24090 Social FUnds Innovation Update Volume 2 No. 2 February 2002 Nicaragua Social Investment Fund Conditional Cash Transfer, a New Avenue for Social Funds? by Andrea Vlermehren, Social Protection Specialist, (ICSIHIS) Nicaragua is the second-poorest country in the Latin rise in utilization rates among children vith diarrhca, America and Caribbean Region, with a per capita impacts from health facility investments were not income of US$430 (1999) per year. The Nicaragua detected, perhaps due to low levels of staffing and Social Investment Fund (FISE) vas created in the medicines found in both FISE-financed health posts early 1990s to help rebuild the social and economic and regular Ministry of Health posts. infrastructure after a decade of civil war, and quicklv developed into the Govemment's main povertv alleviation instrument. Today, FISE can point to an impressive record: it has financed more than 8,500 gr projects in 10 years with 60 percent of these projects benefiting the education sector. More recently, FISE has reinforced mural wvater and municipal |iAA R infrastructure projects. FISE also strengthened its engagement in local capacity building at the municipal and comrmunity level. When l-Turricane Mitch hit Central America in 1998, FISE vas the principal institution mobilized to address the emergency, through opening roads and providing shelter and emergency equipment to satisfy the immediate needs of the affected population. Seeking inclusion for the most vulnerable Children in extreme poverty Box 1: FISE at a glance 1992001 Number of projects: 8.500 In the late 90s, it became clear that there were limits to the effectiveness of supply side interventions. On Investment volume US$ 280 million one hand, the countr wvas approaching the limits of No. of projects by sector: its absorption and operational capacity for social * education 5.500 infrastructure. On the other hand, beneficiarv . hcalth 1.800 asscssments and the 2000 impact evaluation cited * social assistance 180 above provided evidence that part of the poorest * water/sanitation 210 population was still not benefiting frotn FISE- * municipal services 780 financed infrastructure investments simply because thev were not using the investments. In particular, No. of etrojem by2pover700category children living in extreme poverty often do not * extreme 2.700 attend school regularly or visit health facilities * high 3.500 because of high transaction and opportunity costs. * medium 2.275 After 10 years of providing solely supply side investments, FISE management and the An impact evaluation carried out in 2000 showed Government of Nicaragua began thinking about FISE's impressive results: projects were generally strengthening the demand side through new ways of well targeted to the poor and education investments improving access to social services and creating an had a positive, measurable impact on school opportunity for inclusion for the most vulnerable, enrollment (raising enrollment rates by up to 10 particularly young children living in precarious percentage points), especially among the poor. conditions in rural areas. Water investments resulted in improved access and health among the general population, and sanitation investments in improved access. However, bevond a Conditional Cash Transfer (CCT) Programe- children aged (-4 (health grants) and on continuous How do they work? school attendance for primarv school chddren aged 6-13 in grades 1 to 4 (education grants). At the same In 1999, with support from the Inter-American time, the program ensures adequate supply side Development Bank, FISE created a new windoxw to provision through contracting of private health finance Conditional Cash Transfers along the lines service providers. In coordination wvith the M\linistry of the successful PROGRESA (Programa de of I-lealth, standards were set up for contracting Educaci6n, Salud y Alimentaci6n) program of private health care providers for gcographic areas Mexico. The new "Social Safetv Net" program (Red that presently are not covered bv the Iel-alth de Protecci6n Social) provides cash to extremely Ministry's facilities. poor families in selected rural areas. The program has tw,o major objectives: to provide temporal - povcrty alleviation to the poorest families (short - term); and prevent irreversible effects in human capital development of childrcn (long term). The specific goals of the Social Safety Net program are - , to: (i) increase the rate of school enrollment and _ attendancc for poor children grades 1-4, (ii) improve care for children age 0-4 (nutrition, hygiene, health, i ' * earlv childhood dcvelopment), and (iii) supplcment t the income of families living in extreme poverty to - improve nutrition. During the two-year pilot phase, the program benefited more than 60,000 people in 10,000 households. Among these households, 79.5 percent are poor and 44 percent are cxtremcly poor. The avcragc grant amount per family is US$27 per month