The Global Financial Crisis and Urban Poverty: Conditional Cash Transfers buffer the shock

Dec 11, 2009

New Delhi - Conditional Cash Transfers must be part of national development strategies especially to cushion the impact of the financial crisis on the urban poor but these instruments are not a silver bullet for alleviating poverty, said international experts at a meeting organized by the United Nations Development Programme.

At the two-day international conference on ‘Addressing Urban Poverty: Relevance of Conditional Cash Transfers (CCTs)’ in New Delhi experts pointed out that in most Asian countries there are few social protection measures in place to act as safety nets in times of crisis."Over the past decade, the policiesadopted by various countries in Latin America, of transferring cash directly topoor families, with conditions relating to development outcomes -- say schoolattendance or getting children vaccinated -- have opened a policy window tostrengthen the development of human capital and to escape the poverty trap.Conditional cash transfer schemes can serve not only as welfare measures toprotect human development but also countercyclical buffers in periods ofmacroeconomic downswing,” said Mr. Ajay Chhibber, UN Assistant SecretaryGeneral and UNDP Director for Several Latin Americacountriesintroduced Conditional Cash Transfers over a decade ago following the mid 1990sdebt crisis. Drawing on lessons learnt from their experiences developmentpractitioners from Brazil, Columbia, Mexico and Nicaragua said that instrumentslike Conditional Cash Transfers not only helped tide over the crisisbut also helped create social capital by making cash transfersconditional on girls education or women’s healthcare. Participants from the Philippines, Indonesia, Bangladesh and Turkey also sharedtheir experiences with similar models that have been adapted to suit theirneeds.Mr. Arun Maira, Member, PlanningCommission, Government of India said: "Themeasures we employ need to be created by involving the local communitythemselves… Optimal utilization of resources has to be made to ensure betterreach of these instruments to the poor” he added.

In South Asia alone it isestimated 30 million more people will be pushed into poverty because of theglobal financial meltdown. Coming on the heels of the food and fuel crisis thatsaw prices of major staples like rice and wheat rise dramatically real incomesof poor households decreased on an average across Asia by 24 percentpushing many households into poverty.

While India has weatheredthe financial crisis better than many and the rural poor escaped much of theimmediate impact of the economic downturn with the National EmploymentGuarantee Programme acting as a safety net. However, according to rapid surveysdone by the United Nations Development Programme several sectors likeconstruction, garments and gems have been severely affected and several jobshave been lost or wages reduced of countless others as they have moved fromfull time to part-time jobs. For the urban poor there are few social protectionschemes in place.

The conference was part of the UnitedNations Development Programme’s (UNDP) endeavour to share information andexperiences from within the country and from other parts of the world andprovide a platform for further dialogue. The discussion focused on challengesassociated with CCTs such as targeting, monitoring, financing and institutionalcoordination. The UNDP in India is also bringingout a series of discussion papers on a range of development issues in India.

Speaking about the conference Mr. PatriceCoeur-Bizot, UN Resident Coordinator and UNDP Resident Representative, said,“Our objective was to promote informed discussion among various stakeholders onthe desirability and feasibility of introducing multi-sectoral measures foralleviating human poverty and achieving the Millennium Development Goals in India.”

The core concept of conditional cashtransfers originated when the demand from poorer households for social serviceslike education and health was perceived to have declined drastically duringperiods of financial crises. Such schemes aim at reducing extreme poverty inthe short-run while protecting the formation of human capabilities in the longrun. They provide cash directly to poor households in response to thehousehold/ individual fulfilling specific conditions such as minimum attendanceof children in schools, and/or attendance at health clinics, participation inimmunization and the like.

About Conditional Cash Transfers (CCTs): Conditional CashTransfer Programmes (CCTs) originated from Latin America. They have beenconsidered one of the best innovations in the area of social protectionprogrammes. More recently, they have also attracted some attention in Asia and Africa. But what isreally innovative about CCTs? How do they differ of other types of cashtransfers? CCT programmes are characterized by: i) the use of targetingmechanisms to select beneficiaries; ii) the requirement that beneficiaries takesome actions (e.g. school attendance, health check-ups) in order to receive thetransfer, namely, co-responsibilities or conditionalities); and 3) the regularpayment of cash benefits.

About UNDP: UNDP is the UN’s global development network,advocating for change and connecting countries to knowledge, experience andresources to help people build a better life. We are on the ground in 166countries, working with them on their own solutions to global and nationaldevelopment challenges. As they develop local capacity, they draw on the peopleof UNDP and our wide range of partners.

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