Cash transfers in emergencies: a review of recent experiences

Summary of Review1

This recently published paper by the British Red Cross aims to answer the following questions:
  • Can cash transfers improve access to food in the same way as direct food distribution?
  • What effect does a cash distribution have on the local economy?
  • Is cash assistance practically feasible?
  • Does it have advantages over traditional forms of relief?
The authors examined a number of experiences of cash transfer programmes namely in Western Sudan (1984), Ethiopia (1984-85 UNICEF), Ghana (1994 Action Aid), Bangladesh (1998 SC UK), Guatemala and Nicaragua (1998 Red Cross), Albania (1999 UNHCR), Kosovo (2000 UNMIK) and Southern Africa Safety nets (2000 ESCOR)

Main findings
i) The body of evidence on cash based interventions is limited but growing as agencies (and donors) seem increasingly willing to use cash to complement 'traditional' forms of relief and rehabilitation.

ii) The rationale for earlier programmes of this type e.g. in Sudan, Ethiopia and Ghana, was that famines were due to an entitlement failure as well as failure of supply. Also the distribution of cash was more cost effective and quicker than distribution of food. More recent programmes have been based on the idea of helping people recover livelihoods, rather than simply supporting survival.

iii) The Ethiopian and western Sudan experiences lend qualified support to the idea that during a famine, cash distributions in pockets of deficit close to surplus producing areas can bring about an inflow of food at reasonable prices. The Ethiopian case provided solid evidence of the advantages in terms of cost and speed. The Hurricane Mitch agricultural support programme showed how cash can contribute as one key element in a mixed recovery package.

iv) The southern Africa safety net study indicated that beneficiaries tend to use cash for social and productive investment only after consumption needs have been met. Evidence of squandering cash on alcohol or gambling was not found in any of the case studies.

v) The Ethiopian experience demonstrated problems associated with cash delivery into an economy where food prices were already rising rapidly due to overall food shortage.

vi) Several districts in the Ethiopian and Albanian programmes found the administrative burden imposed by the programme (especially on the banking system) exceeded capacity thereby causing delays.

vii) The monitoring and accounting needed to be more stringent than that of food or non-food items, and was found to be inadequate in at least two of the projects.

viii) In some societies the exclusion of certain groups from economic activity or ownership (e.g. women in southern Africa) can make attempts at equitable cash distribution within household problematic.

In conclusion, these valuable lessons give cause for cautious optimism and pointers, as to circumstances in which cash relief can work to best effect. However, key questions remain:

  • Under what circumstances will traders respond to an increase in demand?
  • What level of purchasing power is necessary and at what distance from supply to ensure an inflow of food or other items?
  • How do prices behave following an injection of cash?
  • At what level of cash inflow does inflation become inevitable?
  • How do beneficiaries (gender/economic status) in varying circumstances (emergency/non-emergency) spend cash?
  • How can investment in livelihoods be encouraged while allowing beneficiaries the flexibility to satisfy their consumption needs?
The authors assert that only through carefully planned and monitored experimentation (and pilot projects) will these questions be answered. As learning improves on how to minimise risks and maximise benefits for communities confidence in cash based interventions will grow.

1 Buying power: the use of cash transfers in emergencies. British Red Cross. Peppiatt D., Mitchell J. and Holzmann P., November 2000

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