for families receiving both education and Box 2: Social and Poverty Indicators in Nicaragua health grants, regardless of familv size. This 'lump (1999) sum" approach was chosen to simplify procedures and to be a disincentive to having larger familics. * 47.9 percent of population is below the poverty I'he grants are paid on a bimonthly basis exclusively line to mothers or their substitutes - program results * 17.3 percent of population is below the extreme showcd that 40 percent of the "children's poverty line (defined as: "consumption of calories caretakers" are not actuallv their mothers. below the minimum required to sustain a healthy life") * Number of families in extreme poverty: 100,000, Box 3: Conditions required for transfers 76 percent rural * Average family size extreme poor: 7.7 * No more than 5 days of absenteeism per school * Average school years of extreme poor: 2 years semester * Illiteracy among extreme poor: 40 percent * Monthly/bimonthly visits to health centers, * Child malnutrition among the extreme poor: depending on a child's age 39.5% * A child's progress in weight gain * Mothers' participation in bimonthly seminars on The Conditional Cash Transfer Program nutrition, hygiene, early childhood development and other subjects * US$ 30 million (IDB credit), US$ 5 million IDA credit Attendance is verified by teachers and health * Number of families using the program personnel. * Selection criteria: how do you determine "the extreme poor"? \Vhile the education grant is conditioned onlv on * Number of NGOs/service providers contracted; regular school attendance, the health grants are who is eligible conditioned on weight gain of the children aged 0-4, * How families find out: how the program is accompanied by intensive growth monitoring and advertised to eligible families hygiene and nutrition training for the mothers. And the program is strict in enforcing compliance xvith The innovative element in this kind of social conditions: if just one child of a family fails to attend assistance is an incentive that conditions payments school as requircd, the education grant is suspended. on monthly/bimonthly visits to health services for If one child does not gain weight as would be healthv during two payment cycles, the health grant prevalence of underweight children, achieving is suspended unless the family presents a health universal primary education, and reducing the certificate issued by a local health facility, proportion of people who suffer from hunger? One of the first questions is -whether a poor country like Nicaragua can afford such a conditional cash transfer program. In order to reach all households in cxtreme poverty, approximately US$ 60t million would be necessary per year; this would be about a third of all social safety net spending in Nicaragua. The Bank supported the Government of Nicaragua in 2001 in carrying out a review of the major povert) I' - p4 reduction programs as identified in the Poverty 5 e t ^ Reduction Strategy Program (PRSP) of the Government. 'The review revealed that many of the programs analyzed lacked a clear target group or Stunning Results on the Ground poverty focus, and most had no evidence of outcomes or impact. In a collaborative process, the 'T'his demanding approach seems to work. T'he Government of Nicaragua is now starting to NicaraguLan Safety Net Program has remarkable prioritize programs and investments in the social compliance rates. About 95 percent of beneficiaries sector to achieve greater impact. It is expected that complv regularly with all conditions, which is much at the end of this process, decisions xvill be taken as higher than the compliance rate of similar programs to the reallocation of funds. in Colombia or Mexico. A related, and perhaps the even more important A recent impact evaluation of the Nicaraguan question is whether a program is "cost-effective" program carried out bv the International Food and particularly more cost-effective than other Program Research Institute (TIFPRD shows further programs in reaching the goals of diminishing child impressivc results. During its two-year pilot phase, malnutrition, increasing school attendancc, etc. This the Social Safety Net program achieved school is of course difficult to assess and to date such a enrollment rates for children in grades 1-4 of 94 comparative analysis has not been done, but the percent as compared to 75 percent in the control Government of Nicaragua is considering this group. In fact, 95 percent of the children remained approach. in school throughoult the year despite an emerging coffec crisis. The impact on babies' and small Another question that arises immediately with regard children's health is even more striking. \While at the to the Social Safety Net program is that of start of the program 43 percent of the children aged sustainability. While Social Investment Funds create 0-2 wvere at risk in terms of weight and growth, one socal and economic infrastructure