Knowledge Note

Conditional cash transfer programs have proven to be an effective tool for helping reduce poverty. As use of such programs grows, development experts and policymakers are considering how to successfully promote better health and education in large countries with diverse and often remote communities. In some cases, they are rethinking traditional cash transfer programs to create grant programs that target communities instead of families. One question is whether linking grants to performance, similar to conditional cash transfer programs, can promote better results than giving grants that are not performance-tied. The World Bank is at the forefront of efforts to reduce poverty and create shared prosperity. As part of this, the World Bank is helping countries create and implement programs to reduce maternal and child mortality and increase school enrollment, both of which are crucial for countries working towards meeting the United Nations Millennium Development Goals. In Indonesia, the World Bank worked with the Government of Indonesia on a community grant program to boost the use of health and education services. The impact evaluation built into the program found that cash transfers to rural communities led to positive impacts on average across health and education indicators, with a strong decline in malnutrition. Communities whose grants were linked to performance-based incentives did even better than those whose grants weren’t linked to incentives. This suggests that conditioning grants can produce positive results. Because of the measured impacts, the Government of Indonesia is expanding the community grant program to eight provinces from five and focusing attention on combating malnutrition. And a portion of all grants will now be based on performance.

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Human Development Network