Cash transfers are direct transfer payments of money to eligible people. Cash transfers are usually provided by the state and federal government.

Cash transfer programmes in developing countries is constrained by three factors: financial resources, institutional capacity and ideology. Governments in poor countries have limited financial resources are therefore highly limited in the amount they can invest in cash transfers and the money required to ensure the programmes are effective. The amount invested is influenced by ‘value for money’ considerations, as well as by political and ideological concerns regarding ‘free handouts’ and ‘creating dependency’. As random allocations as not particularly effective, there are to main forms of targeting:

Means testing potential recipients of cash transfers is the more politically acceptable, as money is not perceived to be wasted by including those who do not have a desperate need for the money ("leakage"). This can either be achieved through a screening process of potential recipients, or else by making the benefits of the transfers so low only the most desperate will apply. Yet there are also many problems associated with this method as the transaction costs of screening are very high, due to the need to pay for assessment, the travelling cost of candidates to and from the assessment and also the potential risks for corruption. There also may be a negative effect on social capital as resentment develops of those who receive support by those who do not.