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Income and employment support (Special Supplement 3)

5.1 Introduction

The provision of cash as an emergency response has the potential to impact on all elements of the livelihoods framework by providing the means to protect or recover assets, support livelihood strategies and meet basic needs, or to support institutions (for example, credit systems). Furthermore, it gives people choice and thereby respects the dignity of the affected populations. The provision of cash as part of an emergency response is becoming increasingly common practice for many NGOs. The need for cash transfers as part of long term social safety nets is also increasingly recognised by donors, the UN and NGOs.

An Oxfam CFW project in Afghanistan. Embroidery was identified by the women as something they could and wanted to do.

Most of the major NGOs are now supporting and implementing cash transfer interventions in emergencies, e.g. Oxfam, SC-UK, ACF, Concern WW, CARE, CRS, MCI, and also the IFRC, British Red Cross and local Red Cross (RC) societies. UN agencies dealing with emergency cash programmes include UNDP (in Aceh) and, more recently, WFP in Sri Lanka. Cash programmes have been implemented in a wide variety of emergency contexts, such as floods, drought, chronic food insecurity and conflict, and amongst refugee, IDP and host populations. Interest in cash programmes accelerated with the tsunami response, as it was quickly realised that sufficient food was available locally and markets were functioning or could quickly recover. An unprecedented public response to the tsunami meant that most agencies had sufficient funds to try out something new. As a result, there is now an increasing body of knowledge and experience in cash programming.

This chapter reviews the most common forms of income and employment support in emergencies, which are cash grants, cash for work (CFW), and in some cases, micro-finance initiatives. Food for work (FFW) is another form of employment support, already discussed in the earlier chapter on food aid. Many of the principles of CFW programming, however, also apply to FFW programmes. Vouchers, either in the form of cash, commodities or services, can be considered both as income support or as market support and are covered in Chapter 6 on access to markets, and again under production support (chapter 7), where seed vouchers are the most common voucher intervention. Cash transfers as part of social welfare schemes are touched upon briefly, as there is increasing recognition of the need for longer term assistance to meet basic needs in countries facing long term livelihoods crises. The final section has case studies on cash grants and cash for work in Sri Lanka, income generation for refugees in Guinea, and micro-finance in Argentina.

Income generation is not covered separately, as in many cases, the use of the cash from grants or CFW is used to generate income, for example by investment in livelihoods or business assets. As such, cash grants to re-establish small scale business or to invest in livelihood assets are not very different from the income generation case study in section 5.7.2. In more stable contexts, income generation projects also allow people to diversify their income through small scale, self-employment business schemes. Projects may include support of people in management, supervision and implementation of their businesses.

Finally, there are less common forms of income support which should also be considered in determining appropriate interventions, e.g. fee waivers (for example, for schools and health services), insurance schemes and tax breaks, but these are not covered here.

5.2 The rationale for cash interventions

Emergency affected populations often lose their sources of income, savings or assets. In some emergencies, items needed for immediate survival or livelihood recovery are available on the local market so that it makes sense to give people money to meet their needs. Furthermore, the provision of cash rather than commodities means that people can spend it on what they need most, according to their own priorities.

All cash programmes broadly aim to increase the purchasing power of disaster-affected people so that they are able to meet their minimum food and non-food needs, or to assist in the recovery of people's livelihoods. Specific objectives depend on the context, but may include debt relief, the purchase of livelihood assets, purchase of assets or services to re-establish small businesses, and increasing access to basic services such as health care. Cash transfer programmes may also have broader objectives to stimulate or help in economic recovery.

Cash transfers can stimulate markets in a number of ways, for example, by increasing demand and by relieving debts. In many countries, people take credit from local shops, but in disasters may not be able to pay off debts because of loss of assets and income. Traders, in turn, will not be able to obtain supplies. In such circumstances, the provision of cash grants to affected households, together with credit for shopkeepers, can stimulate the movement of essential supplies into affected areas (Brass, personal communication; SC-UK, 2005, November; Lautze et al, 2002, May).

In cash interventions, recipients get goods and services directly from local traders and service providers, which stimulates the local economy, and reduces the need for much of the logistics input required for commodity distributions. Cash distributions are also much more cost-efficient when compared to food aid. For example, a study in Ethiopia found that cash transfers were 6-7% cheaper than local food purchase, and between 39 and 46% cheaper than imported relief food (Adams and Kebete, 2005, June). The advantages of cash interventions are given in box 9.

Cash for work activities to control gullies in Somaliland

Evaluations of cash interventions show that the most common uses of cash by the recipient population is to meet basic needs, such as food, cooking utensils, clothes, to pay off debts, purchase livelihood assets, or for education and health care (see box 10). The use of the cash is also determined by the method of making the payments, whether other forms of assistance are provided, the total sum beneficiaries receive, and the timing of the payments. Oxfam evaluations show that when cash is distributed on its own, the majority is spent on food (e.g. Creti, 2005, February; Jones, 2004; Khogali and Takhar, 2001). However, this may change if cash is provided after the harvest, as ACF's experience in Somalia showed. Post-distribution monitoring showed that during the hunger gap, 60% of cash was used to buy food, and only 3% used for livestock purchase while after the harvest, 31% was used to buy food, and 47% to buy livestock (Mutambikwa, 2006, January). Cash distributed at harvest time in Ethiopia allowed people to renegotiate contractual arrangements for crop sharing for the next season. For 16% of households it also meant that they did not need to rent out land (Adams and Kebete, 2005, June).

