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Success of cash transfers to the vulnerable depends on accountability

Wednesday October 08 2014
By KWAME OWINO

In the last decade, countries in Central and South America made enormous strides in providing state assistance to the most vulnerable sections of their population through social welfare spending.

Mexico and Brazil pioneered this development by designing systems to support the poor households that ensured their children are enrolled and kept in school. Parents were also encouraged to ensure their children were vaccinated.

READ: Sh12bn for the poor released

Budget figures presented before Parliament in June this year show that use of dedicated funds to attack poverty and deprivation is becoming a constant feature of public spending.

For instance, the executive proposal to Parliament proposed expenditures of up to Sh16 billion for a variety of social programmes.

This amount accounts for about one per cent of all spending for the financial year that began on July 1, 2014. The highest spending would be Sh5.35 billion for older citizens, with Sh7.32 billion for orphans and vulnerable children.

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INCENTIVES THAT UNDERMINE

The rationale for dedicated spending to cushion these families from the adverse effects of poverty is understandable. However, given the rapid rise in these expenditures and their increasing popularity, it is essential for Kenyans to review the design and performance of these allocations.

Recent press reports support the view that the aggressive expansion of social welfare spending may be driven by incentives that undermine their expected effectiveness.

So far, this system of spending is very poorly supervised. It has been established that Kenyans who are placed on the lists for support face extortion, not only by officials of the provincial administration but also other public sector workers, who threaten to purge recipients from future lists unless they relinquish a portion of their money in bribes.

What this shows is that even a programme that has been highly effective in the countries mentioned above will be rendered ineffective unless corruption in the public sector generally and in the Executive specifically is tackled.

ENSURING SCHOOL ATTENDANCE

A dispassionate look at Brazil’s Bolsa Familia programme reveals stark differences with the model adopted in Kenya.

Of importance is that the implementers of the direct cash transfers in Brazil and Mexico made the transfers conditional upon recipient families accomplishing certain tasks related to the programme. 

For instance, there was the requirement that these families ensure prompt school attendance by all their children of school-going age. Development economists attribute the effectiveness of this programme to the requirement for recipients to meet very high targets.

Available information regarding the support provided under social welfare funds in Kenya neither shows that recipient families are expected to meet specific conditions, nor that these  conditions are monitored and used to determine payments.

EXPANDING WITHOUT DISCLOSURE

Taking note of the fact that inequality of incomes and wealth are substantial and that cash transfers are popular social policy, it is important to ensure that the programmes are audited and subjected to evaluation on their effectiveness.

In order to ensure that taxpayers continue to support this social policy, the stated goals and results of its implementation should be released regularly to the public.

What exists today is knowledge that the programme is being expanded to cover many more households, without disclosures about the effectiveness of the public money that has been spent so far.

As expected, administrators of the programme will argue that it would be unfair to make public the beneficiaries of these transfers, including the Orphans and Vulnerable Children Cash Transfer and the Old Persons Cash Transfer Programme.

DISCLOSE PROGRESS

That argument cannot be reasonably used to continue with limited disclosure because these two account for Sh12.6 billion and is equivalent to 60 per cent of public spending on primary education in the same year. 

The scale of that spending alone makes it imperative to disclose any conditions laid for the recipients, their location by county, other socioeconomic data and the progress that is made with regular payments.

The final point is a delicate one that requires a broader public debate and the publication of policy guiding social spending in Kenya. As a low-income country, the demands on taxes will continue to rise, but the prospects for raising revenue in tandem are less clear.

Kenya has a very thin tax base built on working people with regular jobs and pay adequate for taxation. The degree to which this small cadre can be taxed to support sensible spending on social policy is diminishing, creating a growing necessity to guard public funds closely.

Kwame Owino is the chief executive officer of the Institute of Economic Affairs (IEA-Kenya), a public policy think tank based in Nairobi. Twitter: @IEAKwame

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