Can Social Cash Transfers Reduce Chronic Poverty? A Case Study of the Malawi SCT Program

TABLE OF CONTENTS

Dedication

Acknowledgements

Table of Contents

List of Figures

List of Tables

Acronyms and Abbreviations

Abstract

CHAPTER 1: INTRODUCTION
1.1. Introduction
1.2. Background to Country of Study
1.3. Statement of the Problem
1.4. Purpose of the Study
1.5. Study Design and Methodology
1.6. Justification of the Study
1.7. Limitations of the Study
1.8. Dissertation outline

CHAPTER 2: LITERATURE REVIEW
2.1. Introduction
2.2. Conceptualising Social Cash Transfers
2.3. Conceptualising Chronic Poverty
2.4. Linking Social Cash Transfers and Chronic Poverty
2.5. What Rationale for Social Cash Transfers?
2.6. What is known of Social Cash Transfers so far
2.6.1. Impact on Poverty Gap, Hunger and Illness
2.6.2. Impact on Gender Equality
2.6.3. Impact on Human Capital Development
2.6.4. The Wider Impacts of cash transfers
2.7. Conclusion

CHAPTER 3: THE MALAWI SOCIAL CASH TRANSFERS SCHEME
3.1. Introduction
3.2. Introduction to the Malawi SCTs Scheme
3.3. Targeting Mechanism of the Malawi SCTs Scheme
3.4. Use of SCTs by Beneficiaries
3.5. Are there Synergies in the Scheme?
3.6. Conclusion

CHAPTER 4: DISCUSSION
4.1. Introduction
4.2. Does the Targeting Mechanism of the Malawi SCTs scheme aid in chronic poverty reduction?
4.3. Does the usage of transfer money by beneficiaries support chronic poverty reduction?
4.4. What is the implication of the issue of synergies on chronic poverty reduction in Malawi?
4.5. Conclusion

CHAPTER 5: CONCLUSION AND AREAS FOR FURTHEER RESEARCH
5.1. Conclusion
5.2. Suggested Areas for Further Research

Bibliography

Appendices

LIST OF FIGURES

Figure 1.0: Map of Malawi

Figure 2.0: Household poverty dynamics

Figure 3.1: Graph showing likelihood impacts of SCTs in Mchinji district

Figure 3.2: Graph showing differences in asset acquisition between SCT beneficiary and nonbeneficiary households in Mchinji district

LIST OF TABLES

Table 1: Old Cash transfer sizes in Malawi

Table 2: New cash transfer sizes in Malawi

LIST OF APPENDICES

Appendix 1: KII Questionnaire

Appendix 2: Major SCTs Programmes in Developing Countries

SELECTED ACRONYMS AND ABBREVIATIONS

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DEDICATION

To those working to enable the poor come out of dehumanising chronic poverty.

“Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family,” The Universal Declaration of Human Rights, 1948, cited in Barrientos (2010, p.9)

“Recall the face of the weakest person whom you may have seen and ask yourself if the step you contemplate is going to be of any use to her. Will she gain anything by it? Will it restore her to a control of her own life and destiny?”

Mahatma Gandhi in Künnemann and Leonard (2008, p.4)

ACKNOWLEDGEMENTS

To God be the glory. My heartfelt thanks firstly go to the Commonwealth Scholarship Commission in the United Kingdom for the offer of a prestigious Commonwealth Scholarship that enabled me realize my dream through this MSc. May God bless you and may you continue doing to others - who have the drive but do not have the means - what you have done for me. In the same vein to the University of Reading for co-sponsoring my scholarship.

Secondly to my Supervisor, Associate Professor Eleanor Fisher for her time and critical comments that helped me arrive at this piece. Also to Dr. Alex Arnall, my Programme Director and Personal Tutor, for his academic guidance.

Special thanks to my wife, Myness, and my children Kisa and Tusayigwe. You guys are indispensable in my life! Thanks for your encouragement and for allowing me to be away from you for my studies. I love you.

To my mother Judith, my father late Hartley for the foundations you laid in me. Also to my Aunt Jane Naphiri and my late uncle Rodwell Ndambo for offering me the opportunity to pursue the education path.

