Cash transfers programs have been shown to have positive effects on a variety of outcomes.
While much of the literature focuses on the role of conditionality in achieving desired impact,
this paper focuses on the role of ‘soft conditionality’ implemented through both ‘labeling’ and
‘messaging’ in evaluating the impact of the Child Grants Program in Lesotho, an unconditional
cash transfer targeting poor households with orphans and vulnerable children. Beneficiary
households received a clear message that the transfer should be spent on the interest and needs
of children. Our findings are based on a randomized experiment and suggest that ‘soft
conditionality’ does play a strong role in increasing expenditure for children, especially on
education, clothing and footwear. Results indicate in fact that transfer income is spent
differently from general income as it exerts both an income and a substitution effect. This
behavioral change is confirmed by comparing the ex-ante expected behaviors with the ex-post
actual response to the program. We find that for expenditure categories linked to the wellbeing
of children the ex-post response was much higher than the ex-ante expected behavior.