Special Feature

CCT program: A viable poverty reduction tool

Posted on January 12, 2017

In October 2016, National Policy and Planning Staff Director of the National Economic and Development Authority (NEDA) Reynaldo R. Cancio announced in a speech that the poverty incidence in the Philippines experienced a significant drop, from 25.2% in 2012 to 21.6% in 2015. The notable improvement could, to an important extent, be chalked up to higher government budget for social development programs that had helped supplement the poor’s income.

CARMEN, BOHOL -- Daily life in the town of Carmen in Bohol province. The conditional cash transfer (CCT) program has helped thousands of families all over the Philippines by providing financial support for each child that attends school and completes a set of requirements. (ADB)

One such initiative is the conditional cash transfer (CCT) program, branded locally as the Pantawid Pamilyang Pilipino Program or 4Ps. The budget the government earmarked for it ballooned from P21.2 billion in 2011 to P62.3 billion in 2015, and the number of Filipino households enrolled in the program increased almost twofold from 2.3 million to 4.4 million.

CCT programs, which began in Latin America in the 1990s and reached the Philippine shores in 2007 when the 4Ps was officially set in motion, are a viable tool aimed at eroding the bases of the complex problem of poverty. Under the program, the government regularly transfers cash to disadvantaged families provided that they invest in the health and education of their children, hence the “conditional” in the program’s name.

“It’s the stability of the benefits that allows poor people to start thinking about more than just everyday survival,” said Asian Development Bank (ADB) Senior Social Sector Specialist Karin Schelzig in an interview with BusinessWorld. “If you know this is a regular program, you can start to invest in other areas of your life rather than thinking about where your next meal is going to come from.”

Two types of grants are provided in the Philippines’ version of CCT. One is a health grant worth P500 given to each household every month. The other is an education grant, the value of which varies depending on a child’s age: a household receives P300 per child in pre-school or elementary and P500 per child in high school, for the ten months of the school year (the maximum number of supported children is three).

The Philippine government bears the vast majority of the costs entailed in running the program, but large financial institutions including the ADB and World Bank have been lending it a helping hand. In early 2016, ADB provided the Philippine government a $400 million loan to finance a share (about 6.5%) of the cash grants. The amount will be furnished over a four-year period ending in 2019.

The ADB has also provided a $1 million grant that the Department of Social Welfare and Development, the CCT’s lead government agency, can use to strengthen program management and implementation. This second phase of support follows a $400 million loan and more than $2 million in grant funding provided in 2010.

The CCT has two objectives. The first is to provide extremely poor Filipino families with financial assistance so that they can respond to their immediate needs. The second objective is to break the intergenerational poverty cycle by requiring pregnant women and children aged 0 to 5 undergo health check-ups, pupils aged 6 to 14 be dewormed, school-age children to enroll in and attend daycare, elementary, and secondary school at least 85% of the time, and parents to participate in monthly family development sessions (FDS) where topics about health, nutrition, disaster preparedness, etc. are covered.

Ms. Schelzig noted that the FDS is a distinctive feature of the CCT program in the Philippines that has recently been adopted by the Indonesian government, which implements a similar program.

Unlike programs that supply families with rations of food or other necessities, providing cash is far more efficient, Ms. Schelzig pointed out. Also, in contrast to voucher programs that support children’s schooling, whereby funds are channeled directly to the schools, CCT payments go directly into the hands of the families in need.

Ms. Schelzig said that the majority of the beneficiary accounts in which the cash is deposited are in the mothers’ name, who can then withdraw the money from automated teller machines using a cash card. “It basically promotes financial inclusion, financial independence, and mothers having a say in how the money is spent,” she said.

Perhaps the biggest strength of CCT programs is the emphasis on impact evaluation, which establishes whether the program is working out or not. Impact evaluation of the 4Ps has made use of methods such as randomized controlled trials to determine which impacts on beneficiaries’ poverty, health, and nutrition can be credited with clarity and confidence to the program.

Ms. Schelzig said various rigorous impact evaluations have shown that the CCT helps send more poor kids to school and keeps them there longer, promotes pregnant women’s health and nutrition and reduces young children’s risk of stunting, makes families feel less poor and more optimistic about their future, and motivates adult members of the households to seek additional work.

This is contrary to certain misconceptions that programs like CCT encourage a culture of dependence. Independent researchers have even found that CCTs reduce insurgent influence in conflict-affected areas.

CCTs, however, are not and should not be treated as a silver bullet. “CCTs address one fundamental cause of poverty -- poor human capital,” Ms. Schelzig said. “Poverty is multidimensional -- no single program is going to solve it alone.” Still, the benefits of this social assistance program are too compelling to play down.

In his speech, NEDA’s Mr. Cancio said, “The regularity of the cash transfer sustained for three years for many CCT beneficiaries has accorded them some resiliency to weather certain shocks. The program also induced more economic activity in the poor barangays given the presence of a cash economy. These conditions may have also encouraged a number of them to diversify their livelihood sources.”