This article is more than 2 years old

This article is more than 2 years old

Foreign aid in the form of cash transfers with no strings attached can improve health and increase school attendance, a study has found.

Earlier this year, Downing Street was forced to defend the use of controversial cash transfers when press reports claimed £300m had been spent on a poverty reduction scheme in Pakistan dogged by claims of corruption.

Photographs of villagers queuing to withdraw cash on the outskirts of Peshawar were published in the Daily Mail alongside allegations that cards used to access the money – and funded by UK taxpayers – were being obtained by paying kickbacks to officials.

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The corruption allegations led to demands for a review into the unconditional cash handouts, with one Tory MP suggesting the government was “exporting the dole to Pakistan”.

But a review published this week flies in the face of criticism from the anti-aid brigade, showing that cash handouts have measurable benefits for some of the world’s poorest people.

University researchers from Canada, Germany, India, New Zealand and the US conducted a comprehensive review of the effects cash transfers can have on the use of health services, health outcomes and healthcare expenditure among children and adults in poor countries.

The team compared outcomes among cash transfer recipients and people who did not receive such support. A total of 21 studies, covering 17 different programmes and more than 1 million participants living in Africa, the Americas and south-east Asia, were evaluated. In 2011, between 800 million and 1 billion people in these countries received some form of cash transfer.

Advocates say cash transfer programmes give recipients greater control over how best to help themselves, with a greater degree of dignity. The schemes are seen as cheaper to deliver than physical commodities, and mean people can plug the funds back into the local economy. Money is received directly, or accessed with a card or by means of transfer to a mobile phone.

The researchers concluded that, while cash transfers probably do not impact on the use of health services, they might improve some health outcomes.

An unconditional cash transfer was found to reduce the odds of having any illness by an estimated 27%.

“This is a large and clinically meaningful reduction,” said Stefan Lhachimi, a professor of evidence-based public health at Germany’s University of Bremen and one of six authors to work on the review.

“It helps to such a large degree that we know that cash transfers are an effective intervention.

“We also found they probably improve one social determinant of health: school attendance. The evidence revealed families receiving cash handouts were more likely to send their children, including daughters, to school.”

The review, published by the NGO Cochrane, also found that cash transfers probably improved healthcare expenditure, and could improve food security and dietary diversity.

Cash transfers account for 6% of humanitarian spending. Increasingly, however, governments in low- and middle-income countries are using such programmes to reduce poverty.

Fear that cash donations are more likely to be misused has made them a subject of hot debate.

A leading economist claimed recently that introducing a guaranteed basic income could eradicate extreme povertyfor millions of people.

John McArthur, a senior fellow at the Brookings Institution in Washington, said even if cash transfers were introduced by governments in countries where the total cost to the state would be less than 1% of GDP, this would still allow up to 66 countries to afford such a policy.

McArthur claimed such an approach could end extreme poverty for 185 million people, including about 100 million in India, 17 million in Indonesia and 9 million in Brazil.

Between 2011 and 2015, UK aid in the form of cash transfers helped 8.9 million of the world’s poorest people – more than half of them girls and women – to pay for essentials such as food, clean water, clothing, education and healthcare.

The positive impacts of cash transfers – which can be used to feed families living on less than $2 a day, reduce waste and aid transportation costs – were recognised by the Independent Commission for Aid in a review published last year.

Charlie Mason, a humanitarian adviser, has witnessed the benefits of cash transfers in Sudan, where the Department for International Development has established a scheme in partnership with the World Food Programme to support people displaced by conflict or hunger. The initiative has provided poor families in Darfur with monthly payments of about £5 a person.

Mason says they use the money to buy food or pay medical expenses or school fees for their children.

Writing in a blog, he said: “This boosts the local economy, gives people back the right to choose how they support themselves and their families, and allows us to spend our money more effectively.

“It was really impressive to see how advanced this system has become in just a short time, with people using bank cards to access their money and the shops using special card readers to deduct balance in exchange for goods from their shops.”