30th Skoch Summit

14th Thinkers & Writers Forum

Hotel Shangrila

September – 18-19th 2012 New Delhi

Effective Conditional Cash Transfer as a Development Tool in India

Santanu Sengupta

Secretary, Change Innovators Society

& Director, ACMFI - African Centre

for Mobile Financial Inclusion

Revisiting CCT : Definition

CCT is an effective way of government spending,

like education, healthcare, particularly on Women folks to

come out of their vulnerability during child birth, sanitation,

road development and community projects, where the

beneficiaries earn wages or stipends against a specific set of

tasks.

Modern day CCT is highly structured, following the success of

the Bolsa Familia programme in Brazil and sweeping Latam

Ms Pamela Cox deputed as ADB Vice president in charge of

Asia Pacific at Manila, Philippines for embarking on a mission

mode programme in the Far East.

• Outside China, Indonesia, Indo-China, Vietnam and now even

Myanmar is in big focus for such financial inclusion as a pivot

for further equitable & inclusive growth in the region.

But real test lies in South Asia, a melting pot of 1.7 billion

people is the next biggest common market of all. And

everything boils down to India’s story of inclusion & by skillful

adoption of CCT.

The steps taken in this direction, with UID, cashless payments

through MNREGS, various state government initiatives to stop

the huge unproductive leakages, IS a questionable, debatable

issue leading to this important question. Will CCT work in India?

Cont…

Various forms of CCT

A brief mention has been made about why these

programme now being called CCT as an ECONOMIC

instrument whereby the governments of varying

ideological bias has been increasingly relying on such

instruments as a public policy. The underlying theme is

pretty simple.

- Address the need of the vulnerable section and provide budgetary

support for them

- Instead of generalized subsidy it is targeted and designed and aimed

at delivering to the targeted segment of the society.

- It is designed and made in such a manner that the benefits that accrues

to the beneficiaries are discernible to them and they willingly embrace

it with renewed vigour.

- Governments have by and large by these methods minimized leakages

and have been able to lessen the intermediation and wastage.

- By doing so these targeted investments have been helping form long

term assets to a country, saving costly outages, and mismanagement of

development funds, reduction of cost, and most of all a prosperous healthier society.

Replacement of Archaic law & regulations by more modern practical enactment . - Usage of ICT platform & enabling environment & electronic payment gateway. - Delivery mechanism of cash, direct to the beneficiaries. - Attachment of conditionalities easily identifiable by the beneficiary to induce her/him to use. - Multilayer propagation and capacity building programme popularize the programmers' for awareness development - Strong supervisory control at various levels so that the programme becomes a success story. Continuous up-gradation and changes to the initiated one following rapid transformation and changing needs of the beneficiaries.

DESIGNING CCTS

CGAP has a series of country report on G2P,

highlighting how the Latin American countries have

managed their social inclusive programme through

effective CCT. The report by Sarah Rotman and her

team has been initially documented in 2009 and later

published in the form of a PPT

For general viewing in Slide share. I am drawing some

relevant slides and references from the country reports

on Brazil, Mexico, Colombia & South Africa.

How it worked in other countries

We find that during Lula government’s first term,

6.57 million were enrolled out of 197 million population or

barely about 3%.

In the interim 2006-2009 it remained in a plateau at between

10.97 10.94 10.56, and then spurted further to 13 million at

the end of 2011, still below 10% of the overall population.

But the impact and the effectiveness of 3 conducted

programmes, that President Lula’s workers Party continued to

hold on to poor impressively even on to the next incumbent

Dilma Roussef, successor of President Lula.

A brilliant public policy shift, initiating a worldwide trend.

WHY SO? Let us refer to the report by CGAP

We find that during Lula government’s first term,

6.57 million were enrolled out of 197 million population or

barely about 3%.

In the interim 2006-2009 it remained in a plateau at between

10.97 10.94 10.56, and then spurted further to 13 million at

the end of 2011, still below 10% of the overall population.

But the impact and the effectiveness of 3 conducted

programmes, that President Lula’s workers Party continued to

hold on to poor impressively even on to the next incumbent

Dilma Roussef, successor of President Lula.

