EU's blurry vision for coordinating humanitarian cash

Editor’s Note: Devex is exploring the evolution of cash transfers in the aid sector. Here, we explore the EU’s vision for more coordinated cash programming. Read also: Aid agencies mull legal risks of coordinating humanitarian cash LONDON — Almost a year after floating a drastic new approach to coordinating humanitarian cash transfers, the European Union’s humanitarian arm ECHO is running a market assessment to find out whether the controversial scheme could work in practice. Though humanitarian agencies broadly agree that there needs to be more coordination between the dozens of organizations who deliver hundreds of millions of euros of ECHO funding annually in cash transfers, many are already predicting roadblocks in the proposed system. “I feel that the ECHO approach was a way to try and put a band-aid over the lack of clarity and the challenges stemming from a coordinated approach to cash programming,” Ciara O’Malley, global cash adviser for Care International, told Devex. However, “the logic behind it is fair — we’re all in favour of getting as much of our humanitarian assistance [as possible] into the pockets of the communities we’re trying to serve,” she said. Currently, an agency may work independently to deliver cash transfers, coordinating with other entities geographically to prevent duplication; or a donor may fund a consortium, in which one agency takes the lead, partnering with a group of organizations working on agreed areas or geographies. Typically these individual agencies or consortia of organizations receive funding from donors such as ECHO, and then contract a financial service provider to facilitate cash delivery while taking on responsibility for everything else: Needs assessment, monitoring, evaluation, and so on. Some countries or regions have formal platforms for coordination, while others have informal systems or, particularly in post-conflict or emergency settings, nothing at all. The plan launched by ECHO in January last year, and re-launched in November with revisions, is ambitious. It breaks down a humanitarian cash program into three sets of responsibilities, or “components,” which follow the lifecycle of cash delivery. Agencies, alone or in consortia, will bid on components of a program, and share functions and service providers across other programs in a country or region. Component A covers all fundamental elements of a cash transfer program cycle, such as needs assessments, targeting, and beneficiary registration. The design and coordination of the program also falls under this component. Component B covers the delivery of the cash transfer, including fees for financial service providers — such as banks and mobile money platforms — as well as card issuance and other financial transaction costs. The current market consultation being conducted by ECHO will assess the landscape for this component, including “the availability of service providers that could deliver payments,” as well as a “detailed analysis of the market, risk analysis of working with the private sector and/or multilateral development banks, and the feasibility of procuring such services with all our potential partners,” according to a spokesperson. The results, expected in Autumn 2018, “will then inform our own internal assessment later in the year,” they said. Component C is a new addition, following consultations with humanitarian agencies last year, and covers independent monitoring, evaluation, accountability, and learning for the entire program. It could be awarded together with Component A, to the same organization or consortium, but does not have to be. In addition, according to the guidance, ECHO cash transfer programs operated under the scheme will share a common targeting criteria; a single registry or at least interoperable registries of eligible beneficiaries; a common feedback and grievance system; a common results framework; and a shared payment mechanism through a single financial service provider, which will be contracted separately for Component B. Eligible programs will also be required to meet a minimum combined efficiency ratio of 85.25, a metric of cash efficiency indicating that 85.25 percent of the donor award must reach the recipient. ECHO says the new guidance is a step toward establishing a system that is “as practical and efficient as possible, as well as maximising the assistance that reaches the affected populations,” according to the spokesperson, adding that the new guidance is about “an approach, which permeates more than just the large-scale programmes.” Though many in the humanitarian sector welcome the initiative in principle, and commend the “radical” shift, O’Malley said, not everyone is convinced about the details. “The problem is that the details about how this system is going to work, of having large-scale cash programming separated out into these different components, is not yet thought out, and it needs a lot more thought into how the system will be operationalized and how the subsequent risks will be mitigated, because there are risks to it,” she said. “We need clarity around roles and responsibilities.” A blurry vision? ECHO has begun enacting the new guidance with its 2018 Humanitarian Implementation Plans. Still in the early stages, not much is