The Future of Humanitarian Aid: Cash Transfers

“As the nature of humanitarian crises has shifted over the last few decades, cash-based approaches have become an increasingly common strategy for the provision of humanitarian assistance” (Doocy & Tappis, 2017, p. 7). Ingrained in this sentence is an important lesson: as the nature of humanitarian crises shifts, responses must also shift to adapt to this change. Cash transfers represent a forward-thinking attempt to address this evolution. Are cash transfers better than food aid in humanitarian emergencies? In general, it would seem that cash transfers indeed provide a superior and more dynamic tool for addressing humanitarian emergencies than food aid. This is because cash transfers are a more versatile means of addressing population needs (Ibid.), are faster and more efficient than food aid (Ibid), and promote the independence and shock resistance of local markets and governments when integrated into the greater humanitarian framework (Ibid.).

The structure of this essay will be as follows. First, there will be a brief elucidation of terms and the question to be answered. Next will be an elaboration on the benefits of cash transfers over traditional food aid. Lastly, there will be a discussion regarding the broader goals of cash transfers and how they fit in with the greater framework of humanitarian aid. The terms “cash transfers”, “food aid”, and “humanitarian emergencies” have been defined broadly, using the definitions of Doocy and Tappis (Ibid.). As such, cash assistance refers to the provision of money to individuals or households, either as emergency relief intended to meet basic needs for food and non‐food items or to buy assets essential for the recovery of livelihoods (Ibid.). Humanitarian emergency, on the other hand, refers to a singular event or a series of events that threaten the health, safety or well-being of a community or large group of people (Ibid.).

Khokana, Nepal. (2015). [Photograph]. World Vision.

Taken as such, cash transfers represent a better approach to humanitarian emergencies than food aid, since humanitarian emergencies represent a broad range of crises, and cash transfers a more dynamic multifaceted solution applicable to various scenarios. Regarding food aid specifically, it remains problematic given it's vulnerability to looting by the warring factions, and how it enables funds to be captured into the war economy. Additionally, food aid is more costly, prone to biased distribution from local NGOs, linked with corruption, and is even sold by different groups in secondary markets instead of reaching its intended target (Elayah et al., 2022). Of course, as indicated by Doocey and Tappis, Elayah et al, and the World Bank, traditional in-kind aid (such as food aid) and cash transfers should be used together, and their use should be context-dependent (Doocy & Tappis, 2017; The World Bank, 2016; Elayah et al., 2022). What remains clear from the academic literature is that the centrality of traditional food aid as a response to humanitarian crises requires a rethinking, and that cash transfers represent a modern, forward thinking approach which requires increased consideration.

Versatility of Cash Transfers Versus Food Aid

Perhaps the strongest argument for cash transfers is that they can be spent however the beneficiary sees fit, meaning that the aid can essentially be tailored to suit the needs of any individual situation. While food aid is by definition narrowly focused, cash transfers allow for a broad range of uses, from “paying rent to [improving] access to food, water… productive assets and inputs, and basic services” (Doocy & Tappis, 2017, p.23). Most surprising, however, is that in certain contexts cash transfers can actually be more effective at increasing the beneficiary’s access to food than traditional food aid. This idea is based on entitlement theory, which states that “famines are caused by an inability to gain access to or purchase food, rather than an overall lack of food availability” (Ibid., p. 23). In such a scenario where markets are still functioning at a basic level, cash transfers would thereby allow beneficiaries access to markets where they could purchase the food and other vital goods that they lack. However, opponents of cash transfers bring up valid opposition to this point, questioning whether access to markets is plausible in humanitarian emergencies. This argument stems from a logical question: What is the point in giving people money if there is no food to buy, or if the price is too high? Despite such arguments, it remains clear that in the majority of situations, there are markets which allow for the adequate purchase of food (Vos & Dempster, 2021). One illustration of this is that 60% of the world's refugees live in cities, an environment with stable markets and one well suited towards cash transfers (Vos & Dempster, 2021). Yet, food aid also has various benefits, most important of which is that it addresses a fundamental issue in that in certain situations, such as in South Sudan during the Darfur Crisis, there is simply not enough food available in local markets (Elayah et al., 2022). In such situations, food aid would be better suited towards resolving the humanitarian crisis than cash transfers.

