the poor), organizational transparency, and the continuous generation and use of evidence have inspired donor engagement by helping to broaden its scope annually (Haushofer & Shapiroz. 2013). Here we have to discuss what would be the problem when you give poor families money for free with no strings attached. Rich countries have bought over $ 131 billion in development aid in 2015 (DCD-DAC. 2016). Almost all aid is provided as contributions in kind (such as food, fertilizers or textbooks) or services (such as business training) that involve significant administration and costs management (DCD-DAC. 2016). The proliferation of cell phones and last-mile payment infrastructure (such as mobile banking) made cash transfers directly to the poor quickly, reliably and cheaply. As a result, the growing community of researchers, development practitioners and donors is wondering if simply cashing poor households can be more cost-effective than traditional aid. However, the usual criticism of money remittance programs is that this money can be misused (DCD-DAC. 2016). Over the last few decades, large state cash programs for poor citizens have become more common. More than thirty countries have put in place cash transfer programs that provide households with remittances provided that parents invest in their children's health, nutrition or education (Fiszbein & Schady & Ferreira & Grosh & Keleher & Olinto & Skoufias. 2009). Conditional cash transfers are generally successful in reducing poverty and improving education and health outcomes in different contexts, but program costs for targeting recipients and monitoring conditions are often significant. Unconditional money transfers (UCTs) eliminate these monitoring costs and allow poor households to decide for themselves how to allocate funds (Fiszbein & Schady & Ferreira & Grosh & Keleher & Olinto & Skoufias. 2009). Evidence from Morocco and Malawi shows that abolishing conditionality can reduce costs and have a positive impact (Fiszbein & Schady & Ferreira & Grosh & Keleher & Olinto & Skoufias. 2009). After the start of the use of UCT’s by GiveDirectly the support for the program grew and its potential showed that the help that Is provided is increasing. However they decided to do a research on their own alongside with Innovations for Poverty Action (IPA) (Haushofer & Shapiroz.2013). From 2011 to 2013, researchers Johannes Haushofer and Jeremy Shapiro conducted a randomized assessment in Rarieda, Kenya, to measure the impact of UCT on the economic and mental well-being of poor rural households. Although most of the previous evaluations of remittance programs were with small, regular payments, GiveDirectly estimated large, one-time transfers (Haushofer & Shapiroz. 2013). Within the villages receiving UCTs, the researchers tested three design features: distinguishing the recipient's gender, payment time, and the amount of the transfer (Haushofer & Shapiroz. 2013). Overall, the analysis is laying in front of us that the persons were using the funds for basic needs and they did not spend them on vicious goods (Haushofer & Shapiroz. 2013). The average transfer rate is US $ 709 (Haushofer & Shapiroz. 2013). Nine months after the start of the program, monthly household consumption increased by $ 36. (A 23% increase based on $ 158) for a number of goods, including food, medical and educational costs (Haushofer & Shapiroz. 2013). The study found that receiving UCT did not increase the cost of goods for delights such as alcohol or tobacco, which is in line with the evidence from the Randomized Assessment in Liberia, as well as the review of the of nineteen cash transfer studies, nearly all of which found either no impact or a negative impact on alcohol or tobacco spending.In addition, GiveDirectly households reported improvements in psychological well-being (Haushofer & Shapiroz. 2013). Recipient households have also invested more. On average, house investment in homes, furniture and metal roofs for their homes increased by US $ 302 (an increase of 61% on the basis of $ 495) (Haushofer & Shapiroz. 2013). Forty percent of households that received transfers had a flat roof after the program, compared to 16 percent of households in the comparison group. Households also invested more in revenue-generating activities, such as business and livestock. Revenues from these activities increased by US$16 per month (33 percent), although estimated profits did not change. On an annual basis, this increase in income was equivalent to 27 percent of the average transfer (Haushofer & Shapiroz. 2013). From the research work of Shapiro and Haushofer we have to pin point the fact that in conclusion their opinion on the matter how should the project proceed is that an unconditional cash transfer to all members of society that is enough to cover basic needs and guaranteed for the recipients’ lifetimes would be of grounding support (Haushofer & Shapiroz. 2013). In addition in the end of their research they make evaluation on the village level economic effects (Haushofer & Shapiroz. 2013). As ground breaking and important that is – the level on which the conclusion is constructed do not give us a full and independent overview. That said we have to take under consideration what actually is considered to be economic development in general and what are its structural parts. Only on this basis we can conditionally determine wetter the job that have been done by organization such as GiveDirectly is actually helping or in fact deepening the problem. One country's progress is related to different conceptions, but generally embraces economic growth through higher production, the political systems that represent as accurately as possible their citizens' preferences, the widening of the rights of all social groups and the opportunities for obtaining them, and the proper functionality of institutions and organizations that can engage in more technical and logistic complex tasks (i.e. tax increases and public service provision) (Bayly. 2008). These processes describe the ability of the state to manage its economy, the police, the social benefits, and the public administration. In general, the objectives of economic development policies seek to address the problems of these issues (Bayly. 