Cash transfers lead the social assistance response to COVID-19

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Women leave a bank after withdrawing cash during a nationwide lockdown to slow the spread of COVID-19 in Agra, India. Photo by: REUTERS / Danish Siddiqui

NAIROBI — Early Friday morning, people in the Kenyan capital of Nairobi’s informal settlement Kibera began queuing for a food distribution. Residents said they had been waiting for it for over a week — the community elders had gathered their names, ID, and telephone numbers, initially promising a door-to-door delivery. The food was intended as a stopgap measure to help the many daily wage laborers living in the settlement that have been struggling as their work dried up in response to efforts to contain the spread of COVID-19.

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But instead, the food was allocated in person on Friday. It wasn’t until late afternoon that the food finally arrived. As the national curfew approached, which prohibits the movement of people after 7 p.m. in efforts to stop the spread of the virus, it became clear that not everyone would be going home with food.

People got anxious and pushed past the police toward the food supplies, creating a stampede. Police fired tear gas and two women died, reportedly from suffocation.

“Young men were pushing old women. It was so humiliating. Everyone was scrambling,” said Ali Ibrahim Suleiman, a Kibera resident who was at the distribution. “You put people in a line from morning and then don’t give them anything. At the end of the day people start fighting amongst themselves. It’s not like they were fighting because they hate each other. They were fighting because they were hungry.

“I have never seen anything like it before,” he added.

The following day, the government banned food distributions not coordinated through the national response fund. The food distribution in Kibera had been organized through a local foundation.

The chaos of Friday’s food distribution also prompted people in the country to question why there were food distributions rather than mobile money cash transfers — which can provide people with cash to buy food, while avoiding the massive gatherings that food distributions can draw, which can fuel the spread of the disease.

In response to the COVID-19 pandemic, many countries are using cash transfers — a tool that can be fast and support local economies. The humanitarian sector has used this tactic for years to ensure that communities living through crises don’t slip into deep poverty.

“You're basically shutting down economies to try to control the spread of the disease overnight. In any type of recession, you want to get cash to people quickly, but I think this situation especially accentuates that,” Joe Huston, managing director at GiveDirectly, the largest nonprofit organization focused on cash transfers.

Among social assistance responses from governments, cash transfers have been the most widely used during this crisis. There are 143 cash programs in 81 countries that have been expanded or adapted to the crisis. Of those programs, 65 in 43 countries are new initiatives introduced as part of the response to COVID-19.

For some countries, distributing cash transfers will be easier than others. Some countries have existing social safety net structures they can expand upon and others already have well-established ways to deliver cash easily, such as widespread use of mobile money.

Cash as a COVID-19 response

On March 24, India put its population of 1.3 billion people under lockdown. On April 3rd, the government launched a cash transfer program, which included putting 500 rupees, or $6.50, in the accounts of 204 million women who are already enrolled in one of its existing financial inclusion programs.

India is well-positioned to move forward with cash transfers because of its existing social safety net programs, said Alan Gelb, senior fellow at the Center for Global Development.

“Essentially, this is a flip of the switch, they are already set up to do this,” Gelb said.

Kenya also has existing cash transfer programs targeting over a million people, that receive 2,000 Kenyan shillings, or $19, per month. The national treasury allocated an additional 10 billion shillings to this program for supporting vulnerable groups including the elderly and orphans during this pandemic period.

In parallel, there is a committee of private sector and development partners called “shikilia,” or “hold together” in Swahili, discussing raising funds for mobile money cash transfers in urban areas, including settlements like Kibera.  

“I think the most difficult problem that we have now is how to deal with people who are not part of existing social safety nets, but nevertheless will be desperately needing resources.”

