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humanitarian response

A masterclass on cash transfers and how to use High Level Panels to influence Policy

Duncan Green's picture

One of the things I do in my day-a-week role at LSE is bring in guest lecturers from different aid and development organizations to add a whiff of real life to the student diet of theory and academia. One of the best is Owen Barder, who recently delivered a mesmerizing talk on cash transfers and the theory of change used by his organization, the Center for Global Development, which is one of the most effective think tanks around (although I don’t always share its politics….). Here’s the summary (and here are his powerpoint slides, if you want to nick them).

Owen chaired a recent high level panel on humanitarian cash transfers and presented its work in his talk. The traditional aid response is ‘people are hungry due to drought, flood, conflict etc → there isn’t enough food → we need to ship in loads of food’. Both arrows are wrong: Amartya Sen showed that the problem in famine is not lack of food, but lack of purchasing power among the affected populations – in nearly all of Ethiopia’s famines, the country has produced enough food to feed its people. The second arrow is wrong because giving people cash is usually a much more effective response than shipping food over from the US or wherever: the food often arrives too late, just when local farmers are recovering, and a flood of free food promptly destroys local markets. The evidence is now substantial:

  • Cash transfers are 25-30% cheaper than in kind aid (so more food per dollar)
  • When people are given in kind aid, they typically sell 30-50% of it to get the cash they need, at roughly 30% of the actual cost of the aid – a massive level of waste
  • When you ask refugees, they invariably say cash is better than stuff (eg 80% of Syrian refugees in Lebanon)

Plus it’s good politics – cash stimulates the local economy, so local people are less resentful of the influx of refugees, and is more respectful – refugees don’t all want the same thing; cash respects their right to make decisions about their lives.

Cash as a response to humanitarian distress

Suvojit Chattopadhyay's picture

Men thrashing grain in IndiaIn the context of the subsidies regime in India, there is an ongoing debate on the suitability of cash transfers. With the much talked about JAM trinity – the Jan Dhan zero-balance bank accounts, Aadhar and mobile phones, it certainly appears that the state-sponsored welfare system is set to see a significant shift. While this shift may well fall short of being transformative, we could still expect an improvement in how benefits are delivered with reduced leakages to recipients. The use of the JAM model to extend the welfare net and to improve its efficiency implies a decisive move towards cash transfers, and therefore, one may be closer to settling the debate, at least in terms of favoured government policy.

But the argument in favour of cash is not new. I recently came across a 1986 United Nations University WIDER paper by Amartya Sen where he elegantly outlines five arguments in favour of direct distribution of cash in times of food crises. In this paper Food, Economics and Entitlements, Sen tackles this question in the context of a famine. First, Sen demonstrates how even in contexts where aggregate food output is plentiful, the ability of the poor to acquire this food is a whole different matter. Localised food shortages and famine-like situations can arise due to various reasons – at times when the prices of staples rise sharply, or when the prices of products the poor sell fall sharply. However, this isn’t obvious to policymakers as long as they view food sufficiency through the lens of per-capita food production alone.

When famines manifest themselves, there could be multiple policy response options. Sen talks of direct food distribution as the favoured method in those times. Three decades down the line, food relief continues to be popular in times of distress, even as direct cash transfers (as described above) are gaining ground as a favoured instrument of social welfare policy. Policy responses in these times is meant to enhance the ability of those affected, to ‘acquire’ more food. Both market-based solutions that begin with greater availability of cash, and direct distribution are potential paths to this end.
 

Weekly Wire: the Global Forum

Kalliope Kokolis's picture

These are some of the views and reports relevant to our readers that caught our attention this week.

Washington Post 
New apps transforming remote parts of Africa

“For generations, breeding cows in the rural highlands of Kenya has hinged on knowledge and experience passed down from parents to children. But Mercy Wanjiku is unlike most farmers. Her most powerful tool is her cellphone, and a text messaging service called iCow.

The service informs her when her cows are in heat, which feed might boost their milk output and what their fair market price is. And when she needed a veterinarian recently, she relied on the service’s extensive database. “Otherwise, it would have been hard to find someone qualified in my area,” said Wanjiku, a 29-year-old farmer in Mweru, a village about 100 miles north of the Kenyan capital, Nairobi.” READ MORE

Weekly Wire: the Global Forum

Kalliope Kokolis's picture

These are some of the views and reports relevant to our readers that caught our attention this week.

ICT Works
10 Observations on Technology in Africa from Eric Schmidt of Google

“After a week of business meetings in the cities of sub-Saharan Africa, Eric Schmidt posted a detailed list of observations. As he used to run Google and is still on their board, I'll give him a bit more credit than others who might want to opine after a week's exposure to the continent's dynamism.

Eric starts with 3 positive major trends:

  1. the despotic leadership in Africa from the 1970s and 1980 is in decline, replaced by younger and more democratic leaders
  2. a huge youth demographic boom is underway, with a majority of the population of 25, or even under 20
  3. mobile phones are everywhere, and the Internet in Africa will be primarily a mobile one”  READ MORE