Dec 15, 2004
IDB approves $1 billion loan for expansion and consolidation of social protection in Brazil based on the Bolsa Familia program
Resources to reduce inter-generational transmission of poverty
The Inter-American Development Bank today approved a $1 billion loan to Brazil for the expansion and consolidation of a social protection system centered on the conditional cash transfer program Bolsa Familia.
This is the first IDB loan to use a recently approved Sector-Wide Approach (SWAp), relying on Brazilian Government’s procedures to disburse and account for funds.
The newly created Ministry of Social Development and Hunger Eradication will be in charge of the program. The National School of Public Administration will be a co-executor for training activities.
The objectives of the program are to expand the coverage of the Bolsa Familia program to all eligible families in an effective and efficient manner, strengthen the Child Labor Eradication Program, assess and improve the quality of complementary safety net programs and strengthen the newly created ministry as well as the decentralized social assistance structure.
The Bolsa Familia program was launched in 2003 with the unification of several existing cash transfer programs and represents the government’s most important poverty reduction initiative.
The unification of several programs under Bolsa Familia reduces institutional and sectoral fragmentation and promotes efficiency in the use of public resources. However, the government’s sectoral strategy recognized that cash transfers alone are not sufficient to address the risks faced by poor and vulnerable families, and it is also investing in complementary policies and social assistance programs, which are also being supported by the IDB. These include the after-school activities for former child laborers, a new Program of Integrated Assistance to Families, and the creation of a network to train social program managers.
The program supports IDB’s strategy for Brazil of reducing poverty and inequality and promoting social inclusion. Conditional cash transfer programs for low-income families, in existence in several countries in Latin America and the Caribbean, have demonstrated positive results in terms of raising household consumption and increasing school enrollment and health care utilization in a cost-effective manner.
The 25-year loan, with a three and a half-year grace period, has a variable interest rate.