— Alan Gelb, senior fellow, Center for Global Development

Other countries have also launched programs. In Burkina Faso, for example, a new $10 million cash transfer program for fruits and vegetable sellers was announced. Columbia announced a one-off payment of $108 for informal workers. Egypt is targeting 1.5 million individuals working in areas such as construction, ports, agriculture, fishing, plumbing and electricians. El Salvador has pledged to give $300 to about 1.5 million households in the informal economy. Madagascar is targeting 150,000 households with $27. Haiti announced a one-off cash transfer to about 1.5 million households, according to the World Bank.

Source: World Bank, ILO, and UNICEF

While cash programming is picking up globally, the adoption of new cash transfer programs in response to COVID-19 has been slower in low-income countries, according to Ugo Gentilini, senior economist and global lead for safety nets with the social protection and jobs global practice at the World Bank. Other types of interventions, such as waivers of fees for utilities or mobile money transactions or food assistance, are more common.

Some of the bottlenecks to rolling out cash programs quickly in low-income countries include financing the payments, identifying whom to give cash transfers and delivery mechanisms, as well as incomplete data sets about populations, he said.

Gentilini and his colleagues at UNICEF and the International Labour Organization are publishing a weekly update documenting country-by-country social protection responses to the pandemic.

Deciding who gets the cash

Many countries already have social safety net systems in place that include cash transfers directed at target groups, such as those living in poverty, elderly individuals or those with disabilities, Gelb said. Ideally, countries would expand upon those systems.

But this crisis has also impacted a lot of people who are not normally in need of aid and aren’t part of any existing social safety net, according to cash transfer experts.

“In a way, I think the most difficult problem that we have now is how to deal with people who are not part of existing social safety nets, but nevertheless will be desperately needing resources,” Gelb said.

One option is to provide a universal payment, giving everyone a small amount, accepting that some of the money will go to people who don’t need it, Huston said.

But given that resources are limited, making decisions on who to target is often necessary, Huston said. Countries with strong identification or income tracking programs will have an easier time in identifying people, he added.

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Countries without these systems can use communal mechanisms such as connecting with trusted individuals that have lists of people in their community, Gelb said. This only works with settled communities and works better in rural areas, because communities are more stable. Previous lists, such as existing lists from associations or NGOs, can also be used.

There could be employment records for some industries, which could help to identify industries hit hard by the pandemic, Gelb said. But this would exclude informal sector workers.

The Somali Cash Consortium is now linking some of its cash transfers with health systems, so that it can target homes with COVID-19 cases, to ensure those families have enough money that it’s possible for them to quarantine.

Another tactic is self-selection. This could include a hotline where someone receives something like $1 after spending 30 minutes on the phone — a sum that’s low enough to deter higher income earners from spending that time, Huston said.

“You could try to come up with clever means of making resources available remotely for people who really need it, but not worth it for people who don't,” Huston said.

Someone could also sign a legal affidavit saying their income falls beneath a certain level, Gelb said.

Telecommunications companies could build income estimates based off of people's usages of their telephone or through mobile phone surveys, said cash experts.

“But in case of an emergency — it's a bit like you have a massive cyclone or earthquake — the priority is to get the cash out there rather than to be very precise.”

—  Alessandro Bini, director, Somali Cash Consortium

In Kenya, there are discussions around targeting communities through various tools such as geospatial targeting and using information from last year’s census on income levels, said Milkah Chebii, social protection payments specialist at Financial Sector Deepening Kenya.

For a COVID response, just keep it simple, rather than going through a lengthy process of community-based targeting where you're trying to reach the poorest, which is a complicated and imprecise tool anyway,” said Alessandro Bini, director at the Somali Cash Consortium. “It won't be pretty, it won't be an accurate job. But in case of an emergency — it's a bit like you have a massive cyclone or earthquake — the priority is to get the cash out there rather than to be very precise.”

Registration and distribution

Registration of people is also a challenge because of a need to keep physical distance between people to prevent the spread of the virus. The Somali Cash Consortium, for example, is adapting the way it registers recipients of cash transfers.

