Why cash as aid risks becoming a passing fad

Paula Gil Baizan

Financial assistance expert for humanitarian agencies, including World Vision, Save the Children, ICRC and CaLP

A fad is a behaviour by a group of people for a short period of time, think ice bucket challenge, man buns, screaming Yolo. A trend is different. It implies movement. It marks the direction in which something is changing. So, when it comes to empowering people out of shock and poverty, is giving people money instead of stuff a longer-term trend or just a passing fad?

 

The ”State of the World’s Cash” report launched yesterday by the Cash Learning Partnership (CaLP) places cash (as a means of delivering relief aid) very much in the  trend camp. While it produces new information and some interesting insights into current debates, it doesn’t provide much as to the strength of this trend to survive into the future. I believe three issues could condemn “cash as aid” to the dustbin of fads.  

 

1 We can't get along

 

Humanitarian agencies struggle to coordinate to generate collective impact. In general, the system is so complex and the incentives so skewed that the effectiveness of coordination is unpredictable.

 

Today’s report, as well as additional research CaLP and others have produced, notes that inefficient coordination of parallel cash projects carries high costs. Duplication means wasted resources that should be getting to people in need.

 

Cash transfers have become popular in part because they are cheaper to do than in-kind assistance. In a humanitarian sector facing massive pressure and mounting needs, cost efficiency is and will continue to be a powerful driver.

 

But inefficient coordination risks making cash more expensive than in-kind assistance. Think duplication in banking fees to process transfers, duplication in staff processing payments, duplication in resources spent to conduct market assessments after a crisis. If cash turns out not to be the cost-efficient option due to a lack of coordination, this could kill the momentum and turn the would-be trend into a fad.

 

Signs of change

 

Over the last year, donor governments have increasingly called for greater optimisation in the way aid is provided. Some now argue for a single, unified channel of cash delivery. Despite some pushback, humanitarian agencies have recognised that the tide has turned. Initiatives like the NGO Collaborative Cash Delivery platform have taken steps towards building a truly efficient approach. The World Food Programme, the UN’s refugee agency (UNHCR), and UNICEF are also trying to improve their coordination. However, large contracts tend to still go to the large players. There are also private sector actors claiming to fix the coordination issue, like the Smart Communities approach launched at the World Economic Forum in Davos, affiliated to Mastercard, as well as other technology-based startups.

 

Short-termism

 

Humanitarians operate in the short term of saving lives. We are focused on the moment, and this is usually not fertile ground for trends. This short-term focus permeates our work and shapes our strategic engagement in many different and often damaging ways. Myopic vision in humanitarian innovation has translated into products that are not sustainable (e.g. flaws in data protection systems), and others that are not scalable (e.g. incompatible solutions for beneficiary identification). Short-termism has made us addicted to the chimera of immediate feedback from beneficiaries as proof of impact. Short-termism in private-public partnerships has made us focus on product development instead of strategic change.

 

The sector desperately needs visionary leaders and resources to create space to build the future amongst the chaos in which we operate. The future of “cash as aid” depends on this.

 

Signs of change

 

The “State of the World’s Cash” report flags “financial inclusion” (issues around the poorest being unable to get banking services and credit) and linkages to social security safety nets as two areas of contention. On the one hand, linking cash transfers to the sustainable development goals and other longer-term poverty reduction efforts could bring the long-term vision that we need. It could transform the way we measure success and provide a different ecosystem in which the the cash trend can evolve. On the other, we risk curtailing the the humanitarian imperative of saving lives in some volatile contexts where safety nets and financial inclusion are too hard to reach.

 

Money, money, money

 

We are using the wrong metric to measure the growth potential of cash as aid. The “State of the World’s Cash” report notes that cash transfers currently represent 10.3 percent of overall humanitarian expenditure. But for cash to become a lasting trend, what we should be asking is: how much resources – money, staff, products – are available to nurture the trend? How much was spent in developing new cash transfer approaches? How much was invested in understanding the impact of cash? How much did corporates spend in product development for humanitarian cash programming? How does all this expenditure compare to the actual amount that beneficiaries received in their hands and accounts?

 

Signs of change

 

The focus on efficiency has made us lose momentum. We must push for increased resources to nurture the development of cash transfers. The pie needs to be sliced up in a smarter way, as well as to grow.

 

A trend or a fad?

 

A trend also differs from a fad because of the connection it generates between people. A fad is part of a moment; a trend gains power over time because it is a connector that becomes more valuable as other people commit to engaging with it.

 

Cash transfers have pushed the humanitarian sector to have discussions that were not possible in a world where in-kind assistance was king. Bottom line: if we can’t find a solution for optimisation, long-term vision, and increased resourcing, then choosing to give people money instead of stuff will be a fad.

 

As long as business models, agency mandates, and political agendas get in the way, cash has little chance of becoming a lasting trend. Neither do many other improvements.

 

The good news is that all these issues are solvable. The bad news is that they are not particular to cash transfers; they are also applicable to humanitarian assistance more widely. This monolithic state of affairs feels so permanent that it unfortunately seems like a fact of life.

 

(TOP PHOTO: Cash assistance for clean-up operations after typhoon Haiyan in the Philippines, 2013. Photo: Jay Santos/IRIN)