If cash is provided as a complement to food aid, then it is more likely to be spent on livelihood recovery, such as restocking, setting up small businesses and the payment of school fees. However, this also depends on context and the type of food rations provided. For example, both Oxfam and ACF evaluations of CFW programmes in Aceh, found that even though cash beneficiaries received a WFP food ration and other food items from NGOs, the major use of cash was for food (ACF, 2005, July). Larger expenses were community contributions, clothing and gold (savings) (Brocklebank, 2005). Small regular payments are more likely to be used to buy food, whereas larger lump sums are more likely to be spent on productive assets and re-establishment of economic activities (Frize, 2002, Adams and Kebete, 2005, June).

Box 9 Advantages of cash transfers

Choice: cash provides households with a greater degree of choice on spending priorities.

Cost-effectiveness: cash is likely to be cheaper and faster to distribute than alternatives such as restocking, seed distribution, and food distribution.

Dignity: offering cash maintains people's dignity, instead of treating them as passive recipients of relief.

Economic recovery: injections of cash have potential benefits for local markets and trade.

Flexibility: cash can be spent on both food and non-food items and is easily invested in livelihood security.

Empowerment: cash can improve the status of women and marginalised groups.

Source: Creti and Jaspars, Eds (2006).


Box 10 Examples of beneficiaries' use of cash

Purchase of food, kitchen utensils, clothes

Paying off debts and loans

Payment of school costs: fees, clothes, transport

Purchase of livestock and agricultural inputs

Payment for health care

Setting up small shops

Purchase of tools for petty trade: for example woodcutting, donkey carting

Source: Creti and Jaspars, Eds (2006).

Despite the clear advantages of cash programming in many contexts, commodity distribution is still the most common emergency response. Fear of insecurity, diversion and corruption appears to be one of the main deterrents to cash programming. Security is an issue that needs to be taken seriously in any programme, but there is no evidence that cash distributions create greater risks than in-kind distributions. In many emergencies, food aid or other commodities also carry considerable risks, and the risks associated with cash programming must be carefully balanced against the risks associated with other ways of providing assistance. CFW has, in some situations, proved to be safer than food distributions. For example, an Oxfam programme in Haiti found that it was impossible to do food distributions because trucks were attacked and looted, but CFW was possible when the disbursement of cash was carried out through local shops (Creti, 2005, February). Similarly, in Uganda, Oxfam found that CFW was less subject to diversion than food aid (Khogali and Takhar, 2001).

Another common fear is that cash will be spent on nonessential commodities. There are few cases where it has been reported that cash has been spent on non-essential items, for example, Oxfam found that some of the cash was used to purchase cigarettes in Aceh. In such circumstances, stopping the cash distribution is unlikely to stop people from buying cigarettes. Replacing cash with commodity distributions will release income that would otherwise be spent on these commodities, which can still be spent on cigarettes. There are many other fears around cash programmes, for example that women may not have control over the cash, or that cash distribution on a large scale will cause inflation, but these have generally not been borne out by practice. Since cash interventions are relatively new for most humanitarian agencies and certain risks cannot be anticipated, some agencies are implementing on a small scale first and then rolling out programmes where successful.

5.3 Appropriateness of cash interventions

Post tsunami CFW beneficiaries being paid by Oxfam staff

Many agencies, academics and donors recognise that cash as an emergency intervention is appropriate when foods (or other goods) are available and markets are functioning and accessible. In addition to these two criteria, a third criteria is that cash can be delivered safely and effectively.

Whilst basic criteria of food availability and functioning markets appear straightforward, these criteria are difficult to determine in practice. There is no agreed methodology for market assessments, and where assessments have been conducted, interpretation may differ between actors. (Market analysis is discussed further in chapter 7). Food availability may also be hard to determine precisely, as in many countries crop assessments are imprecise, while population estimates are notoriously unreliable. In Afghanistan, the WFP has combined a number of indicators to determine whether food or cash is more appropriate to meet food needs (Hofmann, 2005). These include:

The ability to safely deliver cash in emergency contexts is crucial. Reviews and evaluations have found that where local banking systems exist, or there are informal money transfer mechanisms, these are by far the safest and most effective ways of delivering cash to beneficiary populations (Acacia consultants, 2005; Hofmann, 2005). The use of local banks minimises both the risk of theft during delivery, and the risk to beneficiaries as they can choose the day and amount of cash to withdraw from their account. Oxfam's programme in Uganda involved direct distribution of cash and employed a variety of mechanisms to minimise security risks, for example by varying payments days, decentralising distribution, and limiting the number of people who have information about when payment will take place (Khogali and Takhar, 2001). The issues to consider in an assessment to determine the appropriateness of cash interventions are summarised in table 4.

