Brazil: Results-Based Financing (RBF) Helps Achieve Decline in Family Poverty

[Article by Beryl Lieff Benderly, photo © World Bank/Fernando Bizerra]
 
In 2000, 192 United Nations members joined in a worldwide campaign against eight severe challenges to human welfare. Unanimously adopting the Millennium Development Goals (MDGs), they set specific targets for improving the lives of the world’s least privileged people by 2015 by reducing extreme poverty and hunger, illiteracy, deadly infectious diseases, maternal mortality, gender inequality and more. With the deadline for achieving ambitious reductions now only 5 years away, progress varies widely. One country making conspicuous advances is Brazil, with an 81% drop in poverty. 
 
This achievement, notes a report issued in March 2010 by Brazil’s Institute of Applied Economic Research (IPEA in Portuguese), exceeds both the Millennium Development Goal of halving the number of persons living on a dollar a day and the Brazilian government’s own, more challenging, goal of a 75% cut. 

Much of the credit, according to Brazilian officials like Matheus Carvalho, Secretary of the Division of Social Issues at the Ministry of External Relations, goes to Bolsa Familia (BF), a nationwide conditional cash transfer (CCT) program whose name roughly translates to “family stipend” or “family purse.” CCTs are results-based financing programs that act on the demand side by providing incentives to clients, rather than to service providers, to perform certain actions.  BF has also contributed to the country’s success in already meeting three other of the MDGs--universal primary schooling, empowering women, and reducing major infectious disease—and closing in on more, including cutting child mortality and improving maternal health. Economists also credit the plan with helping to cut the income inequality that has historically given Brazil one of the largest discrepancies in the world between rich and poor.

More than 11 million families—some 46 million people, comprising over a quarter of the population—participated as of 2006, making BF the world’s largest program of its kind.   Another 1.3 million vulnerable families were later added in response to the world economic crisis. The program, economists believe, helps boost local economies because poor families generally spend a very high percentage of any added income that comes their way.

Bolsa Familia got underway in its present form in 2003, when several existing CCT programs were combined into the single monthly stipend.  Those earlier plans were based on programs by a pair of Brazilian municipalities that began in 1995 and pioneered the CCT approach, which now provides the model for social programs in two dozen countries throughout Latin America and beyond, including in the United States. Bolsa Familia grew quickly, tripling participation to three quarters of the nation’s poor families within four years.   By 2008, it accounted for 0.4% of Brazil’s gross domestic product, or some US $4.5 billion a year. 

Like many other CCT programs, BF aims to cut poverty in both the short term and long term—the former through regular monthly payments to many of Brazil’s poorest households and the latter by encouraging families to make investments in education and health care to improve their children’s future earning potential. It achieves its aims by requiring participants to  take particular actions in exchange for receiving benefits, specifically getting schooling for children and health care for children, pregnant women and new mothers. 

Participating families must be either poor—with monthly incomes between about $35 and $70 per capita—or extremely poor, with under about $35 per person a month.  All extremely poor families, regardless of the number or age of their members, receive a basic monthly payment plus additional amounts for pregnant women and for each child up to a maximum of three.   The poor receive similar benefits for pregnant women and children but not the basic amount.  For the extremely poor, the potential payment tops out at about $55 a month and for the poor, at about $26.  The money goes to the family’s female head—preferably a mother or expectant mother--on the theory, widely shared among CCT programs worldwide, that women are likelier than men to use extra income for the family’s, and especially the children’s, benefit.

To get their stipend, the family must agree that all members will fulfill the appropriate requirements.  Children up to age 7 must receive regular health checks and growth monitoring at public clinics and be up to date on their vaccinations.  Those between the ages of 6 and 15 must be enrolled in school and attend classes at least 85% of the time each month.  Pregnant and nursing women must receive pre- and post-natal health visits and attend special educational sessions on health and nutrition topics.   Health facilities keep information on BF participants’ compliance with requirements and transmit it to relevant authorities.  Parents of schoolchildren must provide their children’s schools an explanation for any absences and notify the local Bolsa Familia coordinator in case a child changes schools.   Schools keep attendance records for the students from BF families and regularly transmit them to authorities that determine whether requirements have been met.

The program enjoys wide support “across the political spectrum,” in large part because payments hinge on recipients taking actions that improve their children’s prospects, according to Ariel Fiszbein, Chief Economist in  the World Bank’s Human Development Network, and co-authors.  “The Left sees the conditions as merely restating citizens’ rights” to health care and education “and the Right tends to see them as enforceable contracts.”

Bolsa Familia has had noticeable impacts on Brazil’s families and children.  Evaluations show that families have increased their spending on children’s clothing, education and food. Decreases in stunting and chronic malnutrition among young children suggest that this has improved nutrition.  A survey in one isolated region, for example, found children whose families get BF  26% likelier than those whose families don’t participate to have height and weight appropriate for their ages.  Another study found a 62% drop in malnutrition among babies aged 6 to 11 months and a 30% drop in children up to age 6. Evaluation has not, however, detected increases in vaccination rates.

Bolsa Familia has also somewhat raised school attendance and cut absentee and drop-out rates by 3.4 and 1.6 percentage points, respectively. The impact on educational outcomes is less clear, however, as the percentage of children failing to advance to the next grade has also risen.  Observers note that this rise, as well with the failure to raise children’s vaccination rates, indicate that changing the incentives for poor families cannot in itself break the cycle of inherited poverty without services that can meet their needs. Merely sitting in class without access to good-quality instruction and services for students with special learning challenges does not equip children from deprived backgrounds with the skills needed to succeed in the workforce. The schools and health clinics available to very poor Brazilians, these results suggest,  are not meeting fully  the increased demand that the CCT has created.

Bolsa Familia does appear, however, to have raised the prospects of at least one group—adult women.  Payments go in more than 9 cases out of 10 cases to women—more than a quarter of them single mothers.  Observers site “gains in empowering women, strengthening their positions in the households and communities, increasing their influence within the families, raising self-esteem and reducing domestic violence.”
Some skeptics initially feared that regular stipends would discourage poor people from working, but the adults in participating families, and especially the women, turned out to be more economically active than those in  non-participating families. This appears to reflect the positive effect of extra cash on both local economies and individual families’ ability to save or to invest in small economic ventures.  Assured income has also let some rural families choose to remain on the land instead of going to cities in search of work.

Bolsa Familia is clearly not a panacea for the problems facing Brazil’s poor, but monthly money in their pockets has helped both individual families and the nation at large move toward some worthwhile goals.
 
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