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Cash transfer programs deemed effective in protecting calamity-hit households

CASH TRANSFER programs were able to “effectively” protect typhoon-affected households from falling into extreme poverty, according to a study by the World Bank.

“In the aftermath of Typhoon Yolanda (international name: Haiyan) in the Philippines, the country’s 4Ps program proved to be an effective protection against extreme poverty. It was also shown that it raised in particular non-food consumption,” the World Bank said.

The Pantawid Pamilyang Pilipino Program, also known as 4Ps, is a conditional cash transfer program first launched in 2007 and later institutionalized in 2019.

“Cash-transfer programs have been shown to be an effective way to reduce poverty and protect vulnerable households against idiosyncratic income shocks. For this reason, they are also often proposed as effective and efficient protection mechanisms in the case of large-scale adverse events such as natural disasters, pandemics, or economic crises,” the World Bank said.

It conducted its study on victims of Typhoon Yolanda, which struck the country in 2013.

“The results indicate at best a very tenuous effect on households with at least one school-aged child having positive educational expenditures,” the multilateral lender said.

Based on the study, the risk of falling into extreme poverty was reduced by the cash transfer program.

“The estimated effects on non-food consumption are decidedly more significant, in statistical as well as economic terms,” it added.

The World Bank said that even a moderate cash transfer can “significantly protect vulnerable populations when faced with a large aggregate shock.”

“The upshot is that such programs are indeed an effective policy response in times of crisis. However, many questions remain to be answered. Moreover, it would be important to understand how cash-transfer programs can be temporarily expanded to increase their impact,” it added.

The study recommended looking into horizontal expansion, which means to expand the number of households covered by the program.

“The crucial question in this context is whether an additional dollar spent on either horizontal or vertical expansion, which is increasing the amount of the benefit paid out, has the largest effect on poverty reduction. Understanding how this trade-off depends on the nature of the shock is also of first-order importance,” it added. — Luisa Maria Jacinta C. Jocson

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