Graduation from poverty

Whether governments should indefinitely dole out unconditional cash transfers (UCT) to the ultra-poor or they should give them some kind of in-kind asset transfer/skill training is a policy debate that has been going for more than a decade. Pakistan is no different, and latest findings from the asset transfer programme run by Pakistan Poverty Alleviation Fund (PPAF) points in the direction that perhaps asset transfer is a better choice. The operative word here of course is perhaps.

Speaking at PPAF’s third conference on research and learning, Dr Imran Rasul, professor at University College London, shared the findings of PPAF’s on-going research that he and his colleagues have been working on. Here is a quick summary of it, which, admittedly, is at the usual risks that accompany simplification of economic research.

PPAF’s intervention had two study groups. Group 1 was given a menu of assets to choose from – the asset basket being various livestock, retail outlet, crop farming, and non-livestock assets as such as tailoring. Group 2 was given the option to chose from the same basket of assets, plus the option to take UCT of equal amount.

Turns out, in both cases the poor preferred livestock. In Group 1, nearly 87 percent of the households preferred to purchase one kind of livestock or another. In Group 2, nearly 96 percent chose cash over asset transfer, but eventually more than two-third of those ended up buying livestock. It’s another thing the price paid for livestock by Group 2 varied significantly than the average value of the livestock given to 87 percent household who chose livestock under Group 1.

Imran’s findings reveal that those households who were given the livestock exhibited much higher percentage change in engagement in livestock rearing compared to those who purchased the livestock on their own using the UCT. This change is observed over both two-year and even four-year periods.

Similarly, differences were observed in household income and the number of hours spent working on any economic activity – recipients of asset transfers earning/engaged more than those who chose UCT - implying that perhaps giving an asset livestock is better than letting poor decide which animal to purchase.

These findings appear consistent with the year-one results at the completion of which Imran and his team concluded that “transferred assets have been largely retained and the household decision making, and workings now revolve around those assets. This shift towards self-employment is what is expected to raise incomes over the long term for the households as they divert away from low paid wage labour.”

Do these findings mean that asset-transfers will work better than UCT? For one, as Imran said in his talk, it depends what policymakers want from pro-poor programmes. As research on PPAF’s intervention shows, that on average recipients of UCT save and invest (in business assets) more compared to those who receive in-kind transfers. UCT recipients also spend more non-food consumption.

What are the long-term outcomes of higher savings and investments made by the UCT group? And how does the UCT group exactly benefit from higher non-food consumption? These are the kind of questions worth debating, in addition to the meta normative question: shouldn’t poor have a choice.

Discussing these findings at the panel discussion following Imran’s presentation, participants wondered if asset-transfer would even be possible in a country like Pakistan that suffers from poor administrative capabilities. What wasn’t debated is the availability of adequate quality of livestock.

Running a small intervention is one thing, implementing a wholescale asset-transfer programme is another. Tomorrow, if PPAF or the BISP goes ahead with asset-transfer programme and provides livestock (the preferred choice of both groups), they will be unable to find decent quality local breeds beyond perhaps more than 500 to 700 animals.

The question, therefore, is should the government provide poor quality, low yielding dairy/meat breeds to poor households. Or would it be better off deregulating the milk and meat market and addressing other bottlenecks to unleash growth and development in dairy/meat industry and thereby provide more employment and livelihood, which in turn can graduate many from poverty? It is surely time to study the latter, and make comparisons before going ahead with in-kind transfers.