Typically, staff select villages and community meetings are held to agree on lists of people. Then there is a house-to-house verification process. It is now cutting down on face-to-face meetings, substituting them with phone calls and questionnaires.

According to the Cash Learning Partnership, when contact between the cash distributor and the recipient does happen, the distributor should wear personal protective gear. Cash practitioners should limit gatherings of people at cash distribution sites and clean surfaces, such as ATM keypads, between each use. They should also place hand-washing stations at cash retrieval points or payment points. It also advocates to avoid biometric data collection whenever it’s not critical.

The partnership also recommends staggering delivery, to reduce market congestion on the day of the transfer.

Mobile money is ideal for distribution because it's fast and remote, according to cash transfer experts. These transfers are also very auditable and can provide quick user feedback, Gelb said.  

But unfortunately, not all countries have robust infrastructure around mobile money, with widespread acceptance by merchants.

“The debate should no longer be about what cash transfers are critical interventions in such an emergency situation like this, it should really be how we need to use cash transfers to deploy quickly, faster, and reach as many as we can.”

— Milkah Chebii, social protection payments specialist, Financial Sector Deepening Kenya

Other options include electronic vouchers — such as something like a debit card — which people can redeem for products from a vendor.

For example, Indonesia has expanded its e-food voucher program from 15 million to 20 million low-income households in response to the pandemic.

Otherwise, physical cash is also an option, which can be distributed by local mobile agents of banks. But because the COVID-19 can persist on surfaces, some governments, such as in Kenya, are encouraging people to use mobile payments rather than cash.

The International Committee of the Red Cross recommends that staff regularly wash their hands or use hand sanitizers when handling physical cash, cards and vouchers. Financial service providers are encouraged to use new banknotes or disinfected old ones.

Preventative cash — before the emergency hits in a country — will also allow communities to stock up on things they would need in order to stay at home, according to the Cash Learning Partnership.

Financing cash transfers

The amount and frequency of these cash transfers will depend on financial resources available to countries.

“What we have to hope for is big cash responses from governments all over the world,” Huston said.

Governments could get these funds from either taking on debt or from aid money, Huston said. Where there are gaps, nonprofits and the private sector can step in.

“I think it's pretty valuable to overshoot here and if that’s at the cost of countries taking on debt that you have to raise through taxes later, I think that's probably a cost worth bearing,” he said.

But many low-income countries are not in a great financial situation because of large amounts of debt and declines in commodity prices, Gelb said. Countries have different levels of flexibility in terms of how much they can scale up budgets during a time when this crisis is hurting country revenues.

“That means that they do not necessarily have the cushion that one would like to see, for a situation like this,” Gelb said.

International financing organizations are working to fill in gaps. The World Bank, for example, is making $160 billion available over the next 15 months, to “help countries respond to immediate health consequences of the pandemic and bolster economic recovery.” This week, the International Monetary Fund approved immediate debt service relief to 25 countries that provides countries with grants to cover debt obligations over the next six months, allowing them to allocate more funds to the COVID-19 response.

Recent financing allocated from the World Bank to Tajikistan and Pakistan includes funds for cash transfers.

“The debate should no longer be about what cash transfers are critical interventions in such an emergency situation like this, it should really be how we need to use cash transfers to deploy quickly, faster, and reach as many as we can,” Chebii said.

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About the author

  • Sara Jerving

    Sara Jerving is a global health reporter based in Nairobi. Her work has appeared in The Wall Street Journal, The New York Times, the Los Angeles Times, Vice News, and Bloomberg News, among others. Sara holds a master's degree from Columbia University Graduate School of Journalism where she was a Lorana Sullivan fellow. She was a finalist for the Livingston Award for Young Journalists in 2018, part of a Vice News Tonight on HBO team that received an Emmy nomination in 2018 and received the Philip Greer Memorial Award from Columbia University Graduate School of Journalism in 2014. She has reported from over a dozen countries.