Table 4 Key elements of an assessment of the appropriateness of cash intervention
Element Key issues
Needs The impact of the shock on people's food and income sources as assets
People's ability to meet their basic needs with the food and income available after the shock
People's ability to recover their livelihoods with the assets and income available after the shock
The impact of people's coping strategies on livelihoods and dignity
Likely uses of cash Preference of the emergency-affected populations
Social relations and power within the household and community Intra-household priorities and control over resources
Intra-community differences in control over resources
Likely impact of cash distributions on existing social and political divisions
Food availability Available food, or other goods, nationally and locally, and whether this is sufficient to meet needs
Normal seasonal fluctuations in food availability
Government policies or other factors which may affect food availability
Markets Whether markets in the affected area operating and accessible
Availability and price of essential basic items that people need available in sufficient quantities
Restrictions on the movement of goods How well the market functions, is it competitive and integrated
Likelihood that traders will respond to an increase in demand
Risks that cash will cause inflation in prices of key products
Security and delivery mechanisms Whether banking systems or informal financial transfer mechanisms are functioning
Risks of cash benefits being taxed or seized by elites or warring parties
Comparative risks posed by in-kind alternatives to cash
Corruption Risks of cash being diverted by local elites or project staff
Comparative risks of providing in-kind alternatives
Availability of accountability safeguards to minimise these risks

Adapted from Harvey (2005, February) and Creti and Jaspars, Eds (2006).

Table 5 Advantages and disadvantages of different types of cash intervention
Cash for work (CFW) Vouchers Cash grants
Easier to target than vouchers or cash grants
Creates community assets
Easier to register labourers for CFW, than beneficiaries for cash grants
Encourage traders to bring in certain goods
Can be directed towards food purchase and consumption
Voucher exchange is easy to monitor
Less vulnerable to inflation and devaluation
Security risks can be lower than for cash for work or cash grants
Quick to distribute and circulate
Minimal involvement of implementing agency at point of trade
Low administration costs
High administration costs
Some of the poor or food insecure households may not be able to participate (e.g. elderly, ill, labour poor households, women with other household duties)
Takes up to 6 weeks to organise
May interfere with labour markets or other household activities or priorities
High administration costs
Risk of forgery
May create a parallel economy
May need regular adjustment by agency to protect from inflation
Can take 6 weeks or more to organise
Difficult to monitor usage
Targeting and registration are difficult, because cash is of value to everyone

Source: Creti and Jaspars, Eds (2006).


Box 11 Cash grants in Somaliland

In Somaliland in 2003-04, cash grants were targeted at those who were at risk of destitution as a result of drought. A total of 14,000 households were targeted. A $50 grant/month was based on the cost of food, sugar, oil, water for livestock and humans, drugs for humans and livestock, and relocation costs for livestock, i.e. the total value of essential goods and services. The grant was also kept fairly low to deter recipients from undesirable spending such as on weapons and qat (a local drug).

Even in an unstable environment such as Somaliland, this programme was found to be a success. Monitoring and evaluation of the programme found that the most vulnerable members of the community had been successfully targeted through community based targeting methods, and the main uses of cash were food, water, health, and debt repayment. Some households were able to move their animals from overgrazed pastureland to less affected locations. The incidence of begging and reliance on social support mechanisms fell by 90%. Furthermore, there were no incidences of misuse of cash or negative impact on social relations within or between households. Security risks were kept to a minimum through the use of local money transfer companies to disburse the cash.

Source: Ali et al (2005, March)

Different types of cash programmes will be appropriate in particular situations. CFW is by far the most common cash intervention. The main reasons for this appear to be that agencies are able to retain some degree of control over the programme. Cash grants, on the other hand, require a change in the mind-set of aid workers, as control and responsibility for identifying and meeting needs must be transferred to the beneficiary communities. CFW is appropriate where work needs to be carried out, e.g. rehabilitate houses, or public structures, or where works can assist in halting environmental degradation. Furthermore, although registration is notoriously difficult for any form of relief assistance, registering people for work makes is a lot easier. The main disadvantage of CFW is that it takes a long time to organise if the worst affected or poorest sections of the population are to be effectively targeted. The use of vouchers is usually recommended where there is a need for specific items (such as seeds) and/or to encourage traders to bring in food from surrounding areas. Table 5 sets out some of the advantages and disadvantages of the different types of cash transfers. The challenge for future cash programmes will be first, to agree on the criteria for implementing different types of cash interventions, and second, to implement cash programmes on the basis of rational criteria rather than allow influence of unfounded fears or assumptions.

5.4 Cash grants

A barber shop supported by a cash grant in Sri Lanka

Cash grants have been provided for a variety of purposes (see table 6), but the main forms are grants to meet basic needs or to purchase livelihood assets. The UNHCR have been implementing cash grants for returnees for many years while the Swiss Agency for Development and Cooperation (SDC) have implemented cash grants in at least 13 countries over the past five years. Many of these grants have been to families hosting refugees or displaced populations (Harvey, 2005, February). The cash relief programme in Somaliland, implemented by Horn Relief and Norwegian People's Aid, is one of the few well documented examples of cash grants in emergencies and is summarised in box 11.

Following the tsunami, several agencies started experimenting with cash grants. In many ways, the early CFW interventions by Mercy Corps and Oxfam in Aceh, Indonesia were a form of cash grants. They targeted entire communities with the main objectives of providing people with an income quickly, to stimulate the economy, and to clear roads and villages for rapid return home. Both Oxfam and Mercycorps later gave grants to re-establish livelihoods. The main aim of cash grants for livelihood recovery was to enable households to purchase the assets needed to re-start their income-earning activities (see Sri Lanka case study 5.6.2). In Indonesia, the cash grant aimed to cover the cost of shelter, workshops, tools, equipment, and raw materials for small businesses. As new business opportunities arose, Mercy Corps also started a financial access programme which provided loan guarantees to financial institutions to provide loans to small enterprises (Mercy Corps, 2006, January). Such programmes are considered in more detail in section 5.7.

