This report gathers together examples from the literature which attempt to explain how and why change happens as a result of cash transfers (CTs). While there is a large body of literature examining social protection and cash transfers’ impacts on poverty reduction and development, there is much less on understanding the mechanisms and pathways by which this happens. The report adopts a broad understanding of the concept of ‘Theory of Change’ (ToC) as including pathways, causal relationships, and underlying assumptions about how change happens. It first presents a selection of theories of change about how cash transfers are expected to work in general, drawn from academic literature, and then a selection of theories as used in a few specific cash transfer programmes. Diagrams of change processes are included.
- There is a broad variety of theories of change models for CTs, depending on the context and type of intervention. There is no particular consensus on pathways of change, although most literature pulls in the same direction.
- ToCs are hypothetical and retrospective, applied to existing CT programmes. ToCs are at present a concept not yet widely adopted for programming.
- Most ToCs take a holistic approach, and include macro-micro levels and contextual factors.
- Most ToCs draw on either human capital investment and productive assets theory, or vulnerability/risk reduction. Some groups argue that CTs can play a transformative social role as well as reducing poverty, particularly but not exclusively in fragile states where they can be used to enhance state-citizen relations and state legitimacy.