CCTs Potentials, Limitations and Opportunities for Innovations

By Vicente Paqueo, Ph.D

Summary
CCT works, but it is not a panacea Its effectiveness depends on the
the issues being addressed and objectives aimed for choice of conditionalities attached cultural and historical background political support for efficient targeting and good governance implementation and institutional capacity supply conditions and cooperation of other agencies financial constraint

Realism and adaptive/learning-by-doing strategies have been crucial to CCTs success CCT has reasonably worked well in a wide variety of country circumstances even in situations with capacity challenges (from Brazil to Bangladesh) Looking forward, it appears desirable to design a second generation (2G) CCTs, building on proven strengths and mitigating, if not avoiding, current limitations

CCTs strengths
Simple, focused and easy to communicate Strongly pro-poor through explicit targeting (societal welfareenhancing re-distribution, particularly appropriate in high inequality environment) Rule-based, not driven by patronage More efficient (lower deadweight loss): cash rather in kind assistance allows households to allocate resources as needed and resources to be transferred electronically Reduced corruption and leakages due to CCTs direct transfer of cash to beneficiary households and greater transparency and accountability

CCT strengths continue

Improved utilization of existing capacity (greater efficiency) due to increased demand Reduced sense of entitlement due to emphasis on co-responsibility Enabling incentives to stimulate households to raise investments with high public value Balance between immediate alleviation of urgent needs and generation of long term benefits (facilitating escape from intergenerational poverty) Credible empirical findings on CCTs impact, providing good information for evidence-based decision-making High popularity and political sustainability

Limitations
Attaching conditionalities to activities that have already been optimized to reach larger number of poor households affected by economic difficulties Cost and inconvenience of conditionalities, targeting and good governance (must be weighed against benefits) Cumbersome and not ideal for a quick crisis response assistance to help affected households Need to tailor CCT to special population groups (e.g. street people without permanent addresses, poor in isolated areas, persons in conflict areas) Mixed impact on final outcomes Failure to develop accompanying transition promotion strategies to support exit/graduation Danger of making CCT a panacea and abusing its popularity to push inappropriate solutions Institutional capacity building requirements (can be mitigated by TA and adaptive implementation strategy)

So, what more could be done, building on and complementing CCT? The challenges
Raising the reliability and strength of CCTs impact on final outcomes Ensuring that CCT beneficiaries get onto a sustainable trajectory out of intergenerational poverty (need for a plan early on) Improving crisis response to economic crisis and natural disasters Ensuring that isolated and difficult to identify households and children are included and appropriate assistance (IPs, children in adverse conditions) is provided Expanding access of the poor to social health insurance with adequate support value for dealing with crippling illnesses Adaptation of CCT to better address gender-specific issues In short, there is need to develop further innovations on CCT and complementary measures

Possibilities for Second Generation (2G) CCTsCC

Broadening of objectives to include not just poverty reduction and alleviation but managing vulnerabilities to risk factors, e.g.
Adequate insurance against crippling health expenditures (e.g. PhilHealth) Insurance against natural disasters Going beyond MDGs in education, aiming for secondary education completion Flexible crisis response mechanisms to dealing with transitory poverty

Greater attention to quality of services provided to improve outcomes, e.g.

Incentive-linked performance contract between CCT program and service providers

Recognition of childrens performance and provision of incentives and more opportunities for development of character, talents and excellence Upfront attention and intensification of transition promotion strategy, e.g.
Linkages to effective livelihood and employment programs, access to asset transfers and credit programs, promotion of savings and investment (e.g. Gerter, Caraga experiment) Complementary measures to promote rapid expansion of good jobs accessible to the poor (improved context matters)

Possibilities continued
Special programs for special population groups, e.g.
Outreach for inclusion of persons without permanent addresses, IPS, isolated population, and people in conflict areas Resiliency development for children in adverse conditions (new form of safety net)

Greater and better engagement of CSOs Use of CCT to facilitate reforms of existing distortionary economic/policies and subsidies that crowd out pro-poor programs Adaptation of CCT to better address gender-specific issues, e.g.
Gender differentiated grants Agency of women in public affairs Revisit of roles of women

Caution!
Be selective Ensure focus and coherence Stretch targets but do not over promise Choose only feasible objectives and strategies Ensure effective and efficient public accountability but avoid paralysis Follow adaptive/learning-by-doing strategies to implement: start small, evaluate, learn, expand, etc