From Protection to Production: the impact of cash transfer programs on economic activities in Africa

On the 11th September 2012, SIANI, FAO Norden, Sida and Svenska kyrkan held a seminar called "Cash Transfers, resilience and agriculture development". The role of cash transfers in the context of social protection in stimulating local production and increasing resilience’s of rural communities was discussed as well as a great many other related issues.The seminar was held in Stockholm and also broadcast over the internet.
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  • 1. Solomon AsfawFood and Agricultural Organization (FAO)Agricultural Development Economics Division (ESA)Rome, ItalyFrom Protection to Production:the impact of cash transfer programs oneconomic activities in Africa
  • 2. 2Outline of the presentation1. Background of cash transfer program in Africa2. Why do we expect productive impact?3. What does the evidence say?4. Final remarks
  • 3. Expansion of government-runcash transfers in Sub Saharan Africa Approximately half of the countries of SSA havesome kind of government-run CT program– And others have multilateral/NGO-run CT programs Some programs are national– Others scaling up– Some pilots beginning this year Beneficiaries predominately rural, most engagedin agriculture3
  • 4. What’s particular aboutcash transfers in SSA--context HIV/AIDS– Economic and social vulnerability Widespread poverty Continued reliance on subsistence agriculture and informaleconomy– Exit path from poverty is not necessarily through thelabor market– Less developed markets and risk, risk, riskHigherriskandvulnerabilityWeakerinstitutions With exception of Southern Africa, less fiscal space---donors play a strong role Still missing consensus among national policy makers Weak institutional capacity to implement programs Weak supply of services (health and education)4
  • 5. Wide range of designs Universal programs– Old age pensions, child grants Targeted programs– Focus on ultra poor, labor constrained; OVC and otherspecific vulnerabilities Cash for work for able bodied Prominent role of community in targeting Unconditional (for the most part)– “Soft” conditions and strong messages5
  • 6. A few cash transfer programs are explicitlylinked to productive activities Public works focused on agricultural rehabilitation(Somalia), or with complementary agriculturalpackages (Ethiopia PSNP) or small business loans(Rwanda VUP) CCT, with complementary vocational training orsmall business grants (Atención a Crisis) With exception of these programs, perception thatcash transfer programs do not have economicimpacts6
  • 7. 5 (+1) ways in which cashtransfer programs haveproductive/economic impactsand lead to improvedresilienceYet unconditional cash transfer programstargeted to poorest of the poor can haveproductive impacts7
  • 8. 1. Improve human capital• Nutritional status• Health status• Educational attainmentTypically core objectives of CT programsUnderlying rationale for CCTs in LACenhance productivityimprove employability8
  • 9. 2. Facilitate change in productiveactivitiesBy relaxing credit, savings and/or liquidityconstraints—and/or constructing communityassets Investment in productive activities– Allocation of labor, inputs Accumulation of productive assets– Farm implements, land, livestock, vehicle, inventory Change in productive strategies– New crops, techniques– New line of products or services– New activities (off farm wage labor, migration?)9
  • 10. 3. Better ability to deal withrisk and shocksBy providing insurance via regular andpredictable CTs Avoid detrimental risk coping strategies– Distress sales of productive assets, children schooldrop-out, risky income-generation activities Avoid risk averse production strategies– “Safety first” or “eat first” Increase risk taking into more profitable cropsand/or activities– Specialization or diversification• Higher value crops or ….. migration10
  • 11. 4. Relieve pressure on informalinsurance mechanismsBy regular and predictable CTs to the poorest andmost vulnerable Reduce burden on social networks– Local networks of reciprocal relationships• In SSA, often weakened and over burdened in context ofHIV/AIDS Rejuvenate social networks Allow beneficiaries to participate in socialnetworks Allow non beneficiaries to redirect theirresources 11
  • 12. 5. Strengthen the local economy Significant injection of cash into local economy Multiplier effects on local goods and labormarkets via economic linkages12
  • 13. 5+1. Facilitate climate change adaptationAll five pathways related to increasing resilienceand reducing vulnerability at the level of thehousehold, community and local economy1. Human capital formation2. Change/adaptation in productive activities3. Better ability to deal with risk4. Reduced pressure on informal insurance networks5. Strengthened resilience of the local economyclimate change adaptation 13
  • 14. What does the evidence say? Lots of evidence on human capital– Poverty, food security and food consumption– Nutrition, health and education Relatively few studies on risks and shocks Very few studies on– Productive activities– Multiplier effects– Social networks– Climate change adaptation14
  • 15. 1st and 2nd generation cash transfer program impactevaluations in Sub Saharan Africa (20 in 14)• Malawi SCT– Mchinji pilot, 2008-2009– Expansion, 2012-2014• Kenya– CT-OVC, Pilot 2007-2011– CT-OVC, Expansion, 2012-2014– HSNP, Pilot 2010-2012• Mozambique PSA– Expansion, 2008-2009• Zambia– Monze pilot, 2007-2010– Child Grant, 2010-2013• South Africa CSG– Retrospective, 2010• Burkina Faso– Experiment, 2008-2010• Sierra Leone– Pilot, 2011-2012• Ethiopia– PSNP, 2006-2010– Tigray SPP, 2012-2014• Ghana LEAP– Pilot, 2010-2012• Lesotho, CGP– Pilot, 2011-2013• Uganda, SAGE– Pilot, 2012-2014• Zimbabwe, SCT– Pilot, 2013-2015• Tanzania, TASAF– Pilot, 2009-2012– Expansion, 2012-2014• Niger– Begins in 201215