To my friends Edknowledge Mandikwaza from Zimbabwe, Lekgatlhanye Kanelo from Botswana, Wendy Tsabedze from Swaziland and Susan Mantchombe from Malawi for the company. You guys were marvelous! Many thanks also to Mr. Yewo Msiska of OPC for providing me with phone numbers of DSWOs.

Abstract

The purpose of this study was to explore the role that social cash transfers play in reducing chronic poverty in developing countries. The study was set up following an upsurge in development policy on the use of social protection measures including cash transfers as effective means for reducing deep poverty levels and curtailing trans-generational transmissions of poverty. The study was in a form of a case, using the Malawi Social Cash Transfers (SCTs) Scheme.

It specifically aimed at exploring the targeting mechanism of the Malawi SCTs scheme, beneficiaries’ use of cash transfers, and on identifying synergies in the scheme. Using a mixed methods approach, the study was mostly based on the review of literature. This was supplemented by key informant interviews conducted by phone. The study found that overall, the Malawi SCTs scheme plays a significant role in moving chronically poor households out of their deprivations. Beneficiaries of the scheme were found to have increased capabilities in accessing food, education and health services and in acquiring assets such as livestock and permanent houses.

However, the study also found that despite its positive impacts, the scheme fails to reach out to all chronically poor households in the country. This was found to be a result of the targeting mechanism followed by the scheme. As such, it was found that the scheme faces a lot of challenges in implementing complimentary services since communities, based on the understanding that everyone is poor, exclude SCT beneficiaries from benefiting from other social protection programmes. Furthermore, it was found that erratic provision of transfers to beneficiary households erodes the positive impacts of the scheme. Therefore the study concluded that although SCTs play a significant role in reducing chronic poverty, better operational designs, such as use of domestic financing and universal targeting measures, would make the schemes more effective.

Word count: 13, 932 (excluding cover page, tables, footnotes, abstract, acknowledgements, dedication, figures, table of contents, bibliography and appendices).

CHAPTER ONE: INTRODUCTION

1.1. Introduction

Social cash transfers (SCTs), as an instrument of social protection, are increasingly moving up the policy agenda in many developing countries as a mechanism for alleviating chronic poverty. Both middle income developing countries (MICs) such as China, Brazil, Mexico, Argentina and South Africa (Willis, 2011), as well as low income developing countries (LICs) such as Nepal, Bangladesh, Pakistan, Namibia, Kenya, Ethiopia, Zambia and Malawi (ibid), to mention just a few, are implementing and expanding SCT programmes to the poorest quintiles of their populations in order to reduce their chronic poverty¹ (Arnold, et al., 2011). The rise up of SCTs in development policy has been buoyed by what Mkandawire (2001, p.4) calls the “rediscovery of poverty” in international development.

The ‘rediscovery of poverty’ emerged in the wake of neoliberal economic policies of structural adjustments in the 1980s and 1990s which led to an increase in poverty levels in developing countries as these countries cut back on social service provision such as health, agriculture and education (Craig and Porter, 2006). In South America, this period is referred to as “the lost decade” (Barrientos, 2010, p. 3). In addition, financial crises, globalisation and climate change are other factors which are said to be increasing poverty and vulnerabilit y levels in developing countries (Devereux, 2006). The ‘rediscovery of poverty’ it is argued, is what culminated into the adoption of the Millennium Development Goals (MDGs) in the year 2000 which shifted the focus of development towards poverty reduction (Künnemann and Leonhard, 2008).

Consequently, social policies, especially social protection, re-emergence as viable tools for alleviating the world’s extreme cases of poverty (Mkandawire, 2001). As put by Barrientos and DeJong (2004, p. 9), “There is emerging consensus around the view that social protection provides the most appropriate framework for addressing rising poverty and vulnerability.” Drawing on social protection theories, it is argued that protecting people from extreme or chronic poverty not only helps to sustain their livelihoods, but also enables them to increase their human capital which empowers them to breakup trans-generational cycles of poverty (Barrientos and DeJong, 2004). It is against this background, therefore, that this dissertation sought to explore the role that SCTs play in reducing chronic poverty, using the case of the Malawi SCTs scheme.

