Cash Transfer Policy

Implications for Tackling Corruption

Bhuvana Anand Centre for Civil Society

Delivery of Public Services

Eg. Food Security through PDS
Research shows:

Irregular and insufficient availability of ration Quantity insufficient for family consumption Very poor quality of ration Rate list not displayed in depots No ration depot in some villages

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Presentation at IIM B - CPPM

Delivery of Public Services

Eg. Food Security through PDS
57% of the PDS food grain does not reach the intended people For every Rs 4 spent on the PDS, only Rs 1 reaches the poor
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Planning Commission Report, 2005

28/12/11 Presentation at IIM B - CPPM

Delivery of Public Services

Can we use Transfers instead?
Cash Transfers Conditional Cash Transfers Vouchers

Fixed amount transferred periodically to eligible people Usually paid to individuals by the government in lieu of other social benefits

Fixed amount transferred for particular purposes or with conditions attached to eligible people Eg. cash given to families to buy food in the regular market, instead of ration

Certificates redeemable for goods/services available to eligible people Burden of cash flow on seller not consumer Eg school vouchers or food stamps

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Presentation at IIM B - CPPM

How cash transfers work?

Targetting, Accountability & Transparency
Identification & Targetting
Can be linked to vehicle ownership, property title, Direct deposit into bank accounts In the name of a female member of the household Based on actual numbers of people in the home Use of cash transfer debit cards

Use & Conditionality

Since the payments are cash, they can be used to buy whatever food the families want, at any shop or market Conditions may be included Eg. Vaccinations, school enrollment

Monitoring & Accountability

Electronic transfers, UID/ID linked Consumer protection clause Tiered penalty for corruption based on amount of transfer Eg Public Services Guarantee/Grievances Act

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Presentation at IIM B - CPPM

Why are cash transfers better?

Effectiveness and Efficiency

Increases choice, trade and reduces paternalism

Lets people choose rather than assuming that politicians know best Allows for individuals/families to respond to emergencies and prioritise Quality parameter ignored in direct services can be remedied with cash Allows for flexibility, improved livelihood investments, and local economy growth

Reduces market distortions

Rations can create black markets or cause people to consume more of a good than they otherwise would Allows for market to correct shortages and variations in demand

Administratively more feasible and efficient

People can shop in existing markets with no need for government administered shops Cost of implementation is relatively low

28/12/11

Presentation at IIM B - CPPM

Why are cash transfers better?

Accountability and transparency
Easier to track
Using UID, electronic transfers, post offices etc

Fewer middlemen
Directly from govt to recepient, reduces scope of leakage Easier for people to demand their due Fewer hoops to jump through Consumer protection simpler

Feedback mechanism is stronger

Perception of cash as income increases the sense of loss Within a few tries easier for the system to self correct Can lead to a public welfare-public decision model Community reactions to announcements of recepients
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Cash Transfer Experiences

Very few developing country governments allocate more than 1% of their gross domestic product (GDP) to cash based social assistance programmes, against an average of 8% in OECD countries, where more than 80% of the population is covered by one or more forms of cash transfer programme, against less than 10% of the workforce in Africa and Asia.
Source: (Tabor, 2002)
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Cash Transfer Experiences

Have pilots been successful?
Bikes Bihar Sewa Delhi Progressa Mexico

Keep girls in school longer by providing transport Rs.2000 to any girl successfully completing 8th grade Money given directly to girls 90% of money used for bikes Dropout 2.5m to 1m
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Participants could buy more and better food while avoiding PDS queues Recipients had a hard time understanding the concept Very strong opposition and intimidation

Children must attend classes regularly and members must obtain specified health care Commits the two sides to co-responsibilities More income (20/30%), more children in school, and health improved for participants of all ages
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Presentation at IIM B - CPPM

Problems with cash?

Implementation challenges
Misuse of funds

Use of cash for alcohol instead of food Using technology to track recipient Shorter term misuse, longer term empowerment

Easier to divert/steal

Can be mitigated in high risk environments through use of local established delivery mechanisms Eg Hawala in Afghanistan and Somalia

Inflation

Can be adjusted using refunding scheme similar to income tax Annual and quarterly adjustments possible

Discussed in next slide

Corruption

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Presentation at IIM B - CPPM

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Problems with cash?

Mitigating corruption
Clean targetting
Coopt local community into targetting exercise Eg Zambia using community welfare assistance committees

Program design
Make recipients aware of rights and size of entitlements Investments in technology - upfront cost amortized over time Eg UID, iris recognition technology, electronic bank accounts + cards

Monitoring & evaluation

Extensive publicly available data, including evaluations, results and selection of beneficiaries Operational audits in Colombia and Jamaica; Spot checks in Colombia and Argentina

Grievance redressal
System for reception and handling complaints, including several points of reporting at payment points Established set of procedures for handling complaints Eg. consumer protection plus whistleblower legislation
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Problems with cash?

Mitigating corruption
30 25 20 15 10 5 0 Cash Transfers for Food
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Percentage of people who paid a bribe to receive a service (Transparency Mexico)

Building Permit

Trash Pick-Up

Recover a Stolen Vehicle

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Presentation at IIM B - CPPM