Cash Programs more effective in food availability crisis

CAIRO – 2 August 2018: The rise of humanitarian crises, which are almost often accompanied with food availabilty cirses, around the world has fired the conversation on cash transfer programs, whether conditional or unconditional, compared to in-kind aid.

With Egypt’s location so close to many of the locations that often receive aid from countries all around the world, it is important to understand the difference in aids and the different effects they have on people, cultures and socity, as well as why people may prefer one to the other.

What are Cash transfer programs (CTP)?

Cash transfer programs (CTP) refers to conditional and unconditional programs where cash is directly given to beneficiaries. Conditional CTP provides money as a wage for working in public or community programs. Unconditional CTP provides beneficiaries with money without having to complete tasks. In both cases, beneficiaries can spend the cash freely to meet their basic needs, according to a report by ODI, released 2015.

Food availabity crises are understood to be situations of “severe food insecurity which threatens people’s lives and/or livelihoods,” explains Oxfam GB.

Unconditional CTP is more suitable during food availability crises due to time contraints and the need to preserve energy. Oxfam GB will argue for the use of CTP as an alternative to in-kind aid, providing evidence that risks associated with CTP can be mitigated.

What are the risk?

Diversion or theft: Cash is more tempting than in-kind aid because it can be diverted to illegal items easier and quicker, according to a report by MercyCorps in 2007. The organization, which operates in many developing countries, cites cases where cash from aid has been funnelled to illegal channels. Cash, like food aid, can also be captured by elites or unfairly taxed by landowners, explains the FAO in a 2011 report. In Uganda, beneficiaries reported that they spent the cash as soon as they received it because they feared theft.

Inflation: Sudden cash injections into markets may cause a rise in prices of key goods. This will cause recipients to get less for their money and will disadvantage non-recipients, agreed MercyCorps and the FAO. In Uganda, beneficiaries reported some price increases in local shops but beneficiaries overcame this by buying better-value products from larger shops.

Anti-social use: Beneficiaries may misuse funds by spending on non-essential or ‘vice goods’, like cigarettes and alcohol, suggests Oxfam. However, evidence suggests that a very small proportion of transfers are misused, as much research has shown.

Staff and beneficiary safety: Risks of attack for implementing agencies exist at the delivery, distribution, and storage phases, explains MercyCorps. Risks exist for beneficiaries who may be attacked on the way home, face extortion, or aggression by non-recipients.

Coordination and organisational capacities: Organisations, according to the FAO, have systems for in-kind aid but few of them have one for CTP. Agents often do not undergo training to expand their skills and capabilities to suit CTP. This often causes confusion and tension in the office. Lack of coordination between agencies means that food aid and cash programs are often employed at the same time, decreasing the chances that cash will be spent on food and other essential products.



Experts Recommend Mitigation strategies

Risk Mapping: Before setting up CTP, risk assessments need to be conducted to ensure that safeguards can be put in place. This includes analysis of existing financial systems and food markets, and assessing the risks of inflation due to cash injections. This assessment should examine purchase and price trends during normal times, different seasons, and crises, if possible. This approach was used in the Philippines and successfully helped limit risks. Implementing agents should undergo training to ensure they are familiar with CTP and can adapt to risks that arise during the program.

Electronic transfers (e-transfers): Their privacy and flexibility offer protection for staff and beneficiaries against theft, argued the British House of Commons in 2012. E-transfers eliminate need for storage and cash counting, which reduces human error and staff corruption, explains ODI. However, it is important to note that e-transfers may not always be feasible because of the infrastructure they require and the time they take to set up. This suggests that organisations should employ regular evaluation and preparedness strategies to ensure they are ready for any food availability crises.

Local distribution mechanisms: In Afghanistan and Somalia, aid organisations used local remittance companies to deliver money in remote or insecure areas. In Zambia, Oxfam subtracted money delivery to Standard Bank, which used security vans and police personnel to securely deliver the money, according to multiple evidence-based reports published by Horn Relief in 2004 and 2010. Local systems are usually trusted by beneficiaries and typically have their own safety mechanisms, which reduces looting and risks associated with storage. This seems to be especially the case in developing countries, especially if mobility is somewhat limited.

Distribution planning: If cash is being physically delivered, then distribution planning measures should be employed to mitigate risks. Agencies should:
o Take out insurance against risk of theft during the transportation process, suggests Oxfam, arguing that the money should be divided into bundles and hide them in different locations in the vehicle. Thieves tend to leave after some money has been surrendered.
o Ensure all vehicles are installed with communication devices, further explains Oxfam.
o Inform the community about the consequences of threats to staff or beneficiaries’ security: project will be suspended or withdrawn. To keep their benefits, the community will protect the program, suggested the World Food Programme in a 2014 report.
o Make smaller, more frequent distributions. This will increase chances of money being used for food and other essential products and reduce money transported at any one time by agency or outsourced company, explain aid researchers Creti and Jaspars, after looking at many cases.
o Vary distribution days and increase distribution locations to minimise walking distance for beneficiaries, which reduces chances of looting.
o Inform beneficiaries of date and location of distribution with short notice to minimise chances of non-beneficiaries finding out, explains Oxfam and the World Food Programme.
o Complete payments during daylight hours to give beneficiaries and staff time to safely leave site, says the World Food Programme.

Monitoring: Monitoring should be carried out on a regular basis to ensure payments are being made, money is being spent responsibly, and no beneficiaries are being abused because of the program, suggests the ICRC. Markets should be monitored closely to ensure that prices do not rise because of CTP. A communications line should be established to ensure any problems are reported by beneficiaries or local partners to the implementing agency, the ICRC states. Monitoring will ensure the program is reaching its targets without distorting local markets or compromising social relations.

CTP: cheaper, quicker, better

CTP, like any aid program, has possible risks. However, the benefits that CTP provides often make it a viable alternative to in-kind programs. CTP is cost-effective—take a look at Table one. CTP allows people to purchase food they are used to and like. CTP often stimulates local production and local markets. CTP, unlike in-kind aid, holds no hidden costs for beneficiaries.

A study done in Afghanistan by Crawford and Harvey in 2002 found that for every 50 kilograms of wheat received, seven kilograms were spent on transport and about 3-7 kilograms were spent on milling.

CTP can overcome logistical challenges. During the 2011/2012 Somalia famine, there were certain areas that were extremely insecure for in-kind aid to be delivered. CTP was employed, allowing 1.5 million people to be reached despite insecurities, explains ODI.


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