Lessons From the MDGs

This week's summit at the United Nations on how to reach the ambitious Millennium Development Goals (MGDs) by 2015 marked a clear contrast with the original summit ten years ago. When the leaders of nearly two hundred nations met in New York in 2000, the term "social protection" was barely mentioned.

This time, with a mere five years remaining and progress toward the eight MDGs unequal between and within developing nations, the issue was front and center. As UN Secretary General Ban Ki-moon recently made plain, progress toward the MDGs "requires universal social protection." It's a seismic shift, one that will make MDG progress more equitable and one that signals a new way forward for foreign aid.

Social Protection (SP) includes cash transfers, work for pay programs and, most promisingly, conditional cash transfer programs (CCTs) that tie payments to behavioral targets like children's school attendance or regular clinic visits. SP initiatives are designed to support the poorest and as the World Bank noted, "help individuals, households and communities better manage risks."

The role of risk management is worth special emphasis. Yes, SP programs provide extra cash to help the poor deal with emergencies. But they can also provide the critical stability the poor need to make the investments to escape poverty altogether. As David Hulme, Joseph Hanlon, and Armando Barrientos wrote pointedly in their recent book, Just Give Money to the Poor, "you cannot pull yourself up by your bootstraps if you have no boots."

In part, the new emphasis on SP stems from observing the depressing fallout from the global financial crisis, as well as the food and fuel crises in Africa. But most of the shift can be traced to the confluence of convincing data on SP program effectiveness and the vast potential of new technological breakthroughs. Taken together, these developments suggest that MDG and foreign aid funds generally may soon deliver far more "bang for your buck."

As an August UNICEF working brief detailed, in the Kyrgyz Republic, an SP program reduced the poverty gap -- the average shortfall of the population below the poverty line -- among beneficiaries by 42 percent. In South Africa, SP reduced the gap by 47 percent. In Malawi, one CCT study that incentivized school attendance revealed that participants with at least 75 percent attendance had 60 percent lower HIV infection rates, suggesting the impressive cross-sectoral potential of CCTs.

At the same time, breakthroughs in mobile banking and the use of retail shops as banking surrogates means that many more of the world's poor will soon have access to financial services, providing a place for the poor to safely store and manage their money and opening the door for the delivery of SP programs that are more efficient and less susceptible to corruption. Most countries transfer less than a quarter of "government to person" funds electronically into accessible, functional bank accounts.

How much could be saved? In South Africa, the government cut the cost of delivering social transfers by 62 percent after partnering with a private bank. In Brazil, the cost of administering Bolsa Familia grants fell from 14.7 percent to 2.5 percent of the value of the grant dispersed after a switch to electronic benefit cards. In Argentina, program participants who reported paying bribes to receive their benefits dropped from 3.6 to 0.3 percent after the switch to electronic cards -- a gain of 10.7 million dollars.

To be sure, Social Protection strategies are not a magic bullet for global development. But they may be a necessary condition. And because of their cross-sectoral impacts, smartly-designed initiatives for the 80 percent of the world living without social protection have the potential to accelerate almost all the MDG goals. With special emphasis on electronic transfers, financial access and CCTs, they could provide a huge step forward.

For now, it will be important to keep the pressure on donor nations to honor their 2010 MDG Summit commitments. Long term, the challenge will be to reform foreign aid flows more broadly to reflect these new breakthroughs, channeling a greater percentage of funds directly to those in need, rather than to the expansive and often wasteful foreign aid bureaucracies so often lambasted by laissez-faire development skeptics.