World Bank aids spread of conditional cash transfer programs.
Higher school grades are rewarded with cash.
February 11, 2008 — Development solutions usually travel North to South or South-South. But now one of the most successful ones has gone in a totally new direction from Mexico to the U.S.
To help some of its poorest people climb out of poverty traps that are often multi-generational, New York City is using Mexico's Oportunidades conditional cash transfer (CCT) program as a model tailored to new circumstances.
Some 5,100 families in the Bronx, Harlem and the Brownsville section of Brooklyn will participate in "Opportunity NYC“ the first CCT in the U.S. They'll get cash transfers ranging from $4,000 to $6,000 annually if they meet education, health, and employment targets.
Before "Opportunity NYC" was launched last December, New York Mayor Michael Bloomberg led a team of his officials to Tepotzlan and Toluca in rural Mexico in April 2007 to see how Oportunidades worked and what made it so successful.
Conditional Cash Transfer Programs Benefit Millions
"The case was compelling, particularly in the ways that the programs are adapted to each of the circumstances," said Linda Gibbs, New York's deputy mayor, who was part of the Bloomberg team looking at the Mexican anti-poverty program.
Oportunidades benefits 25 million low-income Mexicans - about a quarter of the country's population. Costing US$2.5 billion annually, it is similar to other conditional cash transfer programs in Latin America, like Bolsa Familia, which reaches 46 million low-income Brazilians.
The closely evaluated success of CCTs has inspired the spread of similar programs to Asia and Africa. The World Bank is supporting 16 CCTs in 12 countries with US$1.2 billion in loans, and has another US$700 million worth of loans in the pipeline. The Bank provided pre-launch advice to "Opportunity NYC".
Commenting on the new South-North route of CCTs, Pamela Cox, World Bank Vice President for Latin America and the Caribbean, said: "Development cooperation goes well beyond the traditional concept of aid or assistance, and that it is not a one-way process process limited to financial flows from the rich world to developing countries, but a truly mutual learning process, where innovative ideas, and state-of-the-art knowledge are part of our shared resources to build a better world."
Instead of 'Handouts,' Cash for Performance
Wherever they exist, conditional cash transfer programs have a common goal: To break poverty chains that often extend across generations. Instead of giving food or vouchers, and other "handouts" through community organizations - part of traditional anti-poverty programs -- CCTs give cash directly to families that's conditioned on performance. To keep getting bi-monthly payments, participating households in the New York program have to meet specific targets, which include:
Regular school attendance, with high achievement.
Health coverage, including regular medical and dental visits.
Full-time work or combined work-job training.
When participants open a bank account, they get a small cash award for that too. Evaluations show that CCTs lower student dropout rates, improve family health, and improve job opportunities all of which build a ladder to help families climb out of deep poverty.
An assessment by the World Bank of Oportunidades found that the poverty headcount rate among participants declined by 4.9 percent in the first year of study and 18 percent in the second year.
The Bank's Cox said Oportunidades and other CCTs also help to empower isolated poor women, who now have bank accounts and more opportunities to participate in community activities.
Getting a Library Card Brings $50 Reward
Opportunity NYC is a two-year, $53 million program. It was privately funded by the Rockefeller Foundation and other donors to speed its startup. The first cash payments, averaging $524, were made in December to 1,431 families.
Cash payments include $25 or $50 per month for 95 percent school attendance for elementary, middle, and high school students; $25 for attending parent-teacher conferences; and $50 for obtaining a library card.
Improvements in test scores can yield $300 to $600. High school students will share $600 with their parents for annually accumulating 11 credits, and a $400 bonus for graduating. There are sets of incentives, as well, for health care and for maintaining employment.
The program will be rigorously evaluated.
Welcoming the first participants, Mayor Bloomberg said about "Opportunity NYC": "It's designed to encourage parents and young people to take positive actions to stay in school, to stay healthy, and increase their earnings - all important ways to rise out of poverty."
Bank Helped Make 'Opportunity NYC' Happen
When New York Mayor Michael Bloomberg tasked his Commission for Economic Opportunity to develop a high-priority poverty-reduction program, CEO went to the World Bank – a major financer and adviser of conditional cash transfer programs – for help.
Laura B. Rawlings, a human resources staffer in the Bank's Latin America and the Caribbean Region, told CEO about Oportunidades. She and other Bank staff worked closely with the Commission and Mayor Bloomberg's staff to help shape “Opportunity NYC.”
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