WFP is piloting cash grants in Sri Lanka. The cash provided has the same value as the food ration, and the key question asked in this pilot intervention is whether households that receive cash are more able to improve their food security than if provided with food aid, because of the choice that cash gives to the beneficiaries. A rigorous monitoring and evaluation system has been developed to compare the respective impact of cash and food aid interventions.

Cash grants are increasingly considered as an option in emergency response. For example, the British Red Cross distributed cash grants in Niger in 2005, and a number of agencies are piloting direct cash transfers in Southern Africa in 2005 and 2006.

5.5 Cash for work

Afghan women's group members weaving as part of CFW project

This provides cash in return for work on a public or community employment scheme The aim is that the entire community benefits from the work carried out and activities can include improving the public health environment, the rehabilitation of public buildings or roads, different forms of agricultural rehabilitation (e.g. storage houses for crops, or wells to provide domestic water or water for livestock and fields), and natural resource conservation activities, such as soil and water conservation techniques or terracing. One of the key criteria for implementing CFW programmes is that the activity is an essential part of the emergency operations and is needed in order to restore livelihoods. However, CFW is often implemented because of the greater degree of control that CFW gives the implementing agency compared to cash grants.

The objectives of CFW are:

Oxfam has developed a set of principles for the implementation of cash programmes, many of which are also found in the Sphere guidance notes for the income and employment minimum standard (see table 7).

Table 6 Different types of cash grants
Type of grant Description and application
Grants to meet basic needs Grants to meet basic food and non-food needs. Can be one off, but are usually provided regularly, e.g. monthly basis. Applied in Somaliland by Horn Relief, USAID in Mozambique, Iranian Red Crescent in Iran, SDC in Mongolia, ICRC in West Bank, Palestinian Territories.
Grants to host families Grants to reduce economic burden of hosting IDPs. Applied by SDC. Countries have included Indonesia, Serbia, and Ingushetia.
Grants to rebuild housing Grants for materials to rebuild houses, together with technical assistance. Applied by SDC in Kosovo. Beneficiaries had to host displaced people in return.
Grants to replace livelihood assets Cash to purchase essential livelihood assets or to purchase the materials necessary to re-establish business. Applied by Oxfam and Mercy Corps in response to the tsunami.
Community grants Grants for communities to design and manage their re-emergence from disaster. Applied by Mercy Corps in Indonesia.
Grants for returnees SDC in Bosnia and Kosovo. UNHCR to cover transport costs for returnees to Afghanistan.

Source: Harvey (2005, February)

Table 7 Principles of CFW programming
Principle Explanation
The food-insecure or the poorest people should be targeted. The beneficiaries of the programme should be those who have lost a large proportion of their food or income sources as a result of the disaster.
The most physically vulnerable people should be included. Arrangements are made for those unable to work, for example they could be given cash grants or vouchers instead of CFW.
The community should 'own' the programme. The community identifies projects activities. This involves a process of community mobilisation and awareness about the nature and process of CFW programming.
Work should be labourintensive. Programmes should employ as much unskilled labour as possible, to maximise impact on a largest possible number of affected households.
A gender balance should be ensured. Projects should promote female participation. A variety of activities should be implemented, a majority of which will be suitable for both men and women. Childcare arrangements may be needed.
Equal pay should be the rule. Women and men will be paid equally for agreed of working units.
Essential livelihood activities should not be undermined. Cash for work activities should not interfere with or replace traditional livelihoods and coping strategies, or divert household resources from other productive activities already in place.

Adapted from Creti and Jaspars, Eds (2006).

A number of other principles apply when planning the implementation of CFW programmes. The Sphere indicators for the income and employment standard provide good planning principles as well as benchmarks against which to monitor the achievement of the minimum standard. These include:

"Project decisions about timing, work activities, type of remuneration and the technical feasibility of implementation are based on a demonstrated understanding of local human resource capacities, a market and economic analysis, and an analysis of the demand and supply for relevant skills and training needs."

"Responses providing job or income opportunities are technically feasible and all necessary inputs are available on time.."

"The level of remuneration is appropriate, and payment for waged labour is prompt, regular and timely. In situations of acute food insecurity, payments may be made in advance."

"Procedures are in place to provide a safe, secure working environment."


Box 12 Challenges faced by Oxfam, Norwegian People's Aid and Horn relief in the Somaliland CFW programme in 2004

  • Some Village Relief Committee (VRC) members/foremen did not have adequate technical skills.
  • The vastness of the area made it difficult for close supervision of the micro-projects.
  • The CFW activities were highly regulated in respect to work norms and schedules, which conflicted with the beneficiaries' nomadic lifestyle.
  • Some women complained of long distances to and from the project sites. Old or expectant mothers were more disadvantaged.
  • There was an influx of people to the CFW sites who could not be included in the projects.
  • The amount of resources provided by the project was too little and was also spread too thinly, thereby reducing the immediate benefits from cash injections.
  • It was difficult to choose the target villages given the complex clan dynamics and the potential for conflicts when some clans were left out.
  • The destitute are still vulnerable after a drought.
  • At the beginning of the project, people who were accustomed to previous cash relief grants expressed reservation about CFW and influenced others.
  • The chronic environmental degradation and the vastness of the area is a big challenge for the sparse population. The task at hand is enormous.