Another central theme component in the debate between food aid and cash transfers is that the choice between cash transfers and food aid is context specific; there is not a one size fits all solution. For example, in 2018 the IRC launched a program giving monthly cash transfers of 66 dollars to Venezuelan refugees in Colombia (World Food Programme, 2019). Such an initiative would work well in Colombia, where there is an abundance of food, steady markets, and a readily available supply of goods (Ibid). On the other hand, in Venezuela, where 3 out of 10 Venezuelans report food regularly being unavailable and where hyperinflation has drastically increased food prices, there would be a greater argument for the necessity for tangible food aid (Ibid.). However, in the majority of situations, cash transfers provide an alternative to food aid which is inherently more tailored to the beneficiary’s needs and more preferred by recipients, and also allowing them to live with greater dignity (Ibid). It is precisely this autonomy of choice which cash transfers provide which not only ensures the satisfaction of recipients needs, but also aims to restore the dignity of the beneficiaries. This being the case, the cash based approach is part and parcel of an evolving humanitarian approach which strives to be people focused and demand driven, making aid as flexible as possible so that it can be applied where it is most critical for those on the ground (The European Commission, 2022).

Cash Transfer Implementation Guide. (2017). [Photograph]. Mercy Corps.

Cash Transfers as a Quicker and More Efficient Alternative

Another of the primary arguments in favour of cash transfers is that it is more readily distributable and more efficient as compared to food aid. This is the case for four primary reasons. First, various studies, including those by the World Bank and the Center for Global Development, conclude that cash transfers are more cost-efficient than food aid (The World Bank, 2016; ODI, 2015). The World Bank study in particular found cash transfers to be 25 to 30% more cost efficient (The World Bank, 2016). Such differences in cost are primarily the result of the costs associated with importing, transporting, and storing in-kind food aid, costs which are not incurred in the case of cash transfers (Ibid).

Secondly, the cost-efficient nature of cash transfers allows humanitarian agencies to be more efficient by making their total limited funding go further. With cash transfers lowering transaction, transportation, and storage costs, more funds are freed which can have a direct and immediate impact on the lives of beneficiaries (Ibid). In Somalia for instance, a Red Cross study found that “35% of food aid budgets went to beneficiaries, compared to 85% of cash transfer budgets” (International Federation of Red Cross and Red Crescent Societies, 2015, p.11). In other words, putting money in people's hands is more inexpensive than transporting and storing food aid while with cash transfers humanitarian agencies can allocate more of their budget directly to those in need to humanitarian assistance.

Thirdly, digital cash transfers have the ability to be tracked, which allows for improved monitoring and reporting regarding how the money is spent (ODI, 2015). For example, the transparency and tracking of digital payments offers opportunities to address donor government concerns about potential corruption and diversion, including to terrorist groups, which could hinder the expansion of cash transfer programming in some settings (Ibid). Such accountability measures, such as increased transparency and tracking of digital payments allow for more precise tailoring of cash transfer initiatives, and provide lessons for how to identify future scenarios in which cash transfers would represent a high probability of success, thus creating a positive feedback loop in terms of future efficiency (Ibid).

Lastly, “business and technology have already played an important role in enabling cash to be delivered efficiently on a large scale”; by partnering with the private sector, governments and International organizations can leverage even greater efficiency, effectiveness, and value for money (Ibid, p. 23). This means that as the scale of cash transfer initiatives grows, transfers will become even cheaper and more efficient.

Echo plane. (2007). [Photograph]. Wikimedia Commons.

The most common argument in opposition to these efficiency metrics is that in impoverished environments with little technological infrastructure, cash transfers won’t be accessible, whereas food delivery might be (Ibid). This is a valid point; any cash transfer initiative must first be analyzed for feasibility based on “the context and an assessment of whether people will be able to buy what they need safely in local markets… and whether cash can be safely delivered”(Ibid, p. 21). This being the case, there is ever increasing evidence that methods to reach beneficiaries digitally are expanding rapidly along with technological literacy (Ibid). Additionally, cash transfers “offer high levels of security to both beneficiaries and agencies, as well as reduced corruption risks” due to increased monitoring and evaluation, as well as the ability to send funds directly to recipients (Ibid, p. 23). On the other hand, in-kind food aid can often be misappropriated or diverted with unintended consequences, while transporting and sheltering it also presents complications for accessibility in difficult environments (Ibid). It has been determined for example, that in the current Yemeni conflict, local NGO's have taken part in biased distribution of in kind food aid, not distributing it based on need, but instead on political allegiance (Elayah, 2022). In one of the most infamous examples of the drawbacks of food aid, the Ethiopian famine of 1984-1986, international humanitarian food aid was funnelled through the Ethiopian government, who then used the in-kind aid as as a counter insurgency tool to extend influence in strategic areas, while intentionally failing to distribute the aid in areas that didn't support the government (Kissi, 2005). Digital cash transfers on the other hand can be distributed directly to recipients, eliminating the risk of misappropriation and corruption from middle men, associated intermediaries, and bad actors (ODI, 2015). This being the case, cash transfers not only provide a more feasible method for directly reaching those affected by humanitarian emergencies, but also provide a more secure method than food aid.

