Why cash transfers work for families

Unbound uses cash transfers as the primary way to distribute benefits, which means sponsored individuals and their families have direct access to their sponsorship benefits.

Armenia, mother of a sponsored child in Guatemala, sells shaved ice to a customer. Through cash transfers, she and her family were able to save what they needed to purchase the shaved ice maker, and are now saving for materials to build her daughter her own room.

Unbound believes in families, and our program model demonstrates that belief.

Unbound uses cash transfers as the primary way to distribute benefits, which means sponsored individuals and their families have direct access to their sponsorship benefits.

Cash transfers give families the most flexibility in how and when to use their benefits. They promote dignity, leverage the ingenuity of mothers in stretching their budgets, and create greater economic stability for families and communities.

"I've spent a lot of years studying international development and global poverty," said Dan Pearson, director of international programs at Unbound, "but I don't know how to raise a family of four on $10 a day. But I know a lot of women that do know how to do that.”

The success of those mothers is evident in the survival and resilience of their children, Pearson said in a May 12 webcast, “Money When It Matters: Unbound Support in a Time of Crisis.

“We need to honor that sort of expertise,” he said. “They know how to wring every bit of value out of every cent they receive."

The back story

When Unbound was founded in 1981, we partnered with schools, orphanages and other established institutions to help facilitate the sponsorship program. Benefits were comprised mainly of school fees and necessities such as uniforms, school supplies and food. As the organization grew, we learned and adapted. We realized we could create an even bigger impact for children and their families as a community-based program, outside of institutions.

As Unbound transitioned to our own freestanding programs with our own staff, our benefit model evolved. In many areas, mothers also began meeting in small support groups on a regular basis. Mothers would vote on the types of benefits they wanted their children to receive and the local staffs would buy items in bulk, which was cost-effective.

Mothers shared, however, that they would sometimes end up with two of the same thing. They would purchase the item with their own money when they needed it but later received it as a benefit. And while mothers could choose something else, like medicine for a sick child, this method of benefit distribution had limited personalization.

Arriving at personalized benefits

Unbound believes it’s important to make sponsorship benefits highly personalized. It’s something we’ve been evolving toward since our inception, but have been intensely focused on in recent years. We began looking at how to stabilize the environment around the child and family to give them the best chance for success, so children could continue to achieve their educational goals but get broader and better support along the way.

Through research, both in consulting with families and studying the growing body of empirical evidence, we determined that distributing benefits through family accounts, also known as cash transfers, allows for the most personalization and gives the greatest flexibility to the family.

"In order to have a personalized approach, you have to put power in the hands of the families," Pearson said.”

Each family is encouraged to create their own anti-poverty “program” with the funds provided by Unbound sponsors.

“They define their objectives for the program and how they're going to reach them, so it's a real partnership of mutual respect," Pearson said.

Since a concern surrounding cash transfer programs has been potential misuse of funds, Unbound conducted evaluations that study the purchasing behaviors of families participating in the sponsorship program.

Evaluations in India in 2018 and Guatemala in 2019 showed that supervision mechanisms, such as submission of receipts, did not affect the ways families use their benefits. Families who weren't submitting receipts were no more likely to purchase “temptation goods” than families who were submitting receipts. The findings are consistent with similar studies done by outside groups.

Currently, 93 percent of the more than 300,000 children, youth and elders sponsored through Unbound participate in programs that use cash transfers as the primary method for delivering benefits.

“No [Unbound] project that has gone to [family] accounts has gone back,” Pearson said. “I think that’s a powerful thing to keep in mind. The majority of projects are now using [family] accounts, and many others that are using some other method of highly personalized benefits are in the process of transitioning to [family] accounts.”

Deciding for themselves

Francisca is a mother of four in Guatemala who has witnessed firsthand the transitions in the program.

[Before] they gave us what was planned from the [program staff]. Now, we are the ones who decide what needs we can cover or prioritize the expenses for my daughter’s education.

– Francisca

The Unbound Antioquia program in Medellin, Colombia, uses mobile technology to distribute benefits. The technology is readily available and inexpensive in the country and in many others where Unbound works. Each month, the program transfers sponsorship funds into family accounts, and the account holders, typically mothers of younger children, receive notification via text message that the funds have arrived.

The staff started training families on the process in October 2014, and the first transfer was made in January 2015. Program coordinator Diana Patricia Lopez Rios said the change in the way sponsorship benefits are delivered has been positive for families.

“Nowadays mothers feel happy that they can make their own decision on how to use the funds for the well-being of their own children,” she said. “They feel secure because they are the ones who know what the need of their child is.”

Parents are in the best position to determine how to use sponsorship benefits effectively for their families.

“Receiving the funds allows each mother in each of these thousands of families to provide what her child really needs and not what we think the child needs,” Diana said. “This is reaching out to the needs of each individual family.”

Francisca (right), mother of a sponsored youth in Guatemala, and Unbound social worker Astrid Maholee Callejas Miranda have a conversation as they walk together. Francisca and her family receive monthly benefits via cash transfer.
Francisca (right), mother of a sponsored youth in Guatemala, and Unbound social worker Astrid Maholee Callejas Miranda have a conversation as they walk together. Francisca and her family receive monthly benefits via cash transfer.

Mothers meet in small groups and one-to-one with Unbound social workers to receive training and make plans for how the program can best serve their children. Each family has a booklet to record family goals and the sponsored child’s personal goals. There’s also space to write how they plan to invest their benefits to reach those goals.

Cash is one of — but far from the only — benefit that helps the sponsored friends of Unbound meet their goals. Around the world, you might find elders participating in an exercise class or growing vegetables in a community garden, scholarship students completing their service hours by tutoring younger children, or women starting or boosting a small business with micro savings and credit offered through local mothers groups. Community support coupled with cash means more opportunity for those sponsored and their families.


Receiving help with dignity

Having access to cash is especially critical in emergencies.

In El Salvador, the government approved COVID-19 funding for families but there was a problem: About 75 percent of the people who qualified for the support didn't have a bank account, according to local estimates. Approximately 10,000 families participating in Unbound were able to receive COVID-19 subsidies from the Salvadoran government thanks to their bank accounts opened through the sponsorship program.

With support from sponsors and Unbound, families around the world are using cash transfers to meet their immediate needs and long-terms goals. Education is the number one goal of families, but they also use their benefits for food, housing improvements and other needs.

"There are a lot of advantages that we've found with [the cash transfer] approach," Pearson said. "First of all, it promotes the dignity of each family. Many people in the U.S. are receiving assistance … many for the first time in their life, in the [COVID-19 crisis], so this issue of dignity has become much more front and center in our own way of thinking.”

Imagine receiving that help in one of two ways, Pearson said.

“The first way you go and stand in line, and when you get to the front of the line you're handed a bag of things that someone else thought would be useful to you. … And then the second method, someone transfers cash into your account, and they trust you to use that money the way you need to use it to meet your current, most pressing needs. Think about the difference between those two experiences."