Conditional Transfer Options for Nigeria

Conditional transfers (CT) are programs that require a particular behavior – usually related to health or education – as a condition for receiving a cash or in-kind transfer. As such, they aim to both increase equity as well as to promote human capital investments. This linkage is the essential characteristic of the programs. They may, in some contexts, be among the most effective programs for increasing service utilization. However, even when there are other effective health or education investments available, CT may be justified in that they are seen as adding an investment dimension to transfer program, that, in general, would otherwise be primarily a means of increasing consumption by the poor. That is, once a government has opted for a transfer program there is value added if that program can be made conditional. As such, CT add a long term investment dimension to short term assistance.

This note is the output of a short exploratory mission to Nigeria on cushioning the impact of economic reform - conditional cash transfer, between Nov 5-12, 2004. The Mission members discussed with key government and donor agencies officials and World Bank Country office Staff in the human development and rural development unit also participated in the discussions. The note is in two major parts. Section 1 is devoted to general features of Conditional Transfer Programs while the second examined CT possibilities in Nigeria with some literature on such initiatives across the globe.

GENERAL FEATURES OF CONDITIONAL TRANSFERS

Once a decision is made on what behaviors to encourage with a CT, there are five further steps common to conditional transfer programs whether they are conditional on participating in a range of health seeking behaviors or on educational activities. These are:

Targeting. Most existing conditional transfer programs separate the targeting mechanism from the service delivery, usually by conducting an application process that screens eligibility on the basis of proxies of poverty. The costs of establishing an effective proxy means test often are a sizable share of start up costs, although the longer a program is in place or the wider the range of programs that use the same proxy means screening, the less this cost is as a share of the total. Other screening criteria for eligibility that can be combined with proxy means testing or used in lieu of it, include gender and age based targeting, targeting on orphan status (as is currently being piloted in Burkina Faso), geographic targeting, and community based targeting.

The latter has the potential advantage of utilizing local knowledge. Design features that enhance the reliability of community targeting include establishing a fixed local budget constraint (to reduce the incentive to exaggerate local need in order to capture more transfers from the center), communication of program guidelines, and requiring transparency and public listing of selections. In some communities where providing benefits to a subset of individuals is strongly in conflict with local norms, community targeting may not be appropriate.

Supply considerations . If a transfer is conditional on utilizing a service that is not locally available, the conditionality inadvertently excludes a portion of the population that may very well be among the poorest. Beyond this consideration, the supply of services naturally influences the effectiveness of a conditional transfer since there is little or no value to encouraging utilization of a service that is of low quality. Moreover, some CT programs have been undermined by their own success; increased utilization of schools or clinics may cause overcrowding and a decline in the average quality. Thus, while new users gain, previous participants lose some value of the service. Some of the more successful CT programs globally have included additional funds to augment the supply of services. Others have tied transfers to private sector providers which, presumably, respond to changes in demand.

Monitoring Compliance. When a CT program is linked to school enrolment or attendance, the school attendance registers generally serve as the main means of determining if the child has qualified for the transfer. While keeping attendance is generally part of the school’s normal routine, it is advisable to undertake spot checks since not all teachers may undertake this task with diligence. Attendance at health facilities is, similarly, often recorded in a clinic’s register and, in addition, on health cards kept by the patient. A health focused CT program might, however, need to give additional attention to the quality of either means of record keeping.

A few CT programs require families with both school age and younger children to both send their child to school and to participate in health programs for children to qualify for assistance (and one, the CT program in Mexico, includes the additional requirement of adult preventative health screening). While such overlap allows a single means testing procedure and benefit distribution system to cover more than one human development objective, it also requires linking of separate data sets. This task is easier if individuals have unique tracking numbers (linking by name is often complicated by variant spellings). An additional issue with programs that have joint objectives is the need for a rule on eligibility for benefits if a household fulfils one or more condition but is not in compliance with all of them. This is a different issue than any decision rule on the amount of payment to provide to households with more than one individual qualifying for the CT. Often in such cases, benefits increase with the number of qualifying children (though not necessarily in direct proportion) with an upper limit cap.

Method of Payment. The best known CT programs have provided cash to beneficiaries. In some programs special Bank accounts have been set up for recipients. Access to a banking system for this is more likely in middle income countries although Bangladesh has also been able to utilize the rural banking network for its school stipends.

Not all conditional transfers are in cash, however. School meal programs are clearly an in-kind transfer and inherently conditional since school attendance (at least at meal time) is necessary to participate. Moreover, there are a number of programs which periodically provide take home food rations conditional on a minimum days of school attendance.

A third means of conditional payments is through vouchers (including the food stamps such as the program which has been running in the United States for more than 30 years). Vouchers have features of both cash and in-kind transfers since they allow some market choice yet they encourage expenditures on a set of purchases deemed to be particularly important for health or education. Moreover, the provision of vouchers may free a program from the logistics requirements of moving commodities or cash and at the same time encourage private market development. Vouchers may also assist in monitoring but have a particular drawback in that it is necessary to establish a redemption system that both beneficiaries and merchants trust. This entails start up costs that are spread over the duration of a program. It is increasingly common for voucher programs to use ‘smart card’ technology. Mexico was one of the first countries to use this approach on scale, using technology manufactured in South Africa.