Fortnam, P. (2006). Gode, Ethiopia [Photograph]. Wikimedia Commons.

Cash Transfers Promote Independence and Local Market Development

One of the most exciting yet complex areas in which cash transfers can make a big difference is in building up local civil societies, markets, and social payment systems. Already, positive effects have been seen on local markets where cash transfers have not caused inflation and have generated positive impacts on local economies, stimulating demand and enabling investment (Ibid). Additionally, cash transfers have been found to encourage recovery of credit markets by enabling loan repayment, increasing future incomes, and positively impacting nutrition and poverty (Ibid). Cash transfers have also played a part in supporting financial inclusion, a process which is accelerating rapidly today, with 62% of adults globally owning a bank account (Ibid). Growing financial inclusion not only facilitates the disbursement of cash transfers, but also creates new opportunities to “expand financial networks in some of the world’s poorest regions by attracting investment in systems... and by linking people with payment systems" (Ibid, p. 23). Such expansion of financial networks also promotes partnerships with the private sector which could prove beneficial for both humanitarian actors and local financial institutions (Ibid).

Perhaps the most important of these benefits from humanitarian cash transfers is to engage government and civil society in building up social protection programs aimed at reducing poverty. It is a goal of development and humanitarian actors to help build and promote these cash based social protection programs which can be designed to be dependent and shock resistant (Doocy & Tappis, 2017). This initiative is twofold. One the one hand, in humanitarian contexts in which existing social programs are established in a country, humanitarian actors can tap into these existing frameworks to expedite cash transfers to vulnerable populations (Ibid). On the other hand, in humanitarian emergencies in which these systems have not yet been established, humanitarian organizations can play an important role in establishing the building blocks for the future formation of such social programs (Ibid). The end goal is for humanitarian agencies to work towards establishing local and nationwide cash transfer systems which are shock resistant and which will hopefully have a lasting impact beyond the current crisis. In this sense, cash transfers represent the broader goals of humanitarianism, which is not only reacting to crises, but working together to build up local capabilities so that humanitarian agencies are less necessary. When compared to food aid, the aims and potential implications of cash transfers appear far more valuable and oriented towards the future goals of humanitarianism.

Conclusion

The ambitious goals of cash transfers are to create a system which is supportive of local markets, meaningful to beneficiaries, flexible, financially inclusive, and above all gives affected persons more control over their own lives (Ibid). Such ambitious and almost revolutionary goals make it clear that food aid, though still suitable for a multifaceted humanitarian approach, is less dynamic than cash transfers. Of course, whether these goals are met in full or fall short remains to be seen. What is encouraging though are the aims, which are ambitious in scope and have seen positive results already. Equally important is how cash transfers represent a strong move towards people-focused aid, and towards tailoring humanitarian assistance towards building up local communities and shock resistant self sustainable social programs. The current and future benefits of cash transfers, though context dependent and not mutually exclusive from in kind food aid, clearly represents a more valuable humanitarian tool than food aid.

Bibliographical References

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Visual Sources

Cash Transfer Implementation Guide. (2017). [Photograph]. Mercy Corps. https://www.mercycorps.org/research-resources/cash-transfer-implementation-guide

Fortnam, P. (2006). Gode, Ethiopia [Photograph]. Wikimedia Commons. https://manage.wix.com/dashboard/a79f2ac4-b9c1-4bfe-bfcc-37e8147d7495/blog/create-post?lang=en

Khokana, Nepal. (2015). [Photograph]. World Vision. https://www.globalcitizen.org/fr/content/cash-transfer-humanitarian-aid-poverty-effective/

Echo plane. (2007). [Photograph]. Wikimedia Commons. https://commons.wikimedia.org/wiki/File:ECHO_plane.jpg