A brilliant public policy shift, initiating a worldwide trend.

WHY SO? Let us refer to the report by CGAP

Brazil Case Study - 1

Oportunidades which was started

during the 1994 financial crisis enrolled roughly 300,000 people

initially has now covered more than 30 million Mexicans till 2010.

Mexican : Oportunidades

Mexican : Oportunida

Mexican : Oportunidades

Prognosis : From Cash to Plastic & Savings

SOUTH AFRICAN CASE STUDY

Government-to-Person (G2P) Payments

Social Safety Net (SSN) Programs

Employee Payments (wages, pensions)

Social Transfers Noncash Support

Workfare

Unconditional Transfers

Conditional Transfers

Price Subsidies

Fee Waivers

To better off employees

To low-income employees

Food

17

0 m

illio

n

What are G2P payments?

MILLIONS

WHO ALL ARE IN THE FRONT

Towards Electronic Payments Over Time

33

WHO ALL ARE IN THE FRONT

Who Plays what role

URBAN SCENES

Rural Scene

Data Centres

Citizens

TARGET CLIENTS / BENEFICIARIES

Govt

Business Centre

Money

Transactions

People

People Business

Centre

Relevance to India

We have examined some major initiatives across the world except

the P4 G2P programme which has significant CCT progamme inbuilt

into it in Philippines.

In India’s case it is imperative for us to remember that India

happen to be one of the foremost countries in the world which has a

huge subsidy based social inclusion programme totalling close to a

hopping Rs 135000 crore or close to $ 27 billion.

Despite that on individual scale our Human development index has

been pretty poor and perhaps the worst amongst the BRICS nation.

CCT: Relevance to India

- Like PDS intended for the poorer section finds its way into the black market and poorer section suffers. Same applies to subsidized Kerosene, Cooking gas and many other central or state benevolent progammes which as struggling to be effective tool for looking after the poorer section as there as hardly any effective frame work for monitoring the pooling essential data for the beneficiary clients. - During the 1st UPA regime it forged the ideation of NREGS as discussed and UPA tentatively started 100 days guaranteed work in about 100 districts in the country as pilot phase. Despite sketchy initially it later transpired to be a grand success for the UPA.It has extended to other remaining Districts. Cont……

India perspective : continued

- But in the practical discourses or implementation time both identification

as also awarding of jobs, work audit, and finally payment to the

beneficiaries is delayed beyond reasonable limits.

- Due to all these negative aspects India’s policy planners have been

mulling actively using CCT as a tool to minimize all these negative

aspects of the development assistance programme buoyed by the

success story of the NREGS programme.Let us examine in the light

of the current CCT proliferation who CCT can play an upshot to the early

success of MNREGS and beyond, and that it cannot.

- MNREGS can be the mother of all CCTs, if it could be streamlined

effectively as the Think tank is seriously trying. Hence I would not like to

delve deep into its functioning, because MNREGS is bringing gradually a

huge numbers of core competent areas like ICTs & management for

financial services delivery in place. …………………………..Contd..

Conclusion •

In continuation of the big bang reforms push the UPA II is trying to fast track

reform agenda in to parallel tracks while trying to give a direction to the beleaguered

economy . In the social sector the policy is :

1) Target the needy and make sure the Safety net covers reaches them

2) Attack leakages, pilferages and wastage thereby reduce subsidy burden .

But in doing fine balancing act whether it actually does manage to do it or bring

further confusion and burden to the common man will be an acid test of the regime.

• But it is possible to emulate this paradigm shift better than even the LATAM

BRETHREN, despite their early start they have, if MNREGS, UID, eGov, Financial

Inclusion and many other parallel initiatives are harnessed under a Centrally

monitored programme with very stringent evaluation & impact measurement

tools to make it work on the ground.

• CCT part 3 will be the final series culmination in the next Skoch programme

prescribing ho it can be effectively work in India to a better managed inclusive

society.

Santanu Sengupta Director, Corporate Affairs and Finance

ACMFI - African Centre for Mobile Financial Inclusion

santanu@acmfi.org/acmfi2010@gmail.com

Thank You