Source: Acacia Consultants (2005, July).

CFW payment has sometimes been made on the basis of a unit of work completed, or as a daily wage. The different factors that have been taken into consideration in the past include:

A meeting of men in Waras, Hazarajat, Afghanistan. The men were part of an Oxfam CFW project (see picture p.5). The meeting was to get feedback on their attitude to the programme and their thoughts on CFW v FFW.

Past projects have made various arrangements for those unable to work on projects (but who are also amongst the most food insecure or poorest sections of the population) and to encourage the participation of women. For example, Oxfam often provides cash grants to those unable to work as part of CFW programmes. In others, special projects can be designed for those who are unable to participate in the main work activities, which may include the elderly, or women with small children. In Kenya, destitute elderly women participated in a project that produced housing materials since the work was light and could be done seated. In addition, tasks such as supervision, minding children, providing water, counting, and clerking were given to people who could not perform heavy labour (Lumsden and Naylor, 2002). In Afghanistan, women unable to leave home for cultural or religious reasons participated in group textile production and kitchen gardening (Jones, 2004).

Countries where sections of the population suffer chronic poverty and food insecurity, and where CFW has become a common intervention include Ethiopia, Kenya, Somalia, and Afghanistan. Common factors for each of these countries include:

Waiting for cash in Sri Lanka

CFW programmes in situations of chronic food insecurity, in particular where these are large rural dispersed populations, face numerous challenges (see box 12). Some of these relate to the nature of CFW projects; i.e. that they have high administration costs, and take time to plan, and may need particular technical skills to supervise projects. The most significant challenge, however, is the need for longer term programmes to meet basic needs in such situations. Most emergency cash programmes are short term, but the needs continue beyond the period of a typical emergency intervention. This is discussed in the next section.

5.6 Cash transfers as part of social welfare and social protection

Beneficiaries at Mirijjavila Bank, Sri Lanka

With the increasing recognition of chronic livelihoods crises with high levels of poverty and chronic food insecurity in much of the Horn, East and Southern Africa, there is a growing acceptance of the need for cash transfers as part of long term social welfare programmes. The rising prevalence and impact of HIV/AIDS, particularly in Southern and East Africa, has highlighted the need for longterm welfare programmes. Many donors (e.g. the World Bank and DfID) now recognise the need for multiyear commitments for the predictably food insecure. The Commission for Africa has proposed that African governments should develop social protection strategies to support communities with orphans and vulnerable children and recommended that donors should commit to long term, predictable funding of these strategies (DfID, 2005, October).

Signing for cash using a thumbprint in Zambia

Social welfare can be defined as assistance to meet basic needs for those who cannot meet such needs in normal times, whereas social protection includes a range of measures to protect people from shocks and to build up assets as well as meet basic needs (SC-UK, HIA/IDS, 2005). The term social safety net is also commonly used and includes measures to mitigate the impact of shocks.

There is relatively little experience of cash transfers as part of social welfare schemes in Africa. Some positive examples do exist, however, in Southern African countries. For example, Botswana and Lesotho have introduced non-contributory social pensions for adults who have lost their children due to HIV/AIDs and who are caring for their orphaned grandchildren. GTZ has successfully supported a pilot cash transfer in Zambia initiated in 2003 by the Zambian Ministry of Community Development and Social Services (GTZ, 2005, July). This was targeted at households with few able bodied adult members, mainly as a result of HIV/AIDS, and had a positive impact on food security, and children's nutrition, health and education. Also in Southern Africa, many NGOs are implementing home based care programmes (HBC) which is a community based approach to providing health care and other support to people living with HIV/AIDS, some of which include cash transfers. However, HBC implemented by NGOs are unlikely to reach the scale required for social welfare systems. The International Labour Organisation (ILO) calculated the cost of providing social welfare to the poorest 10% of households for seven African countries13, and found that in none of the examples would the cost would rise above 3.1% of estimated government expenditure, or between 3-5% of development assistance14 (DfID, 2005, October).

Sensitising beneficiaries prior to disbursement of cash transfer (Mongu Province) - for accountability and transparency and to promote HIV/AIDS awareness

Ethiopia and Afghanistan are examples where extensive donor support is provided to establish social protection programmes. Ethiopia is in the process of establishing an ambitious Productive Safety Net Programme (PSNP), planned for five years, with initial estimated beneficiaries of 5 million. It consists of an extensive public works programme for the chronically food insecure, and grants for those unable to work. The public works component builds on previous FFW and Employment Generation Schemes. The programme has experienced setbacks due to the administrative requirements of disbursing the cash, managing a balance between cash and food aid as payment (in particular when food prices are rising), and debates around policy. In Afghanistan, the National Emergency Employment Programme (NEEP), is a social safety net based on CFW, and is funded by the World Bank and ILO (Hofmann, 2005, June). Both the Ethiopia and Afghanistan national programmes rely heavily on the support of NGOs to implement the programmes.

