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Fighting poverty with direct cash payments is more common now than ever before. In 1997, only three developing countries had centrally managed cash transfer programs targeting poverty. Today, more than 120 do, and more than $200 million in cash is distributed daily. The adoption of cash transfers was a significant step in reducing extreme global poverty. Evidence shows that these programs work – both to reduce poverty and to boost human capital. For example, recipients spend the money on essentials like their children’s school supplies or investing in their small business.
Now there is more pressure on cash transfer programs to enhance their effectiveness. So how can we further help families make the best use of money?
Research from the emerging field of behavioral science—the study of how humans make decisions and take actions—suggests that light-touch design features may improve outcomes at little additional cost.
The application of behavioral insights has already revolutionized the design of products, policies, and programs with a diverse array of development goals. We can use these same insights to design cash transfer programs to set beneficiaries up for success.
Today, a new generation of cash transfer programs – currently being piloted in several countries in Africa – uses behavioral insights to help beneficiaries decide how to spend their cash and follow through on those plans. But the circumstances under which they receive the funds—like how long they have to wait on payment day or how close the local market is to the payment site—impact whether they put that intention into action.
Read the full article on incorporating behavioral science into cash transfers by Josh Martin & Laura Rawlings at ideas42