Cash transfers impact on household poverty reduction: expenditure patterns, food demand and wellbeing in Lindi district, Tanzania

Abstract

One of the most popular methods for reducing poverty in Africa, and specifically Tanzania, is cash transfer (CT). However, variables like targeting errors and households' economic decisions limit its impact on numerous aspects of household economic wellbeing. Understanding how these aspects impact the programme's implementation can help in its reform and expansion for improved outcomes. Thus, the present study was conducted in Lindi District to (i) assesses community perceptions on Community Based Targeting (CBT) Mechanism and determine households‘ factors influencing community perception on the transfers (ii) examine the impact of CTs on households‘ spending patterns (iii) determine the effect of CTs programmes on households‘ food demand and (iv) evaluate the impact of CTs on poverty reduction.Community perceptions on CBT where analysed using descriptive statistics and factor analysis, and ordinal logit regression was employed to determine households‘ factors influencing community perception of CBT. Mann-Whitney U test was used to assess the difference between beneficiary and non-beneficiary households on their perception of CBT mechanism. Community perceived performance of the mechanism as average, although complaints of exclusion and inclusion errors were reported. Moreover, the study indicates that sex and participation status of respondents influenced community perception of CBT mechanism. Beneficiary households were more likely to be aware of the villages‘ meetings conducted to nominate eligible households than non-beneficiary households. Furthermore, the Working Leser Model was used to assess how CTs affected household spending patterns. The study used Propensity Score Matching (PSM) to address the issue of endogeneity which was brought on by the use of the Working Leser model. Marginal budget shares and demand elasticities were calculated using Working Leser model coefficients. The results showed that CTs have a negative influence on the share of the budget allocated to food and favourable impact on the share allocated to non-food and health expenses. Consumables like food and utilities were seen as necessities by both non-beneficiaries and beneficiaries, but durables, investment assets, non-food items, health, and education were regarded as a luxury goods. Moreover, to assess the CT effect on food demand and its implications on food security, Ordinary Least Square (OLS) model adjusted to fit in Almost Ideal Demand Framework was adopted. The study employed the Instrumental Variable (IV) technique to address the challenge of endogeneity. Findings indicated that CTs has effect on demand for roots xv and tubers, cereals and vegetables. Roots and tubers are staple foods while cereals are substitute foods in Lindi District, implying that, as the income rises, poor households demand for staple foods together with their substitute side dishes tend to increase. The study also evaluated the impact of CT on households‘ overall wealth, housing conditions, use of basic services, and productive and non-productive assets by employing Propensity Score Matching (PSM). Nearest Neighbour, Radius caliper and Mahalanobis matching techniques were used to match beneficiaries‘ and nonbeneficiaries‘ households. Findings indicated that CTs has no significant impact on overall poverty level of recipients‘ households. Thus, small monthly free handouts to poor households by themselves are not enough to significantly reduce extreme poverty. However, the results indicated significant effect of CTs on five poverty indicators, which are; type of floor, sanitation facilities, livestock, mobile phone phone and chair. In conclusion, the study indicates that even though small, consistent cash transfer programmes have a noticeable influence on household spending patterns in Tanzania, they are inadequate in eradicating extreme poverty. The study recommends to the Central Government, and TASAF in particular to develop comprehensive multi-intervention programmes capable of significantly influencing various poverty indicators and addressing different aspects of household povert