Latin American and Caribbean governments are adopting conditional cash transfer programs to break the cycle of poverty. The programs provide cash to poor families on the condition that they make verifiable investments in human capital, such as regular school attendance or the use of basic health care services. The impact of cash transfers on poverty goes beyond the increased incomes for poor households provided by straight transfer policies. The programs also relieve credit constraints and encourage the accumulation of human capital that raises household incomes and promotes long-term income growth throughout the economy.

The Bank has supported conditional cash transfer programs since the late 1990s in Brazil, Colombia, the Dominican Republic, Ecuador, El Salvador, Jamaica, and Nicaragua (the last, a pilot project). In 2005, the Bank approved financing for El Salvador’s innovative Red Solidaria a la Familia (Family Solidarity Network), which will benefit disadvantaged families living in the 100 poorest municipalities. The Bank also supported expansion of Colombia’s Familias en Acción (Families in Action) from 340,000 to 400,000 families by including extremely poor families in marginalized urban areas and zones affected by violence.

Impact evaluations confirm these programs’ success in reaching the poor and improving consumption, education, and health, especially in middle- and upper-middle-income countries where high inequality dampens the poverty reduction effects of economic growth. In Colombia, for example, beneficiaries increased average consumption by 15 percentage points more than control households, and children under age two grew taller by up to 0.78 centimeters. In Ecuador, secondary enrollment grew by 10 percentage points between 2003 and 2005, and child labor fell 17 points among beneficiary families of the Bono de Desarrollo Humano (Human Development Transfer) conditional cash transfer program.