Are cash transfers better
chunky or smooth? Evidence from Nigeria
By Gautam Gustav Bastian
co-authors: Sreelakshmi Papineni
Fri, 09/01/2017
Imagine this: You open your mail and it says that you are owed $1,200 from
overpaid taxes! After recovering from your elation, you read on. The letter
requests you to choose if you would like to be paid over the next year in
increments of $100 every month or $300 every three months?
How would
you decide? Would you spend rather than save the money if you got it every
month? Would you splurge it on luxuries or be forced to share with your family
and friends if you got a bigger chunk every quarter? Would you feel happier or
more stressed out about your life and finances depending on the frequency of
the payments?
We set
out to ask a similar set of questions about some of the poorest households in
northern Nigeria. Would cash transfers received quarterly or monthly change
important outcomes like household consumption, savings, investment, food
security, or happiness? Here is a brief take on how we went about answering
these questions and what we’ve found so far.
Monthly
or quarterly cash transfers: which works better for the poorest of the poor?
Working
with the United States Agency International Development (USAID) and Catholic
Relief Services, we organized a rigorous research study by varying the sum and
frequency of unconditional cash transfers to 1,200 women from ultra-poor
households. A public lottery was used to select women to receive about $700 in
15 monthly installments or five quarterly installments. The selected households
came from rural farming communities and most women in the study were primarily
engaged in household work or childcare.
The cash
transfers were handed over to the women at a public space in their home
villages so the timing and amount of the cash transfers were visible to family
members as well as the wider community. We were curious about how the women
getting the cash transfers would share the money with other members of their
household, especially since the cultural custom in the region would anticipate
that she hands over all the cash to her husband. A larger less frequent payment
could attract more attention.
The study
found that receiving chunkier, less-frequent transfers made no substantial
difference in the proportion of the cash the female held on to and in the
overall positive impact on the household’s living conditions. This means that
chunkier transfers can lower the overall cost of delivering cash, possibly
freeing up resources to increase the number of beneficiaries and widen the
impact of such programs.
Cash
transfers work!
Cash
transfers to extremely poor households in northwest Nigeria have an immediate
and overall positive impact on many dimensions of household welfare. Women are
more likely to work, the whole household eats more food (more regularly) and
eats a more diverse diet. The cash recipient’s households save more, but also
spend more on their children’s clothing and healthcare. Finally, they also
invest more in assets, especially small animals.
The
bottom line is that no matter how often they received the transfers, the women
who received them and their households were better-off on numerous measurable
dimensions.
Digging a
little deeper into one of the more interesting effects, we find that roughly
one fourth of the women who were not engaged in an economic activity before
getting the cash transfer, switched over to being economically active. Most of
these women start a small, often home-based, non-farm business like a small
store, cake-making or rice processing as a result of getting the cash transfer.
Women
getting the cash transfers are also happier and more satisfied with their
lives. They spend more on festivals and celebrations, bolstering their position
in the community and gaining important social capital.
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