The aim of this background paper for the UNRISD Flagship Report on Poverty is to evaluate the use of cash transfers as a tool for reducing poverty and inequality in developing countries. Drawing on UNRISD’s policy regime approach, the paper draws on data and studies on existing cash transfer programmes in developing countries to synthesise evidence on the effects of cash transfer programmes on poverty and inequality. Of particular interest are the appropriateness and cost-effectiveness of targeted versus universal cash transfers, and conditional versus unconditional transfers. The paper concludes that in practice transfers are never really universal and where they involve identifying and targeting specific groups of people they can be relatively simple to administer. However, targeting based on social categories is likely to involve major errors of inclusion and exclusion.