1.2. Background to Country of Study

Malawi is a country of about 14 million people (NSO, 2013, online) located in South Eastern Africa with a total land area of 118,484 km² (NSO, 2011, p. 13). It is bordered by Tanzania to the North and Northeast, Mozambique to the East, South and Southwest, and Zambia to the Northwest (ibid). See Figure 1 below for the map and location of Malawi.

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Figure 1.0: Map of Malawi (Source: Nations Online Project [accessed: 27/05/2013] highlights added)

Key: Districts with the first phase of SCTs programmes which are also the focus of this study

According to the UNDP (2012), Malawi is one of the world’s poorest countries. In the year 2012, the country was ranked 170 out of 186 countries on the UNDP’s Human Development Index, a composite measure of the standard of living in a country comprising of longevity, income and education levels (UNDP, 2012). Furthermore, statistics show that in 2012, 73.9 % of Malawi’s population lived below the international poverty line of US$1.25 per day (UNDP, 2012, online); thus almost three quarters of the country’s population was poor by international standards in 2012! However, this exceptionally high percentage of Malawians living below the international poverty line in 2012 might have been due to the devaluation of the local currency, the Malawi Kwacha on 7th May, 2012 from MK168.00 to 1US$, to MK250.00 to 1US$ representing a 48 % devaluation (RBM, 2012, P.1) which pushed up inflation to close to 40 % (NSO, 2012, online). Nevertheless, the situation is a reflection of the vulnerability of the people of Malawi to poverty as they lack assets that can cushion them from the impacts of economic shocks as well as natural hazards (Devereux, et al., 2006).

Malawi also fairs poorly on all other conventional development indicators. For instance in 2012, the Multidimensional Poverty Headcount for the country was 66.7 % (UNDP, 2012, online), life expectancy was only 54.8 years (ibid), Gross National Product per capita (GNP per capita at 2005 constant) was US$774, and adult literacy levels of 74.8 % (UNDP, 2012, online). All these development indicators for Malawi were below both the Low Human Development Index level and the Sub Saharan Africa averages (UNDP, 2012). Thus, according to Chinsinga (2009), Malawi though has never suffered any war, “grapples with the breadth and depth of poverty seen in few countries not ravaged by war” (ibid, p.1). This therefore makes Malawi an interesting case to study the use of social cash transfer schemes in reducing chronic poverty.

1.3. Statement of the Problem

The eradication of chronic poverty in the world stands out as the first goal in the Millennium Declaration (Sachs, 2005), a framework for garnering concerted efforts from donors and developing county governments to reduce global poverty. While many other regions of the world are making big strides in achieving this goal, the story is different for Sub Saharan Africa where chronic poverty still remains high years after the Millennium Declaration (see Potter, et al, 2012, p. 47). As seen above, one of the Sub Saharan countries where this is particularly true is Malawi.

In 2005, the Government of Malawi through its National Statistical Office (NSO), carried out an integrated household survey (IHS) which found that 52.4 % of Malawians were living below the national poverty line of MK47.00 (about US$0.30 at the time) per day (Chinsinga, 2009, p. 3). Out of the 52.4 %, 22 % were found living on less than MK27.00 or US$0.20 per day and were categorised as ultra or chronically poor (Miller, et al, 2010, p.487-488) (for a discussion on chronic poverty, see Chapter 2, Section 2.3). Of the chronically poor, 10 % (ibid, p. 488) were also found to be labour constrained, meaning that they did not have any able bodied person between the age of 19 and 64 years or had one able bodied person aged between 19 and 64 years but who was caring for three or more dependants such that he or she could not use his or her labour to earn a living (GoM, 2006). The survey also found that despite the high levels of chronic poverty, there was no comprehensive social protection scheme in the country (Miller et al., 2010). The few safety net projects that were there, were found to be ad hoc and lacked coordination and implementation capacity (IPRSE, 2011).

These statistics alarmed the Government of Malawi and as a result, made it to develop a National Social Support Policy whose long term goal is “to increase assets of the poor [in order] to enable them to meaningfully engage in sustainable growth and contribute to poverty reduction” (GoM, 2006, p. 37). Consequently, social protection was placed as a second key theme in the Malawi Government’s overarching development framework, the Malawi Growth and Development Strategy (MGDS) (GoM, 2006). Mechanisms put in place by the Government of Malawi to ensure social protection included provision of subsidised farm inputs especially fertiliser, free provision of antiretroviral drugs (ARVs), school feeding programmes, and social cash transfers targeted at the 10 % ultra or chronically poor and labour constrained househo lds (GoM, 2013). It was against this background, therefore, that this study was developed to gain a deeper understanding on the role that the social cash transfers play in reducing chronic poverty in Malawi.

