In the U.S., schools in several cities have implemented “cash for grades” programs to encourage disadvantaged students’ achievement in the classroom.
Now, developing countries are testing out cash incentives as a possible method of fighting poor health and education. In the Philippines, the government’s new “Pantawid Pamilyang Pilipino Program” provides cash assistance to poor families that follow human development guidelines. Approximately 4.7 million families in the Philippines, or 27.6 million people, were considered poor in 2006.
Gilberto M. Llanto is a research fellow with the Philippine Institute for Development Studies and holds a Ph.D. in economics from the University of the Philippines. He writes at the “East Asia Forum” blog about the new program and its likelihood of success.
Philippines rolls out cash in return for health and education
A growing number of developing countries have implemented conditional cash transfer (CCT) programs, a new intervention funded by donors that seeks to improve the health and education status of mothers and poor children, respectively, and reduce poverty in the long run. The CCT is a targeted transfer program whereby cash is directly transferred to poor household beneficiaries on condition of doing certain activities such as keeping children in school. This intervention rests on the importance given to human capital in stimulating growth and social development.
Recently, the Philippine government has designed its own version called “Pantawid Pamilyang Pilipino Program” (4Ps), allocated a budget and knocked on the doors of donors such as the World Bank for supplemental funding.
The 4Ps will provide cash to targeted poor households on condition of regular school attendance by the households’ children and visits to health centers by family members.
The 4Ps are based on the following rationale:
- Investment in human capital (e.g., basic education, health) leads to long-run poverty alleviation. Early interventions provide much higher returns over the lifecycle, and
- Cash transfers have an immediate impact on the poverty situation.
That poor households—which do not have the means to improve their education and health status—need some form of subsidies is undeniable. That cash transfers provide immediate relief, especially to poor households suffering from hunger and various deprivations, is obvious.
The policy question, however, is whether or not the 4Ps constitutes an efficient and effective instrument for providing subsidies. More importantly, will conditional cash transfers yield the expected outcomes on education, nutrition, and health? Will the expected human capital investment outcomes be realized?
The budgetary implications of this program are staggering and more so if funded by borrowing. In the next five years, the government hopes to transfer cash to 500,000 poor households. It cannot do this, though, without passing the hat to donors since it simply does not have the resources to fund the envisaged massive program of conditional cash transfer.
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