Conditional Cash Transfers

A conditional cash transfer, often shortened to CCT, is a government program that gives money to poor households on the condition that they take certain actions, usually keeping children enrolled in school and attending regular health checkups. The approach aims to do two things at once: reduce poverty today by raising family income, and reduce poverty tomorrow by building human capital, the health and skills that let children earn more as adults.

Mexico’s experiment

The modern CCT began in Mexico in 1997 with a program called Progresa, later renamed Oportunidades and then Prospera. It paid mothers in poor rural families a monthly grant if their children attended school at least most days and if family members visited health clinics. Grants for secondary school were slightly larger for girls, because girls were more likely to drop out.

What made Progresa famous was how it was evaluated. Because the government could not reach every village at once, it randomly selected which eligible communities would start first. That allowed researchers to compare similar villages with and without the program. They found that enrollment rose, especially for secondary school and especially for girls, and that children in participating families were healthier. The strong evidence helped the program survive changes of government and inspired copies worldwide.

Brazil and beyond

Brazil launched Bolsa Família in 2003, combining earlier programs into one. At its height it reached around a quarter of the population and is widely credited with contributing to a fall in poverty and inequality, at a cost of roughly half of one percent of national income. Similar programs spread across Latin America and then to countries such as the Philippines, Indonesia, Turkey, Bangladesh and Pakistan.

Conditions versus no conditions

A lively debate asks whether the conditions are necessary. Unconditional cash transfers give money with no strings attached. Supporters argue that poor families know their own needs best, that monitoring conditions is costly, and that conditions can unfairly penalize the poorest households, such as those living far from any school. Studies of unconditional transfers in Kenya and elsewhere have found that recipients mostly spend the money sensibly, on food, livestock, home improvements and small businesses, rather than on alcohol or tobacco, contrary to a common fear.

On the other hand, a randomized study in Malawi found that conditions did produce larger gains in school enrollment than unconditional grants, while unconditional grants did better on some other outcomes, such as reducing early marriage among girls who had already left school. The answer may depend on the goal.

Getting targeting right

Every cash transfer program must decide who qualifies, a challenge called targeting. Because many poor households have no formal income records, governments often use surveys of household assets, such as the type of roof or whether the family owns a refrigerator, to estimate who is poor. Mistakes happen in both directions: some poor families are wrongly excluded, and some better-off families slip in.