Latin American countries were the first to flirt with the conditional cash transfer model. It evolved in response to the economic crisis of the 1990s. Many governments found that in the face of the crisis the poor were not availing themselves of education and health services. At the same time governments had to cut their social spending and subsidies. They wanted the poor to use social services but without expanding the budget for it. Conditional cash transfer programmes emerged as a response to this twin challenge; they put hard cash in the hands of the people but on conditions like they sent their children to school or for health check-ups.
Mexico was the first country to start such a programme called Progresa in 1997, the year it faced economic meltdown. Progresa is a poverty alleviation programme that transfers cash to the woman heads of the extremely poor rural families. The condition is that each of the children must attend school between Class III and VIII. With change in government in 2000 the scheme was renamed Oportunidades. It was also scaled up from BPL families in rural areas to all rural and urban families. Oportunidades replaced the country’s poorly targeted and ineffective consumption- based subsidies. By mid- 1990s the country was running 15 food subsidy schemes. Still about 60 per cent of the poor rural families received no support from the federal government.
In Brazil the much-talked-about family stipend programme Bolsa Família started in 2001. It evolved from a series of localised schemes introduced in urban areas during the 1990s. Luiz Inacio Lula da Silva, the former president, expanded it in 2003. This substantially contributed to his re-election in October 2006 (see ‘Cash swings votes’). The programme became a central part of Lula’s ‘zero hunger’ campaign. In 2010 it covered 12.4 million families, up from 11 million in 2006 (Brazil’s population is 193 million). In the recent presidential elections, every candidate promised to expand it.
Conditional cash transfer has had an impact on poverty and income inequality, according to the World Bank assessment. It attributes 21 per cent of the reduction in income inequality between 2000 and 2007 to conditional cash transfer schemes in Brazil and Mexico. Such programmes have been fairly successful in reducing acute distress and increasing consumption levels of the poor. For example, in Mexico and Brazil such schemes contributed 25 per cent and 50 per cent of the total income of the poorest families respectively. In Mexico the poverty gap declined by 12 per cent, severity of poverty by 19 per cent and the number of poor by five per cent, according to the World Bank review.
In Brazil, where the health and welfare ministry evaluated Bolsa Família between 1995 and 2004, over 82 per cent beneficiaries reported eating better and prevalence of stunting in children was 29 per cent lower compared to non- Bolsa families. In Mexico, Progresa participants reported a 16 per cent rise in me an growth rate a year (1 cm) for children who received treatment in the critical age of 12 to 36 months. A good part of the success owes to the size of the schemes.
Before long several countries began copying the conditional cash transfer model. The number of countries running such schemes swelled from three in 1997 to 40 in 2010. Another 30 countries have only recently adopted such schemes. African countries are the latest to adopt this model. Most of the bilateral and multilateral donor agencies are pushing for conditional cash transfer. The scope and size of such programmes have also gone up. Mexico’s Progresa started with about 0.3 million families in 1997, but now covers five million families. Brazil started with municipal Bolsa Escola scheme in Brasilia and the municipality of Campinas. Today the federal Bolsa Família programme serves 11 million families across the country. In Colombia, Famílias en Accion programme, similar to Progresa, benefited 0.4 million families initially; it has expanded to 1.5 million families by 2007.
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