that are expected year later this figure went down to 28 percent. The to last for 15-20 years and are often accompanied by number of malnourished children participating in the local development processes, what long-lasting program (23 percent) was cut in half within less than effects can be expected from handing out cash? A a year. Also, 80 percent of the children aged (C3 few have already been mentioned, such as the fact have completed immunization record as compared that increasing the ycars of schooling of the children to 66 percent in the control group. Spending on increases their human capital. Similarly, the long food items amounted to 70 percent in program term positive and cost-effectve human development families while the control group families spent only effects of a healthy and caring early childhood are 66 percent of their income on food. well documentcd and intemationally acknowledged. Another expected result concerns behavioral Remaining Questions: Affordability and changes of the families with regard to nutrition, Sustainability of CCTs hygiene and earlv stimulation as well as regular school attendance. It is hoped that these changes in These results are remarkable, particularly after only a behavior will remain engrained and even be passed two-Nycar intervention. If these outcomes continue, on over genrations. At hiis point, we have no might Conditional Cash Transfer Programs be the evidence that this occurs. 1-notever, it seems that key to achieving an important part of the Millennium the longer the program intervenes, the higher the Development Goals of reducing child mortality and chances arc for profound behavioral change, especially if the conditions of a CIT program emphasize training and capacity building for mothers - an investment shown to be effective, if done wcll. For task team leaders thinking of designing similar CCT components or programs, here are some lessons to consider: 1. Analyze whether the bottleneck in the social sectors of a particular country is a demand or a supply side problem. Is it the supply of infrastructure, the supply of social services, or the inability of the poorest/vulnerable to benefit from the social ser-vices and infrastructure? 2. Coordinate closely wvith health and education ministnrcs and local Is a Social Fund the Right Mechanism for representatives from the outset to ensure Supporting Conditional Cash Transfers? optimal links with the supply sidc. A CCf interventon cannot be an isolated program, In I-londuras, Nicaragua and Turkey, the Social but must build on local social services and lFunds w,ere the first institutions to initiate a CC'I capacity. program. Their motivation was to strengthen the demand sidc of social services so that the poorest 3. Poverty targeting is essential for the xwould benefit equally from schools and health effectiveness of CCTs. Make sure that the services. The institutional set up of Social Funds implementing agency is on top of the latest clearly provides some benefits for managing CC'TI thinking and knowledge on targeting. programs, namely their povert focus, administrative indepcndence, management capacity, operational 4. Start with a pilot program that is big expertise (procurement, financial management, ctc.), enough to mcasure outcomes \,et small and their experience with donors have definitely cnough to be adjusted. Although the CCI' contributed to their success in setting up CCTs. concept is quitc straightfonvard, the H-Io\vever, in other countries different choices have programs havc proven to be rather complex bcen made. In Jamaica, for example, the in their design. Government analyzed its existing social safety nct and found several transfer programs already in place. 5. Design conditions and verification of Instead of creating a nexw one, a decision was made conditions carefullv. Each countrv has its to reform the existing transfer programs, own "break even point" of benefits and consolidating three of them into one Unified Bencfit conditions. The design of conditions Program and link all benefits (to children aged 0-17, depends heavil on the quality and reliability people with disabilitics, pregnant wvomen, the clderl, of the supplv provided bv the health and and destitutc peoplc) to certain conditions. This education sectors. shows that the institutional arrangements for CC'l's depend entirely on the countir's context. IFor more information on the Nicaragua Social Investment Fund, please contact Andrea Vermchren (avermehren@worldbank.org) at the World Bank's IHIeadquarters office. T H E kV 0 R t D B A N# K "Social Funds Inniovation Updates" are published informaDly by the Socral Funds thematic grup of the I-luman Delvelopment Network - Social Protection For additional copies, contact the Social Protection Advisory Service, 'Ihe World 13ank, 1818 I-i Street, NW, W\ashington, DC 20433. USA, Fax: (202) 614- 0471, E-mail: socialprotection@iCorldbanik.org. 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