A considerable challenge for the new development of state welfare systems is to ensure adequate and sustained financing, administrative and management capacity. This is especially the case where physical infrastructure and logistics are poor, and where state institutions are weak. Where government capacity for administration and monitoring is weak, such systems may be vulnerable to 'leakage' and corruption.

Projects implemented by NGOs on the other hand, tend to be small scale, which excludes large numbers of vulnerable people (SC-UK/HAI/IDS, 2005). Support for social welfare programmes raises both technical and institutional issues for most agencies. Some of these are summarised in box 13.

5.7 Micro-finance

In many situations of protracted displacement or post conflict, people will start small enterprises such as petty trade or service provision to meet some of their basic needs. People need access to credit to start such activities, and for these activities to grow. However, institutions which provide credit, such as banks, are rarely available in camp situations, and where they do exist, poor people may not obtain access due to their lack of creditworthiness or collateral. In such circumstances, people may get loans from local money lenders, or resort to damaging or illegal livelihood strategies.

Microfinance in emergency settings can include emergency loans, remittance services, loan rescheduling, loans to restore capital assets or to start new economic activities. Micro-finance has also been defined more broadly as any financial service targeted at low income people (including credit, savings, money transfer, insurance and currency exchange), and including services provided by community managed groups, NGOs, commercial banks, individual moneylenders, and collectors. For example, a recent pilot project by the World Bank in Malawi provides insurance for smallholder farmers whose harvests have been affected by drought. The project designed an index based weather insurance contract that will pay out if the rains required for groundnut production are insufficient. This section focuses on loans as the most common form of micro-finance in emergencies.

The main aim of micro-finance is to give poor or disaster affected population's access to financial services that will allow them to invest in ways that support their livelihoods. Microfinance differs from the cash grants for livelihood recovery in that beneficiaries are expected to pay back loans, and there is an expectation of durability of the financial services provided. Agencies planning micro-finance need to plan for a long-term intervention rather than a short term emergency response.

In emergencies, the distinction between grants and microfinance has sometimes become blurred because the institution implementing the project does not have the capacity to establish systems to retrieve the money. Alternatively, repayment has sometimes been cancelled when it is believed that clients are unable to repay the loan. This confusion can undermine the work both of formal and experienced micro-finance institutions and of informal financial services. In addition to general livelihoods assessments, the following needs to be determined before deciding on the suitability of micro-finance services (Wilson, 2002, March);

The most suitable candidates for microfinance services are home-based resident populations and returnees, both of who tend to have at least some assets and an incentive to stay where they are if they can earn a living (Doyle, 1998), although there is an increasing body of experience working with refugees and IDPs. Preconditions for the success of micro-finance projects include (Doyle, 1998):

Loans can be provided to individuals or groups, with group lending often preferred by NGOs as a form of collateral. This is not necessarily the preferred option by the recipient population, however, as was found in a review of micro-finance initiatives in Rwanda, Cambodia, Angola and Mozambique (Wilson, 2002, March). The same study found that people preferred to use local money lenders as they were more flexible than NGO schemes. Micro-finance is often accompanied by training to upgrade recipients' skills, which is frequently considered as important by beneficiaries as the loan itself (Jacobson, 2004, November). A study by Tufts University developed a number of best practice principles for micro-finance in protracted refugee populations, which are summarised in box 14.

Box 13 Challenges in establishing social safety nets in Kenya

In many parts of Kenya, acute food insecurity, as a result of poor rains, is exacerbated by underlying structural poverty and increases vulnerability to external shocks. The decline in livelihoods, and the number of people who are unable to meet their immediate needs at any time, is not being adequately addressed by the current response mechanisms. There is now a predictable caseload of chronically food insecure people who need continual or regular assistance to meet their basic food and non-food needs. Predictable needs can be met more effectively through predictable resource flows, which give government more control over management of food security responses and facilitate more joined up decision-making across relevant ministries and departments. There are several challenges to this approach, however:

  • In Kenya, as in many countries, emergency food relief is the only available instrument at scale. Transiting out of emergency food aid to address a chronic problem requires establishing an alternative system at national level. This needs policy change, stakeholder buy-in, significant resources and strong leadership.
  • A move away from relief is a huge challenge to some organisations, which are either unable or unprepared to change. It also stretches the mandate for organisations, particularly around funding.
  • While new systems are being developed, it is important that needs are still met and that support continues, so there is not a gap in delivery of resources.
  • There are organisational challenges due to artificial divides within organisations. There are differences of opinions as to what fits into the 'livelihoods' department and what fits into the 'humanitarian department'. Chronic food insecurity and multi-annual safety nets don't have a natural fit in either and there is a risk of them falling through the gap.
  • It is difficult to distinguish between who is adversely affected by a current dry period and who is already unable to meet basic food needs during normal times. This has resulted in a blanket approach to all food insecure people, using an emergency relief response.
  • A safety net will not operate effectively in isolation. Complementary programmes are needed to address underlying causes of food insecurity and poverty. Moreover, additional resources will be needed to respond to acute food insecurity at critical times.
  • Addressing chronic food insecurity directly through a multiannual safety net has implications for working through government, rather than parallel to government. This is a challenge to standard humanitarian practice, as well as to operating agencies that are used to working independently of government.

