History Of Conditional Cash Transfer

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Introduction

Conditional Cash Transfer (CCT) programs award cash payments to poor households that meet certain behavioral requirements, generally related to children’s health care and education. In some cases, conditional cash transfers have been used for broader environmental goals, such as making payments to people living near forests in return for protecting the area rather than damaging it in order to earn income. In the form of grants to the elderly, they are a tool for strengthening social protection systems.Conditional cash transfer programs, financed by the governments, have spread rapidly over the last decade in the developing world. The concept of CCT structures originated in Latin American countries mainly in response to the economic crisis of the 1990s . During this time there was a drastic decline in the demand for social services from low income households. These programs represent a change in governmental approach that used to focus on the supply-side delivery of basic services. Alternatively, they focus on the demand-side, by protecting the consumption of merit goods. These programs also represent a shift from general subsidies to more sharply CCT programs providing cash transfers to poor families that are contingent on children’s educational and health investments, typically school attendance and regular medical checkups, with the goal of breaking the intergenerational cycle of poverty.

The first wave of conditional cash transfers, which mostly targeted middle income countries, have been marked by good implementation in most cases with respect to targeting, general administration and impact evaluation. In Latin America alone, CCT programs benefit over one hundred and ten million people (The Economist, 2010). T...

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...nal incidence of poverty with expenditures on CCT programs can prove to be a difficult task. An economic downturn and inability to fund the program can obscure any improvements in the overall incidence of poverty, even though beneficiaries of the program are better-off than if they had not received the program at all.

The total amount transferred by these programs is still modest. Its share in total income is still only less than 1% even in the Brazilian Bolsa Familia and the Mexican Oportunidades. While these figures are small in comparison to the weight of transfers from the social security system, CCT income is so well targeted that even with such a small participation in total income they have an important contribution to decreasing inequality in Mexico and Brazil. The second most important factor of the decrease in inequality in Mexico and Brazil has been CCTs.

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