Cash transfers. Evidence paper

This DFID evidence paper updates the previous DFID review of evidence published in 2005. It draws on new research and evidence which has accumulated as social protection policies and programmes have expanded in developing countries. Written by DFID staff from the Poverty and Vulnerability Team, it has benefited from other contributions and reviews, and internal consultation. It was reviewed by DFID's Development Policy Committee (DPC) in October 2010, which aims to ensure that DFID policy is coherent, evidence-based, implemented throughout the Department, and delivering Ministerial development priorities. This paper provides a synthesis of the global evidence on the impact of cash transfers in developing countries, and on what works in different contexts and for different development objectives. It aims to help inform decision-making, mainly by DFID and its development partners. Firstly, evidence is summarised on the multiple types of impact that cash transfers can have in achieving a range of social and economic policy objectives. Secondly, evidence is assessed regarding specific design and implementation choices for tailoring programmes to particular objectives and contexts. Thirdly, questions of affordability and financing are examined. The primary purpose of cash transfers is to reduce poverty and vulnerability directly. However, the evidence shows that they have a proven potential to contribute directly or indirectly to a much wider range of development outcomes, including human development (health, nutrition and education), gender equality and women's empowerment, and economic inclusion and growth. Reflecting a more limited research base, there is more limited evidence that cash transfer programmes can contribute to other outcomes (such as strengthening the "contract" between citizens and the state, or supporting climate change adaptation). The paper concludes by identifying priorities for further evidence generation to address knowledge gaps, as well as recommendations for DFID policy and programmes. It recommends that DFID should continue to:

• support cash transfers through its bilateral programme, with an emphasis on context-specific approaches and building sustainable, nationally-owned systems.
• encourage attention to and financing for cash transfers in international fora (e.g. the G20) and in multilateral policy and programming.
• encourage evidence-based policy-making and programming, with investments in robust research and evaluation. Specific priorities include strengthening monitoring and evaluation practices, consistent cost-benefit analysis for comparison across different instruments and design options, and further research on aspects of practice for which the evidence base remains limited (e.g. on implementation of cash transfers in fragile and conflict-affected contexts, the role of social protection in building effective states and climate change adaptation, and links to financial inclusion). 

DFID - April 2011