Peru's poorest 60,000 families are to receive monthly payments of $30 (£16), the president has announced.
Half of Peruvians subsist below the poverty line
Alejandro Toledo said the subsidies would be disbursed to the female heads of families in 70 rural districts.
He said those who received the money should prioritise its use for pre- and post-natal care in government-run clinics, and for vaccinations.
But critics say bureaucracy and corruption will prevent the money from reaching remote Andean areas.
Mr Toledo launched the scheme in the remote mountain town of Chuschi.
Dressed in traditional Andean clothing, he said he hoped the scheme would eventually benefit three million people.
In his four years in office, Mr Toledo has overseen economic growth and an export boom.
But about half the country's 28 million inhabitants still live below the poverty line, and many families have no access to drinking water, electricity and basic sanitation.
"It doesn't make sense that Wall Street applauds us because we do things well at the macro level. The objective is that that healthy economic growth is reflected in the reduction of extreme poverty," Mr Toledo told reporters.
Mr Toledo cannot stand for re-election in April 2006, but opposition parties say they fear the payments will help the Peruvian government gain support for his successor ahead of the poll.