Source: Karen Tibbo, Livelihoods advisor, Oxfam


Box 14 Best practice principles for micro-finance in protracted refugee contexts

  • Develop or bring in micro-finance institutions for the longer term, including host as well as displaced community.
  • Separate micro-finance services from relief programmes. Use different agencies or different staff.
  • Build trust and familiarity between implementing agency and refugees before starting micro-finance initiatives.
  • Livestock and other in-kind loans may be more appropriate in refugee situations where new refugees continue to arrive, there are high levels of insecurity, or where no agency experienced in micro-finance is present.
  • Anticipate the risks inherent in working in emergencies and adapt programmes accordingly. This can include using savings or group guarantees as collateral, adapting the loan terms (frequent loan repayments works best), not over-estimating loan size, and base interest rates on institutional costs, inflation, market rates, risk and client capacity.
  • Where possible, provide a mix of service, for example marketing assistance, training, and other financial services such as flexible savings or money transfer services.

Source: Jacobson (2004, November)


Key reading

Creti, P. and Jaspars, S. Eds. (2006). Cash transfer programming in emergencies. Oxfam Skills and Practice. Oxfam. Oxford.

Harvey, P. (2005, February). Cash and vouchers in emergencies. HPG discussion paper. ODI.

Save the Children-UK, Help Age International, Institute of Development Studies (2005). Making cash count: Lessons from cash transfer schemes in east and southern Africa for supporting the most vulnerable children and households.

Swiss Agency for Development and Cooperation (2003, October). Cash Workbook.

DfID. Post conflict micro-finance project.


5.8 Case studies


5.8.1 Cash grants and cash for work in Sri Lanka

Sophia Dunn, Oxfam GB

Coir mill

Following the devastating tsunami in the Indian Ocean on 26th December 2005, Oxfam GB scaled up its activities in Sri Lanka and opened an office in the southern province of the country. Outside The Liberation Tigers of Tamil Eelam (LTTE) controlled areas, some parts of the Southern Province are amongst the poorest in Sri Lanka, and thus most eligible for assistance.

Oxfam GB had no existing partners in this area and therefore no relationship with the community. Immediate needs were being met through assistance from WFP (food) and the government (cash vouchers and cash grants), and were provided to all households directly affected by the tsunami for seven months, beginning in February 2005. Oxfam thus set up a programme of both cash grants and CFW, with a view to enabling people to purchase their own food and basic needs when government assistance ceased.

Why cash grants for some people and cash for work for others?

Coir yarn machine

The local government authority was responsible for coordinating livelihood activities. Oxfam GB requested to assist the coir, lace and agricultural sectors as these groups are considered to be poor livelihood groups. Furthermore, Oxfam wanted to prioritise women's activities as many organizations were concentrating on the (male dominated) fisheries sector. Also, at that time, coir and lace industries were tsunami affected but not being assisted by other agencies.

Most of the households preferred to return to their original means of income generation so that they could earn money faster than if they had to undergo training first. By providing a grant, people were able to purchase the materials and equipments they needed quickly and locally to re-start income generation activities and without logistics or any other additional complications for Oxfam GB.

End Product - door mats

CFW was used in villages where communal work was identified as being relevant for the beneficiary community, or for specific livelihood groups who, for various reasons, were unable to start their original income generating activities.

Who received grants?

Cash grants were provided to:

  • Lace makers.
  • Coir makers received a grant between three women (between 1-3 households (HH)) as three people are needed to operate the machine.
  • Farmers received a grant to replace livestock lost during the tsunami.
  • Households who received a temporary shelter from Oxfam GB. These grants were given to re-start income generation in a number of activities including shoe making, tutoring (e.g. buying chairs, table, blackboards), fish selling, fish drying and sewing.
  • In two camps in Matara, all HHs received a grant to restart income generating activities (IGAs).

Who received CFW income?

The groups of people who received CFW income were:

  • Coir industry workers who needed to re-establish their coir pits as soon as possible. Activities included clearing lagoon of debris, digging the pit, filling pit with husks, and re-establishment of coir soaking pits at beaches.
  • Fishermen in Hambantota District (Kirinda GN Division) as they were waiting for other NGOs to provide boats/nets and engines and in the meantime they had no other income source.
  • Chena farmers in Hambantota District (Andaragasyaya GN Division) as their source of income was farming and it was outside the planting season. Also they were considered 'indirectly affected' by the government and therefore were not entitled to food vouchers from WFP or cash vouchers from the government. Activities included clearing of silt from paddy field irrigation channels, repairing roads, and construction of a community water reservoir.

Making lace

By the end of July, the livelihoods team had distributed more than 3000 cash grants to re-start coir yarn making and other small businesses.

Lessons learned from cash grant programme

Cash grants place responsibility with beneficiaries and allow them to choose items they need. Cash grants have enabled Oxfam GB to assist a large number of beneficiaries with a minimal input. Equivalent grants should be given to people undertaking the same work so that there is equity.

Lessons learned from CFW programme

Due to the large number of beneficiary households, the amounts of money paid out on a weekly basis exceeded the amount allowed by the Oxfam GB cash carrying guidelines. As a result, money was transferred to a bank less than an hour away reducing the distance between bank and payment site.