1.4. Purpose of the Study

The purpose of this study was to assess the role that social cash transfer schemes play in reducing chronic poverty. The specific objectives of the study were:

- to examine the effectiveness of the targeting mechanism of the Malawi social cash transfer scheme
- to assess the use of cash transfers among beneficiaries
- to identify synergies created between the social cash transfer scheme and other poverty reduction strategies

1.5. Study Design and Methodology

This study was in a form of an intrinsic exploratory case study. As explained by Berg (2009), an intrinsic exploratory case study is a study that seeks to better understand characteristics, traits or any other aspects of a case. Using a mixed methods approach, this study was mostly based on a review of the literature on the Malawi social cash transfers scheme. These materials were purposefully selected and included government reports, research findings, text books, journal articles, websites and other relevant materials about social cash transfers in Malawi. This method was chosen considering time and resource constraints on the part of the researcher to go to Malawi and collect primary data.

However, available literature was supplemented by in-depth telephone interviews conducted with District Social Welfare Officers (DSWOs) from five districts of Mchinji, Salima, Machinga, Chitipa, and Phalombe². For location of all these districts, see Figure 1.0 above. These districts were purposefully selected as they were the districts where the SCTs scheme was first rolled out. The scheme started in the district of Mchinji on a pilot basis and later extended to these six other districts. Ethical clearance for the interviews was sought and granted by the University of Reading upon submission of the interview questionnaire³. Further clearance was sought from the Ministry of Gender, Child Development and Community Development (MGCDCD) in Malawi. This was done to show the researcher’s commitment to research ethics.

1.6. Justification of the Study

The use of SCTs as a government policy for poverty reduction is a relatively new approach in many low income countries including Malawi. For instance, in Malawi the scheme is only eight years old (Chinsinga, 2009). Hence there is a lot of academic research interest in this policy area (Arnold, et al., 2011). As such this study was designed in order to contribute to the understanding of the role SCTs play in reducing chronic poverty in developing countries. Therefore, this study will offer useful insights both to academicians and development practitioners regarding the use of SCTs in development policy.

1.7. Limitations of the Study

This study had four main limitations as outlined below:

- The first one was time and financial constraints to enable the researcher to travel to Malawi and carry out primary data collection which could be more reliable and more valid than the secondary data used. Therefore, overreliance on secondary data could have affected the outcomes of this study since as in most cases, validity and reliability of information is problematic in secondary data sources. In addition, failure to conduct field primary data collection made this dissertation fail to comment on the relationship between SCTs and public service delivery in Malawi such as health and education since such issues are best captured through field work research.
- The second limitation was the overreliance on data about the Mchinji district SCT pilot project because most of the available secondary data sources on the Malawi SCT scheme are about the Mchinji district cash transfer pilot project. This also might have affected the outcomes of the study.
- The third limitation was the inability to conduct telephone interviews with beneficiaries of the scheme. This was due to technical difficulties in getting phone numbers of the beneficiaries (assuming that they own phones), and let alone the unreliability of telephone networks in rural areas in Malawi. As a result the telephone interviews were only conducted with government officials in the name of District Social Welfare Officers who might have given biased views about the scheme.
- The fourth one was failure to conduct phone interviews with DSWOs for Mangochi and Likoma districts. This reduced the interview sample size. DSWO for Mangochi was just three weeks old in the position so he declined an interview. While in Likoma the interview did not take place because of phone network problem.

1.8. Dissertation outline

The rest of this dissertation is arranged as follows: Chapter 2 presents a conceptual framework of SCTs and chronic poverty as well as the theoretical linkage between SCTs and chronic poverty. The chapter also presents a review of the literature highlighting major debates and findings on the use of social cash transfers in fighting chronic poverty. Chapter 3 is a case study of the Malawi Social Cash Transfer Scheme in line with the three objectives of this study. Chapter four is a discussion on findings on the Malawi SCTs scheme to gain a deeper understanding on the role of SCTs in reducing chronic poverty. The conclusion and areas for further research of the study are presented in chapter five.

