Cash Transfers and Economic Growth: A Mixed Methods Analysis of Transfer Recipients and Business Owners in Malawi

Abstract

AbstractSocial protection policies that simultaneously reduce poverty and stimulate economic growth and development will be transformational for direct recipients and disadvantaged communities. This study assessed whether the Malawi Cash Transfer stimulates economic growth in the communities where it is operational. Data collection was conducted in Mchinji Malawi from 2007‐2009. This study is based on data from two sources including 1) a randomized community control trial designed to measure the impact of the cash transfer and 2) qualitative interviews with business owners. Over the course of one year, the cash transfer intervention group had increased demand for and increased expenditures on foods, basic necessities, livestock, healthcare, and schooling supplies versus the comparison group whose expenditures remained low throughout the study. Additionally, cash transfer households invested in productive assets and farming equipment, which led to greater agricultural production, consumption and sales. The majority of business‐owner respondents confirmed that transfer recipients are frequent customers and reported that sales to transfer recipients were an important part of their business. Respondents reported that the transfer strengthened local markets by providing a steady source of customers and cash, with reliable sales even during the rainy season. Business owners grew their businesses, earned additional profits and some made investments in infrastructure and capital. This study yields insights into the mechanisms by which cash transfers impact economic growth and contributes to the discourse on social protection strategies. Once the cash transfer scheme is operational throughout Malawi, it appears as though there will be important impacts for recipients, non‐recipients and local businesses. Findings from this study may be applicable throughout resource‐poor countries in Africa. Still, continued follow up and larger studies are needed to determine the consistency and scale of impacts on economic growth and development.