Monitoring and Evaluation. It is readily apparent that any transfer program requires that appreciable attention be given to monitoring to prevent abuse. Moreover, a monitoring system reduces the leakage from target groups to a wider population. These are essential features of any transfer program; in addition CT programs benefit from monitoring the supply of services on which transfers are conditioned. This service monitoring both improves program compliance as well as provides feedback useful to ensure that the heath and education sectors adapt to meet the increase demand for their services.

Evaluation serves an additional function. Despite increased global experience with CT programs, any general lessons they provide need to be tempered with the fact that impacts on objectives have been quite variable. In part, this is due to the fact that the success of demand side interventions are inevitably linked with the quality of service delivery.

Mexico’s Progresa program, likely the most visible conditional transfer program, is noteworthy for the extensive baseline evaluation of its pilot phase. By undertaking an extensive quantitative study of targeting efficiency and of the impact of the program on education and health, the government was able to simultaneously document its success (thereby ensuring survival following a change of the ruling party) and find means to improve the cost effectiveness of the program. Similarly, pilot phases of programs in Colombia and Turkey led to major redesign for scaling up. One feature of most evaluations is that they generally include participatory beneficiary assessments in addition to quantitative surveys.

CT POSSIBILITIES FOR NIGERIA

The remainder of this note lists possible CT approaches for Nigeria under three broad categories – those linked to schooling, those linked to health services and those linked to micro-enterprises. In all cases these options acknowledge that there are few, if any, basic services in Nigeria with excess capacity. Thus, any CT that stimulates demand must be matched with investments and reforms that improve basic service delivery. Moreover, CT programs must take into account that the ability to deliver cash in Nigeria is hampered by the limited access to banks for many potential beneficiaries.

The overall governing structure of Nigeria leads to two other related underlying principles for the set of possible CT programs. First, local governments as well as community schooling committees have taken an increasing role in the management of services in their jurisdictions. This has been encouraged through a range of World Bank assisted and donor programs including Self-help and UBE education programs as well as through social funds (Community-based Poverty Reduction Project). This community level decentralization can prove an asset in CT programs as well, both in beneficiary selection and in service delivery. Thus, community participation needs to be tapped wherever feasible. Second, the wide range of capacities and needs in different zones implies that design features must vary considerably across states. Moreover, as it is likely that states will differ appreciably in their interest in managing (and co-funding) any CT program that is partially supported by the federal government, a piloting phase will have the opportunity both to work out details in self-selected states and, at the same time, serve to demonstrate to more reluctant states what CT programs are practically feasible

CT Opportunities in Education . One form of transfer to enhance school enrolment is based on the concept of school bursaries. In a number of countries (for example, Mozambique, Swaziland, and Zimbabwe) school committees have been given the direct responsibility to manage funds earmarked for assisting low income families that may otherwise not be able to enroll their children and dependents. The use of school committees is a form of community based targeting in the sense that it relies on local knowledge to determine the most needy families. However, it is possible (indeed, advisable) for the FGN and participating states to provide clear guidelines as to the characteristics of the targeted beneficiaries. In Southern Africa orphans are one such group, but there is no need to restrict a program to this group. In countries that have tried bursaries, funds are mainly provided to meet the school fees of beneficiaries, thus allowing transfers directly to the bank accounts of schools. While there are no direct tuition charges in Nigeria, the 2003 DHS reveals that families often claim that direct schooling cost such as books and uniforms contribute to school drop out, as do indirect opportunity costs. Many schools already make efforts to accommodate the needs of some of these students, but as schools are usually not compensated with additional resources such assistance reduces funds the school have for other needs. Thus, schools have a disincentive to admit hardship cases.

In some areas grants are currently provided to schools for maintenance and other tasks. Thus, adding a demand stimulus role can be more or less a broadening of the permitted use of such grants. It is possible to make grants on a per capita basis (or per girl student basis) or even include more progressive incentives to increase enrolment, but such performance based funding also requires a corresponding more detailed monitoring system. Such grants can be used to selectively defray uniform and other costs (ideally with targeting and transparent selection criteria and posting of beneficiaries – if this does not impose counterproductive stigma).

Committees could possibly be allowed to use such grants to fund school meals. A detailed discussion of design features for school meal programs is somewhat outside of this note. However, it should be remarked that globally such programs have regularly been shown to increase enrollment (with far less evidence on direct nutritional impact). School feeding programs, however, are frequently unsustainable, especially when quality standards are set at a level such that expensive ingredients, often imported, are necessary to meet the objectives. Disruption to teaching can be minimized if the provision of meals or snacks is contracted to private vendors (as has been done, for example, in Chile and Bangladesh). It is recognized that a multisectoral committee exist under the coordination of the Federal Ministry of Education that is currently looking into the design of school feeding programme.