CHAPTER 2: LITERATURE REVIEW

2.1. Introduction

This chapter of the dissertation draws a summary of the debates and findings in the literature on the use of social cash transfers (SCTs) in fighting chronic poverty. The main debates discussed in here are: whether SCTs are an appropriate approach to reducing chronic poverty in developing countries, and whether they should be universal or targeted, conditional or unconditional. While the findings include SCTs impacts on hunger, poverty gap, gender, human capital development, and wider positive externalities on communities. However, before delving into these, the chapter starts by presenting a conceptual framework within which SCTs and chronic poverty are discussed in this dissertation as well as the theorisation behind SCTs as an intervention for reducing chronic poverty.

2.2. Conceptualising Social Cash Transfers

Social cash transfers, also referred to as cash transfers (CTs) or social transfers (STs), are designed and carried out within the concept of social protection (Slater, 2008). As defined by Devereux (2006, p.4), the term social protection refers to “policies and practices that protect and promote the livelihoods and welfare of people suffering from unacceptable levels of poverty and…are vulnerable to risks and shocks.” In other words, it means public as well as private arrangements to ensure that the poverty of the poor does not get deeper and those on the brink of becoming poor do not slide into poverty. Typically, social protection takes three forms as labour market regulation, social insurance, and social assistance (Hall and Midgley, 2004). Labour market regulation is delivered through the workplace by, among others, ensuring minimum wages and job security (Standing, 2011). Social insurance is also provided through the workplace but on a contributory basis between the employer and the employee to protect the employee from falling into poverty as a result of life cycle events such maternity, accidents or sickness (Gentilini, 2009). Social assistance, on the other hand, involves non-contributory payments to the poor in cash or in- kind to ease their poverty (ibid). Therefore, SCTs fall under social assistance and it is within this framework that they are discussed in this dissertation.

SCTs are defined as regular, non-contributory monetary payments given directly to poor people or households in order to empower their capabilities for them to have the freedom to be able to increase their consumption of both publicly and privately provided goods and services (Covarrubias et al, 2012). In this dissertation the term SCTs is discussed strictly in reference to state-run cash transfer programmes as opposed to emergency or ad hoc cash transfers and cash transfers implemented by non-state actors such as Non-Governmental Organisations (NGOs).

It is argued that states provide SCTs in order to achieve one or all of the four goals of social protection (Newsham et al., 2011). These are: to protect the poor from the adverse effects of extreme poverty; to prevent the vulnerable from falling into extreme levels of poverty; to promote the capabilities of the poor for them to be self-reliant; and to empower them for social inclusion (Arnall et al., 2010). Due to this multidimensional ability of SCTs to fight chronic poverty both ex post and ex ante, there is high interest in their use in developing countries where a significant proportion of the population still lives in such kind of poverty (Devereux, et al, 2006). The next section discusses the term chronic poverty as used in this dissertation.

2.3. Conceptualising Chronic Poverty

The term chronic poverty is understood differently within different schools of thought. However, for a better understanding of the term as used by this dissertation, it is important to start by defining the term poverty itself. According to Potter, et al (2012), to most people, the term poverty is synonymous with lack of income or money, a condition mostly referred to as ‘income poverty’. However, to others poverty means more than just lack of income or money. It means being persistently ill, socially excluded, lacking assets, lacking opportunities and choices, lacking political freedom and lacking freedom of expression, amongst others (Devereux et al., 2007).

Poverty can also have local expressions in any given context. For instance, as put by José, an eight year old from Guatemala, cited in Willis (2011, p. 15), poverty could mean “having to wear trousers that are too big.”

This dissertation takes the view that poverty is more than just the absence of material things or money; a view mostly advanced by Amartya Sen in his 1999 influential book, Development as Freedom. According to Sen (ibid), to be poor is to be deprived of the basic capabilities of life. These capabilities relate to the ability to be able to meet basic human needs and wants. Or as put by Sen (1999, p. 4), they relate to the freedom to be able “to satisfy hunger, or to achieve a sufficient nutrition, or to obtain remedies for treatable illnesses, or the opportunity to be adequately clothed, or sheltered, or to enjoy clean water or sanitary facilities” (p. 4). These capabilities can be deprived by a number of factors such as ill-health, unemployment, lack of education, shortage of farm land, climate change, orphan-hood and widowhood amongst others (Sen, 1999). Therefore, according to this perspective, poverty is a condition of multi-dimensional deprivation in someone’s life. Based on this understanding, poverty levels are conceptualised in a time space framework as summarised in Figure 2.0 below.

