Conditional Cash Transfer Programs in Developing Settings:
Executive Summary

Conditional Cash Transfer (CCT) programs provide cash payments to poor households that meet certain behavioral requirements, generally related to children’s health, nutrition and education.1 For example, in Mexico’s PROGRESA, grants are provided to poor families with children under 18 enrolled in primary and secondary school on condition that the parents send children to school and regularly visit health centers. Evaluation results show that in general CCTs are effective means of reducing poverty and incentivizing parents to invest in the health and education of their children.2

CCTs are versatile programs, and have been used in a variety of different countries and regions worldwide. The largest CCTs such as Brazil’s Bolsa Escola and Mexico’s PROGRESA cover millions of households aimed at developing human capital in education attendance and health services. In Honduras and Colombia, CCTs are focused more narrowly on extremely poor households to increase educational attainment and reduce child labor. In Cambodia, CCTs have been implemented to address gender disparities in education. Recent CCT pilot programs are being used in Sub-Saharan Africa to reduce the risk of HIV/AIDS infection.
There are three important elements to consider when designing a CCT program: payment system, payment size and desired impact.
The payment systems used in CCTs varies across countries. Most of the Latin American programs work through the banking system. For example, in Brazil, payments are made on debit cards and cash can be withdrawn at banks, ATM machines or lottery sale points. In nearly all extant CCT programs, parents are the recipients of the cash transfer payments, and in nearly all programs where the parent is the recipient, payments are made to the mother of the children.

In practice, there is a great variation in the payment size. In many CCT programs, transfers are based on mean household’s pre-transfer expenditures. The monthly educational grants of Mexico’s PROGRESA amount to 20% of monthly consumption expenditures while in Nicaragua’s RPS program, the annual educational transfers represent 8% of total annual household expenditures. Payment size can also be differentiated by grade or by gender. For example, the FA program in Colombia and Jamaica’s PATH pay higher amounts for children in secondary school than for those in primary recognizing that the opportunity cost of the time of older student is higher than that of younger students.

By and large, CCTs show a positive impact on the consumption level, school attendance, and use of health and education services among the poor. In Cambodia, two pilot programs have reduced the drop-out rate between 6th and 7th grades by 20 to 30 percentage points. The use of preventive health care services in Colombia, Honduras, Mexico, and Nicaragua has been increased by between 8 and 33 percentage points.3 By affecting people’s consumption behavior, beneficiaries tend to spend more on better sources of nutrients than those who have the comparable purchasing power but who do not receive transfers. In addition, transfers with more generous benefits lead to relatively more substantial impact assessments, particularly in terms of primary school and nutritional outcomes.
Although even the best-designed CCTs cannot meet all of society’s needs, they can and do provide a vital solution for designing and implementing a social protection system for vulnerable households and individuals, thus helping to close the human capital gap in developing countries.