Asset Transfers or Cash Transfers: The Design of Anti-Poverty Transfers to the Ultra-Poor

Recent evidence suggests that the 'Targeting the Ultrapoor' (TUP) programme pioneered by BRAC in Bangladesh has proven very effective and portable in achieving such aims across a diverse set of low-income settings. As a consequence, interest in the programme has been growing.

The TUP programme is an in-kind social protection programme: it provides a one-off large-scale asset transfer (typically livestock) combined with complementary training. The key open question is whether beneficiaries could do better with an equivalent-valued cash transfer. Namely, whether a social protection programme designed around cash transfers could lead to better outcomes than transfers in-kind. This is the research question at the heart of this project, which aims to inform the design of social protection programmes across the developing world.

Standard economic theory suggests under a certain set of conditions, households can do no worse with cash transfers than in-kind transfers. This project will test whether this is so, and if there is a divergence in the returns to transfers in-kind versus cash transfers, what is the origin of this divergence? Does it relate to market imperfections, or does it relate to particular behavioural biases or psychological traits that might lead households to treat cash and in-kind transfers differently?

The project answers these questions using a large-scale randomised control trial to compare the classic TUP design to a modified design where beneficiaries have the choice of cash instead of an asset-skills bundle. The Asset Transfer Programme is a regional poverty alleviation development intervention, being implemented in four of the poor districts of Southern Punjab namely; Bahawalpur, Muzaffargarh, Lodhran and Bahawalnagar.

Based on preliminary findings two years post intervention, the research team has observed that transferred assets have been largely retained and household’s labour market activities now begin to focus around those assets. Households that take up cash transfers also use these transfers to invest in similar types of asset. Most importantly, there has been a significant occupational shift out of wage employment and into self-employment for both in-kind and cash transfer treatment arms. In the short run, this is an encouraging result as occupational shifts is an early indicator of successful implementation of the programme and its ability to shift households out of poverty. Following this, household earnings from self-employment, particularly from livestock related businesses have grown, as they divert away from low-paid labour.

At the aggregate household level, the researchers have also observed an increase in earnings for the two treatment arms. Given the rapid rise of earnings as reported in subsequent survey waves, the team expects earnings from self-employment to improve further, and also potentially show some statistical difference in increase between the treatment arms.

The researchers hope that with the help of data from subsequent follow-up surveys, this evidence can play an important role in wider policy discussions on how anti-poverty can be most efficiently designed for both local and international stakeholders.