  • 16. Main evaluation topics in the 1stgeneration1. Food security and consumption2. Health: use of services, morbidity,nutritional status3. Education: enrollment, attendance, ageof entry to school4. Targeting
  • 17. What’s newish in the 2nd generation1. Mitigation of HIV riska. Sexual behavior and perceptions2. Psycho-social status (PSS), mental health,preferences3. Conditionality4. Productive activities and economic growtha. Household and community levelb. Simulation modeling5. Networks of reciprocal exchange
  • 18. From Protection to Production (PtoP)project FAO–UNICEF Focus on understanding economic impacts of cashtransfer programs– Providing technical and analytical assistance to governmentagencies carrying out impact evaluations– Guiding principle: piggy-back on/add value to existing impactevaluations– Formally working with government and development partnersin 7 countries in Sub Saharan Africa• UNICEF country offices are key partner Mixed methods approach– Household decision making via econometric methods– Local economy effects via SAM/CGE modeling– Perceptions and local dynamics via qualitative methods Primary funding from DFID (2011-2014) Part of overarching “Transfer Project”– UNICEF, Save the Children UK, University of North Carolinaand FAO18
  • 19.  Focus on:– Asset accumulation, productive activities andlabor allocation– Risk coping strategies– Time use– Social networks/reciprocal exchange– Climate change adaptation Preparation of methodological guidelines Design, pilot and supervise implementation ofadditional modules in household surveys Taking advantage of experimental design and paneldata, carry out household analysisA. Household level impact analysis
  • 20. SCT program targeted to ultra poor Increased investment in agricultural assets, including cropimplements and livestock Greater share of household consumption produced via ownproduction Decreased agricultural wage labor and child work off farm,and Increased on farm activity by both adults and childrenMalawi SCTWhat have we found so far?
  • 21. What have we found so far? Modest impact on productive assets - agricultural assets,including crop implements and livestock Greater share of household consumption acquired via ownproduction Substitution between wage and non wage labor intensity Large reduction in child labor on farm labor Positive impact on participation in nonfarm enterprise forfemale headed households21Kenya CT-OVC
  • 22. B. Simulation of local economy impactsPreparation of methodological guidelinesand analytical work led by Ed Taylor andteam at UC DavisJoint funding and dissemination withWorld Bank
  • 23.  Immediate impact of transfer will raise purchasingpower of beneficiary households. As beneficiary households spend cash, impactsimmediately spread outside beneficiary households toothers inside and outside treated villages. Trade and purchases within village may set in motionincome multipliers inside treated villages. Periodic markets and purchases outside village willshift income effects to non-treated villages, potentiallyunleashing income multipliers there. In longer run, as program is scaled up, transfers willhave direct and indirect (or general equilibrium)effects throughout the region of implementation.How do local economy effects work?
  • 24. TransferControlTreatment
  • 25. TransferControlTreatment
  • 26. TransferRest ofLesothoRest ofWorldControlTreatment
  • 27. TransferRest ofLesothoRest ofWorldControlTreatmentTransfer
  • 28. TransferRest ofLesothoRest ofWorldTreatmentControl?
  • 29. Kenya CT-OVC and Lesotho CGP Positive local economy income multipliers,ranging from 1.08 to 1.57 Potentially limited by constraints in labor,capital and land markets– Complementary efforts with bothbeneficiary and NON beneficiaries key tomaximizing income multiplier29What have we found so far?
  • 30. C. Complement with qualitative methods Implement complementary qualitative field work ineach country Focus on economic activities and social networks Integration with quantitative analysis Qualitative work will be led by OPM
  • 31.  Food, education and health top priority, theninvestment in farming Increases credit worthiness of beneficiaries Beneficiaries able to re-enter social networks• They can contribute more, enhancing risk sharingand expanding coping mechanisms• Broadens social capital base Local economy stimulated• More diversified goods available, enhanced labormarketWhat have we found so far?Ghana LEAP program
  • 32. Final remarks Cash transfer programs increasingly linkedcomplementary productive programs Even cash transfer programs originating inthe social sector have impacts on livelihoodsand local economies, fostering resilience To maximize effect on local economy, need topay attention to constraints faced by nonbeneficiaries as well32
  • 33. Finally, PtoP aims to increase capacity ofprogram managers and policy-makers Direct technical assistance/quality assurance onimpact evaluation design, data collection and analysis Input into policy process and ongoing programimplementation Supporting the Transfer Project community ofpractice on impact evaluation– Network, website, face to face meetings, thematiccapacity-building events– First meeting in Naivasha, Kenya (January, 2011)– Second meeting in Kenya (February, 2012)
  • 34. PtoP feeds into better understanding of linkagesbetween social protection and agriculture Contribute to policy debate– Understand overall contribution of CT programs topoverty reduction (cost-effectiveness)– Political economy: more support for CT programs– Articulation as part of rural development strategy Contribute to program design– Most programs not designed with productive dimensionin mind• Evidence on how households spend, invest, or save can helpstrengthen design and implementation• Confront potential synergies and constraints (eg, child labor)– Link to graduation strategies, “productive insertion ofbeneficiaries” or welfare-to-work transitions
  • 35. Our websitesFrom Protection to Production Project Transfer Project
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