Study finds cash-transfer program beneficial to poorest families

Washington D.C.—A new study by the Independent Evaluation Group (IEG) spotlights the impact of World Bank-supported programs in protecting the most vulnerable during the last decade. The study shows that the majority of social safety nets (SSNs)—programs designed to protect the poor from shocks and contribute to reducing chronic poverty—achieved their objectives. In several countries of Latin America, for example, conditional cash transfer programs provided much-needed funds to the poorest families and helped improve children’s school attendance rates.

The World Bank provided $11.5 billion in lending and advisory services in the developing world during 2000-2010 for SSNs. In the wake of the fuel, food and financial crises, the number of countries receiving support from the World Bank for these programs increased from 68 to 83, with over half of the new countries being low-income.

The study also finds that few countries were prepared for the triple shocks that pushed 64 million additional people into extreme poverty by the end of 2010. In middle-income countries, the safety net programs were generally geared to assisting the chronically poor rather than those who suffered job losses, yet these programs were not flexible enough to alter their targeting strategies. Low-income countries often lacked poverty data and systems to reach the poorest people, who would have benefited from short-term employment and subsidies that SSNs can provide.

“Countries that had prepared themselves during stable times by building permanent social safety nets—such as Chile, Colombia and Georgia—were better positioned to respond than those that had not when the crises hit,” said Vinod Thomas, director-general, Evaluation, World Bank Group. “The World Bank was more effective in helping countries where it had been already engaged over the past decade through lending, advisory services or policy dialogue.”

Global crises, persisting inequality, frequent natural disasters and unforeseen economic shocks have underscored the need for safety net programs in all countries, irrespective of their income levels. The World Bank is in a unique position to offer continuous support to clients in this area through its lending and advisory programs. As such, there is a crucial opportunity for the bank to raise its impact further through improvements in strategy and delivery mechanisms.

The World Bank’s lending, advisory and capacity-building programs for SSNs have been largely concentrated in middle-income countries, which received almost 80 percent of the bank’s lending support and had a strong emphasis on institutional development. With tighter budgets and many competing needs to help the poor, low-income countries expressed less demand for SSNs as essential elements of their poverty reduction programs. Safety nets, however, remain an important instrument in low-income countries to help protect the most vulnerable from shocks and assist the extremely poor. For example, a large-scale WB-supported SSN program in Ethiopia, in place since 2005, has helped millions of households cope with chronic droughts and prevented them from sliding deeper into poverty as a result of the most recent food crisis.

“The World Bank needs to maintain its recent momentum and increase engagement in low-income countries, where safety nets are important to protect the poorest,” said Jennie Litvack, the main author of the study. “It’s encouraging to know that these issues are being addressed by the World Bank management in the development of its new social protection strategy.”

IEG’s study also found that the World Bank support evolved over the past decade, marking a shift from a project-focused approach to one that focuses on helping countries build sustainable SSN systems and institutions that can respond to various types of shock. While the Bank’s SSN programs generally achieved their immediate objectives, the study pointed out that many programs were not adequately anchored in a longer-term strategy for SSN development in countries.

The study recommends several improvements. First, it stresses the importance of engaging with countries during stable times to help develop SSN programs flexible enough to address systemic shocks. Second, it emphasizes the importance of building SSN systems and institutional capacity, particularly in low-income countries. Third, it calls for results frameworks, which include improvements in program design, monitoring of results, as well as links with the countries’ development goals.