Lace support in a camp

At the beginning of the project there was major confusion/ corruption, e.g. some households sent different people to collect the cash. Now each household has one named representative who is the only individual allowed to collect the cash.

The high demand for work meant that tasks were finished quickly so that there were constant discussions with the community and their leaders to come up with new ideas for CFW projects.

The chena farmers are earning more from CFW than in a normal year activity.

Some people who were casual fishing labour did not return to fishing even after receiving boats. They preferred to stay involved in CFW.

A lot of paper work is required (five extra finance officers were employed in Hambantota and Matara).

The finished product

Corruption can occur in a number of ways, e.g. supervisors were putting down names of people who were not working and also more than one name per household.


Assistance to each household was determined by the households themselves, both in terms of the amount and the items to be bought. All of the households used money for restarting IGA.

Provision of cash allowed rapid provision of materials to the affected households, as people were able to purchase for themselves from local suppliers.

CFW provided a source of income for households unable to access government assistance.

Use of cash transfer minimises the need for logistics and increases use of local procurement, therefore having a knock-on effect on the community. However, close monitoring of the labour market is essential to ensure that it is not being distorted by CFW.


5.8.2 Income generation in Guinea Conakry

By Alexandros Yiannopoulos, ACF Spain (ACF-E)

Since the 1990s, Liberia, Sierra Leone and later on the Ivory Coast, have been embroiled in conflict. This has led to a mass exodus of refugees to neighbouring countries, particularly Guinea, which has received 150,000 people. More recently, the political and security situation has improved. At the end of May 2005, there were 2,111 Sierra Leonais, 4,024 Ivoirians and 63,062 Liberians in refugee camps in Guinea Conakry. Even though the security situation was stable, many of the refugees were still reluctant to leave, preferring to wait and see what happens with the elections planned in October 2005.

Income generation activities (IGAs)

ACF-E carries out food security monitoring, agricultural and environmental programmes and IGAs in Guinea. These activities are adapted to the needs of the refugees and the Guinean populations. The IGAs are a complement to the general food distribution, with a view to reducing dependence on the WFP food ration and increasing selfsufficiency. IGAs are highly flexible and can be implemented with very few resources. They target a wide range of social groups, from elderly to single parent families, and in a refugee context, where space and access to natural resources is limited or even prohibited, they provide one of the few sources of income.

The principal livelihoods of the refugees and the Guinean population are either agricultural based or commercial. The IGAs therefore build on the existing knowledge and experiences of the beneficiaries to assist them to start or improve an activity they would not normally be able to carry out due to the lack of resources. IGAs are small-scale activities that are run by groups of five people. Grouping the beneficiaries helps to reduce risk and improve co-operation in the villages. ACF-E has started four types of IGAs:

  • Non-agricultural IGAs (e.g. bakeries, small restaurants, market stalls/small trading, soap making, etc.)
  • Poultry raising for elderly women
  • Market gardening
  • Apiculture (honey production)


Groups to support were selected based on the following criteria:

  • Not in receipt of assistance from other humanitarian agencies
  • Acceptance of the activity by the population
  • Vulnerable families (women headed households, widows, displaced and returnees from the local conflict)
  • Demonstrable motivation and ability to implement the activity.

The IGAs were started through a one off grant. The amount varied according to the start up cost of the activity. The amount of the grant was discussed in advance with the group members and was based on the material needed to start the activity. Table 8 gives an overview of the different types of IGAs implemented with the Bureau of Populations, Refugees and Migration (BPRM) financing between 2004 and 2005. ACF-E provided training and support for the IGAs, which included management methods. However, many of the groups had experience and were able to establish their own systems quickly.

Funds were managed by the treasurer with the co-operation of the group members. Funds were apportioned in three different ways. A weekly contribution of 500 FG (Guinean franc) was put into a central kitty to cover either emergency needs (health) of a member, or as a donation or loan to cover other costs such as education, purchase of clothes or livestock. About one third of the income was used to cover the food needs of the families, while the remainder covered the running costs or expansion of the activity. The proportion of the funds distributed depended on the turnover and profit from the weeks activity and the priorities of the group.

In the well established refugee camps there were large markets both for the refugees and the Guineans. However, the purchase of raw material, goods and manufactured items used in IGAs had to be imported from Kissidougou or other neighbouring markets.

Table 8 Example of IGAs, activities and grant size
Type of activities No of groups No of members Start-up capital (FG*) No of beneficiary families Total grant given (FG*)
Bakery 2 5 270000 10 540000
Forge 1 5 280000 5 280000
Knitting 1 5 221250 5 221250
Pâtisserie 4 5 225625 20 902500
Processing of agricultural produce 1 5 260000 5 902500
Restrants 6 5 270000 30 1620000
Soap making 8 5 260000 40 2080000
Small trade 52 5 280000 260 14560000
Traditional fishing 1 5 100000 5 100000
Total 76     380 205,63,750

*Guinean francs


Visiting the IGAs after the first three months, the teams found all the IGAs running and making a profit. The variation in the profit depended on the initial investment costs and the running costs. Some activities, such as poultry ra

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Reference this page

Susanne Jaspars (). Income and employment support (Special Supplement 3). Supplement 3: From food crisis to fair trade, March 2006. p23.



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