Optimizing Cash Transfers: 4 Principles to Boost Program Effectiveness

Over the past decade, cash transfers have emerged as an incredibly effective tool to alleviate poverty. However, governments and organizations that implement these programs have limited resources, and cannot reach all of the over 700 million people worldwide experiencing extreme poverty. Behavioral science suggests ways to reach more people with the resources we do have. Optimizing the value for money of these programs - making each dollar go further toward alleviating poverty - can ensure that programs support even more people and make progress in the fight against poverty.?

Traditionally, cash transfer programs have focused on getting cash in the hands of participants. This has meant that programs are often designed to be convenient for implementation - and not for the people who experience them. But focusing solely on delivering cash misses a golden opportunity. Program administrators and donors can stretch their dollars further by accounting for how participants receive, make decisions, and follow through with their plans for how to use their cash.?

That’s where behavioral science comes in.? Behavioral science– the study of how people make decisions and take actions – highlights that the context, or the environment people are experiencing, has an outsized influence on their behaviors. Cash transfer programs inherently create contexts that influence how people save, spend, and invest. That’s true whether or not the program is thoughtful and intentional about it. Ignoring the context can limit the effectiveness of these programs, and thus hinder their reach and impact. An effective cash-transfer program, then, must design for the sometimes unintuitive ways people act.

Through ideas42’s decade of experience working on behavioral science for cash transfer programs, we have identified some of the key program features that have an outsized impact on behaviors, and how to design the context of programs to support their use.?

First, program designers should make cash transfers unconditional.

Recipients are often selected because they are experiencing poverty, which means that they are already living in a context of resource scarcity. The research from behavioral science is clear: living in chronic scarcity saps mental bandwidth and attention, making it difficult to focus on important-but-not-urgent tasks. This burden is exacerbated if program administrators add ‘conditions’ and extra tasks participants have to meet to receive their cash. At best, this can place undue pressure on participants, and at worst, this can mean that the people who are the most resource constrained may lose out on the benefit altogether. Decades of research show that recipients use their money to improve their families lives, and they know how to do so. Designers must provide recipients with trust, dignity, and support in using their resources by making the transfer unconditional.?

Designers can also use positive, future-oriented framing to ensure programs are dignity-enhancing.

The way programs are framed - including what programs are called, and any signal of what they are intended for - creates the context in which the participant experiences the program and uses the resources they receive. Explicitly labeling programs as ‘for people living in poverty’ can unintentionally remind participants that they are experiencing poverty – which may be associated with stereotypes of not being able to save money or invest in their future. Creating an environment where participants are reminded that they are capable of reaching their goals, and priming them to consider all of the ways they can improve their livelihoods with the transfer, is crucial.

While having clear and ambitious but within-reach goals is a key first step, simple planning and budgeting tools can provide support and make it easier for participants to achieve their goals.

A sudden influx of cash requires people to make decisions about how to spend it, and to follow through on their intentions. Budgeting isn’t a trivial challenge for anyone, and it’s exacerbated by contexts of scarcity because so much attention is already spent meeting urgent needs, such as feeding a family. Cash transfer programs should provide tools to meet these demands. Simple scaffolding tools, such as tools that make it easy for people to budget their money between their immediate needs and saving for future investment goals, can break these broad tasks down into more manageable pieces. These kinds of tools have been rigorously tested, and when customized to the context, they can cost-effectively support participants in saving and investing towards their goals.?

Finally, designers should reduce hassles in participation as much as reasonably possible.

Hassles in registration (such as needing formal ID cards or other paperwork) or in actually obtaining their cash (such as having to take a SIM card and other paperwork to a cash-out point) can place additional burdens and drain the attention of recipients who may already be bandwidth constrained. Programs should make participation as easy as possible, so that participants can use their full attention to make important decisions and follow-through with how they wish to spend, save, or invest their money.

Increasingly, cash transfer programs are also often layered with accompanying measures or “cash plus” components, such as training sessions on financial education, nutrition, or parenting. Where such components are included, they should also be designed with human behavior in mind - such as focusing on actionable tips and ensuring they don’t create undue burdens for participants.??

Cash transfers are inherently behavioral. Like all programs, cash transfer programs create the context in which people experience them, and this context affects how people in the program decide how to use it. With a few simple, behaviorally informed programmatic tweaks - including making transfers unconditional, using positive and future-oriented framing, providing easy-to-use budgeting tools, and removing hassles in participation - program designers can ensure that more people not only have the resources they need to survive, but can achieve their goals and create better lives for themselves and their families.

#globaldevelopment #behavioralscience #cashtransfers #socialprotection #socialimpact