A variation of food for education transfers that also enhances enrollments is the provision of take home rations to students who meet a minimum attendance or academic performance criterion. Clearly, these take home rations differ from conditional cash transfers mainly in the form of benefits provided (and, thus, in terms of logistics and monitoring systems). They differ from school feeding both in the management and coordination requirements and in the possibility to target benefits to a subset of students (meals should not be targeted within a school, though any fees for the meals might be on a sliding scale). For example, Bangladesh provided wheat rations targeted to poor primary school students, and a number of African and Asian countries have provided tins of cooking oil to female students, with World Food Program (WFP) assistance.

CT Opportunities in Health Services. Nigeria has one of the lowest rates of child immunization in the world. While, undoubtedly, there are many factors that contribute to this, the current record implies that a program the focuses on increasing household demand for vaccinations is unlikely to make much headway without substantial efforts at improving distribution channels. One element of such a strategy – improving household and clinic records – would also serve to assist monitoring compliance with any CT program conditioned on a household obtaining basic child health services. One other crucial supply side issue is the management of the cold chain

One way to provide inoculations where clinics are unavailable or with an irregular supply of vaccines and drugs is to organize child health fairs or child health weeks. This concept has been tried in a few states in Nigeria as well as in other African countries. It differs from the vertical NIC campaign in that such services can be designed as an integral component of a community based health service delivery system. In Uganda – where child health days were organized by NGOs and CBOs contracted for this task – a number of services (deworming medicine, vitamin A distribution, growth monitoring, demonstration of the preparation of weaning foods etc.) were provided along with vaccination for any child who had fallen behind the recommended schedule. The more services that are available – and the more entertaining the communication programs – the higher the likely turnout. An alternative to this concept is to have door-to-door service delivery on designated days. Some States in the Federation are also doing this under a rural medical care scheme. This is less likely to miss children but reduces the possibility to organize health education programs. Another variation of this approach is to include nutritional screening at health days. Under this screening children with low weight for height or under more complicated surveillance, who have failed to gain weight between weighings - are provided a small amount of supplementary food. There are occasional anecdotes that parents deliberately keep one child thin to gain access to such supplements, but there is no reliable evidence that this occurs on any scale to pose a risk.

Conditional transfers can also be linked to maternal health services. For example, transfers can be conditional on one or more visits to antenatal programs that offer tetanus vaccines, iron and folate supplementation, and nutritional counseling as well as basic screening for eclampsia and other pregnancy complications. While such a program can be means tested, given that pregnancy is an identifiable criterion and the transfer is not likely to be large enough to influence fertility decisions (and this could be countered by birth spacing messages being provided within the program) the potential for abuse is limited.

Such a programs would still need to consider how the transfer is delivered. One manner, currently being piloted in Indonesia, is to provide vouchers when the woman visits the antenatal clinic. The vouchers can be used to pay for the costs of delivery (with both public and private providers, including traditional birth attendants who have received a training package). Alternatively, or additionally, the vouchers can be used as payment for insecticide treated bed nets. If this option is chosen, the antenatal clinic can be encouraged to participate in social marketing and explaining the role that bed nets have in protecting the health of the unborn child. It is anticipated that private merchants will respond to the increased marketing possibilities that such a voucher program will provide.

Conditional Micro-Finance. Micro-Finance (MF) programs have been used in a variety of settings to improve access to credit for low income individuals. Generally, interest rates are set at, or close to, market rates with subsidies, if any, made to the provider of the loans to reduce transactions costs. In addition to locally appropriate mechanisms to reduce the hazard of loan default (both due to hardship and out of a misunderstanding of the nature of the objectives of the often externally funded program), MF programs often include stipulations to enhance the financial management capacities of its participants. For example, programs may require that beneficiaries set up savings accounts or purchase a minimum amount of insurance. Credit providers may make attending training sessions on financial management a precondition for loan access. It is not, then, a major departure from commonly employed procedures to add a requirement that beneficiaries attend one or more sessions on child health and nutrition or on maternal health. From the standpoint of program design, adding this feature to any existing or planned NGO or CBO provided MF services basically implies that designated health trainers be added to field staff. Some NGOs working within Africa have had successes utilizing such an approach (for example, Freedom from Hunger’s programs in Ghana and Mali).

While many MF programs have been able to target services to individuals who are poorer than the average, they rarely are able to reach the very poorest strata. This is in part because a sustainable MF program must still screen for creditworthy candidates, even if they are flexible on collateral requirements. Poorly educated or labor poor households often do not qualify. While it is not necessary that every community development project target the same households, merging health education goals to the core MF objectives need to take precautions not to undermine the latter. There is currently a huge demand for microcredit and a proposal by the FGN to respond to this. Linking a human development goal as a condition to eligibility for such a support is a clear justification for public sector support (subsidies).