Conditional Cash Transfers: Generating Buzz, But Let's Think Outside the Box

At yesterday's launch of the World Bank Policy Research Report, Conditional Cash Transfers: Reducing Present and Future Poverty, New York Times contributing writer Tina Rosenberg recounted her article pitch to her editors at the Times. Asking her why she was so intent on going to Mexico to cover Oportunidades, the conditional cash transfer program that started it all, she answered: Because it's a social policy program that actually works.

From Latin America, to Africa, to even the United States, conditional cash transfer (CCT) programs are sprouting everywhere and garnering an increasing amount of attention. As the packed auditorium demonstrated yesterday, the buzz has long since reached Washington. And as Justin Lin, Chief Economist for Development Economics, noted, the World Bank will be extending CCT projects to six additional countries this year.

In the scramble of eager participants that shot their hands up breathlessly to seize their chance to ask their multi-part queries to the pre-eminent experts on CCTs, I didn't have the chance to ask the question in the back of my mind: How can CCTs be used to incentivize and change savings and asset-building behavior?

CCT programs aren't a magic bullet, the panelists reiterated. Santiago Levy-- the brainchild behind Oportunidades-- emphasized that CCT programs don't work everywhere, and certainly, they must function within a larger network of social safety net programs provided by the government.

But I wonder how much more powerful they could be if they were used as instruments to help the poor increase savings and build assets, and served as a gateway into formal financial inclusion of the unbanked.

Rosenberg mentioned that, in the course of her time researching the impact of Oportunidades in several villages in Mexico for her New York Times Magazine article, that many women invested parts of their transfer in small businesses. These businesses were sustainable, and added to family income.

If that's the case, then certainly there's room to explore the role of CCT programs to help the poor save, accumulate assets, and increase financial inclusion.

In the U.S. and Latin America, pilot projects and formal government programs are beginning to test these waters. Proyecto Capital in Peru is working to connect, combine, and adjust CCT policies with those that encourage savings, asset building, financial inclusion, and access to financial and entrepreneurial "know-how" for the poor. New York City's Opportunity NYC program links payments to bank accounts so as to encourage savings and reduce services associated with high transaction costs. And evidence from Latin America demonstrates that households participating in CCT programs increase their savings rates and investment in productive assets. Participants of Paraguay's Tekporã program saved 20% more due to their participation in the program; evidence from Mexico likewise affirms that families invested 12% of transfers in income-generating activities, and saved more when payments were made through banks.

So on the day of the launch of this seminal study, it seems timely to start thinking about CCTs in more innovative ways that increases financial inclusion, and helps people save and build assets. This is only the beginning of the conversation-- the Global Assets Project is beginning to ask these questions, and will release a report exploring the potential between CCTs and savings in the coming weeks. In the meanwhile, let's hope that the lively discussion that was sparked at yesterday's event continues in ways that think about CCTs outside the proverbial box.