2008). Let us accept that because of many, irrelevant for the text circumstances, the certain governments of certain countries are not able to conduct the so called economic development policies. Than we should also, at least to certain extend, agree that the international organizations constructing their field of work in the foreign aid business are the ones that are actually seizing the functions of the state they are helping. Be that already said we have to assume that organizations like GiveDirectly and others involved in the unconditional cash transfers work, are going to set their policies towards the economic development. And again here we have to say that the pattern is – trough economic development improving polity, socio-financial capabilities and public administration (Bayly. 2008). However in the research made by Shapiro and Haushofer it is clearly stated that there consumption increase in goods including food, medical, and educational expenses (Haushofer & Shapiroz. 2013). And following the already established economic pattern we should also ask the question what will happen if because of unknown circumstances the unconditional cash transfers stop. Then there will be again a missing stage on the place of economic development. And again the international foreign aid institutions will be faced with the problem of missing economic growth, which in fact will deepen the problem because of population already fixed to the idea that could rely on UCT’s for its daily needs. And that is the major issue – regular satisfaction of basic daily needs without trying to build some sustainable economic source of income. From the more the second research of the same scholars (2016) we could understand that again they are focusing on issues that are important, however not to the extent of helping this society economically in long term (Haushofer & Shapiroz. 2016). In the text is incorporated and given attention to gender differentiations in the terms of – what part of the society is usually using the money the most – women or men (Haushofer & Shapiroz. 2016). How are they spending them and most importantly how that is helping their social status and economic improvement? However they are not finding any conclusive result regarding their welfare status – not more than some facts like the one that they are now able to buy more food and kitchen utilities or in general objects for the household (Haushofer & Shapiroz. 2016). There is no significant positive data on the entrepreneurial factor of the rural societies in Kenya and Uganda (where the platform is majorly orientated). So in fact what is achieved there is just short-term possibility for the people of individual households or households in whole regions to acquire objects and spend more funds on foods (Haushofer & Shapiroz. 2016). In fact the only positive outcome of the unconditional cash transfers is the higher nutrition factor and better healthcare in the sense of affording higher quality medicine (Haushofer & Shapiroz. 2016). In order to strengthen this point of view we have to acknowledge the recent paper by Araujo, Bosch, and Schady (2016), evaluating the 10-year effects of Ecuador’s Bono de Desarollo Humano cash transfer program (that we spoke about earlier in this paper), concludes that “…any effect of cash transfers on the inter-generational transmission of poverty in Ecuador is likely to be modest.” (Araujo & Bosch & Schady. 2016). In another research authors Sarah Baird, Craig McIntosh and Berk Ozler, report the effects of a cash-transfer experiment in Malawi more than two years after it ended, tracking a broad range of outcomes for females aged 18-27 (Baird, McIntosh and Özler. 2015). Their earlier work has demonstrated the short-term effectiveness of cash transfers in improving school participation and test scores as well as reducing the incidence of pregnancy, marriage, psychological distress, and sexually transmitted infections during adolescence, indicating the possibility of finding longer-term improvements in well-being as young adults (Baird, McIntosh and Özler. 2015). In the evaluation given in the end of the research there are some findings regarding UCT effectiveness which can’t be overlooked. The short-term improvements in the UCT arm seen during the program failed to bring about long-term welfare gains. Significant reductions in teenage marriages, total live births, and HIV infections, as well as improvements in psychological state and nutrition elevation observed at the end of the program, were no longer there two years after the end of the intervention (Baird, McIntosh and Özler. 2015). Additional observation concludes that the end of the cash transfer program was immediately followed by a marriage and baby boom among the beneficiaries, who reported lower levels of empowerment and had husbands with lower cognitive ability compared with both the CCT and the control groups (Baird, McIntosh and Özler. 2015). Important is to be noted that a large “baby boom” appeared 10-12 months after the end of the unconditional cash transfer program, indicating a spike in pregnancies immediately after the cessation of financial support, is preceded by a similarly-sized “marriage boom” only a few months earlier (Baird, McIntosh and Özler. 2015). This paper has been published only two years after the end of the program. And what it states in conclusion is that only two years after the end of the program, UCT beneficiaries are, in most respects, in a position indistinguishable from where they would have been in the deficiency of cash transfers. Palliative benefits of small and frequent unconditional cash transfers are uncontested and reinforced by their study, but the idea that they can contribute to a sustained improvement in welfare over the longer-run is unproven and not supported in the research (Baird, McIntosh and Özler. 2015). It is necessary to could conclude that the unconditional cash transfer is one of many ways that the mankind have come up with in order to fight poverty. However the good intention there is no data showing that this is actually helping the recipients in long term. Most of the times when we are assessing the job done by UCT’s using organizations – it is noted that the criteria by which the UCT effectiveness is evaluated involve short term affordances like food, medicine, household needed objects. Another part that is also taken under consideration by the specialists that defend the UCT practice is the gender differentiation in the area receiving the benefits. In other words nothing concrete regarding long-term economic development and welfare of the receiver is stated and proven by any data. In fact the only thing that UCT’s are basically useful for is to sustain and probably meliorate the status of the household (individual or multiple) for certain time – not permanent.

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