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Figure 2.0: Household Poverty Dynamics (Source: Jalan and Ravallion, 2000, cited in Arnold et al., 2011, p. 9)

Figure 2 above shows households’ transition into and out of poverty over the course of time. It is seen that there are three aggregate household categories based on poverty levels, namely: the non-poor, the transient poor, and the chronically poor which are the subject of this dissertation. From the figure, it can therefore be understood that the chronically poor are those who live in conditions of extreme deprivation characterised by a high poverty gap. Poverty gap refers to the level by which living conditions have fallen below the poverty line (Arnold et al., 2011). It indicates the severity of poverty (as shown by the zigzagging lines in Figure 2). From the zigzagging lines, it can be seen that poverty is very severe among the chronic poor category where it steeps deeper below the poverty line.

People living in chronic poverty according to the Lipton’s “two 80%s rule” (Ellis, 2012, p. 203) are those who “fall below 80 % of their dietary energy requirements…despite spending 80 % of their income, including self-consumed farm income, on food” (Ellis, 2012, p. 203). Other than food, they also lack basic necessities of life such as soap and clothes, and basic assets such as shelter, hoes, sickles, chicken or goats, among others (Chinsinga, 2009). Lack of these basic necessities and assets constrain the chronically poor from achieving their capabilities and freedoms. As discussed in the next section, it is argued that SCTs can have a significant role in decreasing such kind of poverty (Devereux et al., 2006).

2.4. Linking Social Cash Transfers and Chronic Poverty

The linkage between SCTs and chronic poverty is based on a theoretical understanding that “individuals can be trusted and empowered to make effective use of resources available to them to improve their living standards” (Arnold et al., 2011, p.3). Although poverty is multidimensional, it is argued that improving the level of income of individuals or households plays a crucial role in facilitating their capabilities and freedoms from chronic poverty (Sen, 1999). Therefore, the design of SCTs is based on this theoretical understanding that empowering poor people with a given amount of income will boost their capabilities and freedoms not only to enjoy the basic necessities of life but also to increase their assets and construct their own pathways out of chronic poverty. As argued by Arnold et al., (2011, p. 8) “cash transfers can help…in tackling chronic poverty… by bringing [the chronically poor] close to the poverty line and improving their options for working their way out of poverty.”

Therefore, the purpose of SCTs is not to bring people above the poverty line but to empower their capabilities which they can use to move up the poverty line on their own and progressively move into the transient poor or indeed the non-poor categories over time. However, a review of the literature shows that the use of SCTs in fighting chronic poverty in developing countries is surrounded by a number of debates (see Section 2.1). These debates mostly centre on two main themes, namely: the rationale for providing SCTs, and the appropriate design of SCTs schemes. These are discussed in details in the next section.

2.5. What Rationale for Social Cash Transfers?

The debate on rationale for providing SCTs to poor people in least developed countries such as Malawi is centred around the very high poverty levels in such countries (Farrington and Slater, 2006; Covarrubias et al., 2012). There is a strong and persistent view in the literature that long-term and sustainable reduction in poverty depends on high economic growth (Harvey et al., 2005; Farrington and Slater, 2006). Drawing on savings-led theories of economic growth such as the Harrod-Domar Model, it is argued that high economic growth depends on productive investments in the economy, and that such investment depends on the amount of savings or capital available (Todaro and Smith, 2003). With this view, poverty in developing countries is seen as a function of low economic growth resulting from lack of capital for investment (Kambhampati, 2004).

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¹ For a list of countries with SCTs, see appendix 2

² Interviews for Likoma and Mangochi districts did not take place. In Likoma it was due to phone network problems while in Mangochi the DSWO was just three weeks old on the job, so he declined an interview

³ See appendices 1 and 2 for ethical clearance and interview guide respectively