known yet about how the guidance will look in practice. “Since all the projects funded under the 2018 budget are now still in the process of being implemented, we will have a better overview of the extent to which the guidance … [was] concretely put in practice once we receive project-specific reports in the months to come,” the ECHO spokesperson said. He pointed to two programs where the new guidelines are beginning to take shape: One in Lebanon where the monitoring, evaluation, accountability and learning aspects — comprising Component C — are being contracted separately; and one in Somalia, where ECHO is “witnessing good coordination with various actors,” he said. In a workshop hosted earlier this year by Voluntary Organizations in Cooperation in Emergencies, an alliance of European humanitarian agencies, participants also reported seeing more emphasis on the combined efficiency ratio in proposals, as well as a greater focus on transparency. The 85.25 combined efficiency ratio requirement leaves a thin margin for more complex humanitarian situations, however, where other components of program delivery might be more costly. “There are a lot of contexts where that can be difficult,” Daphne Jayasinghe, chief policy advisor on economic programs at the International Rescue Committee, told Devex. “The guidance should be very clear about where that expectation would be in place.” It is the combined efficiency ratio requirement, in particular, that has many in the sector concerned, with some asking if the donor focus on efficiency may be getting in the way of effectiveness, which is harder to measure. In January 2017, after publishing the first guidelines, ECHO consulted agencies about their main concerns, and subsequently narrowed down the applications. “In the second iteration [the guidance] was clarified somewhat,” Jayasinghe said. ECHO specified that the new guidance would only apply in contexts where three specific criteria were met: Where ECHO alone or with other donors were providing large-scale transfers in a protracted crisis context; where there was predictability around the beneficiary numbers; and where the scale of assistance was €10 million ($11.6 million) or above. “This applies to a number of contexts in which we operate, including for instance Somalia, Turkey, Lebanon, Greece and Jordan,” the ECHO spokesperson said. “However, a harmonised cash transfer programme approach and independent monitoring and evaluation should become the norm in any context, based on established best practice.” Jayasinghe said the revisions “at least gave a bit more guidance about the type of context where that [combined efficiency ratio] expectation will be in place, but you know I think a lot of the sector fed back that, given the kind of challenging contexts that we work with and the different overheads that could be in place, it could be unrealistic in some settings.” For example, in Jordan’s refugee camps, United Nations High Commissioner for Refugees’ Common Cash Facility maintains a database of aid beneficiaries and uses a single financial service provider; a clear-cut case where ECHO’s guidance would work well. But for the protracted conflict in South Sudan, where Plan International is trying to deliver cash transfers via mobile phones for the first time, it is not so simple. “There is hardly telephone network in the place where we’re working at the moment, on an innovation programme in South Sudan,” Aftab Alam, global lead on cash-based programs in emergencies at Plan International, told Devex. “You can imagine, if we have this universal system, if it’s supposed to be transferred through a [financial service provider] like a bank, in this banking system the product isn’t there … so then I would say this universal system has to be customized for the situation.” Jayasinghe added that even with the amended guidance, current digital and financial resilience in many crisis contexts simply can’t support such a high bar for efficiency, which “relies on certain prerequisites.” “For example, as a proxy for digital financial inclusion, government-to-person payment systems were only available in 30 percent of the high-risk settings we work in, and so we argued at that point that while there is a lot of attention to resilience and financial inclusion, it tends to be in more stable, development contexts and there’s a real need for it in humanitarian settings,” she said. On the flipside of resilience, others are asking how the new guidance will influence another debate: What should humanitarian cash programs leave behind? “In ECHO humanitarian cash guidance, they do say that humanitarian cash assistance should be linked with social safety nets where they exist, and where they don’t exist should set the foundations for them,” O’Malley said. “But is it something that is expected to be a by-product of what you’re programming, or is it something that should be integrated into a specific objective within your programme and appropriately resourced?” For example, if a humanitarian disaster resulted in the creation of a large-scale catalog of beneficiary data, this system could theoretically be used as a foundation for a government-owned social safety net. “But there’s no more clarity about how that can actually be done,” O’Malley said. Organizational change A number of new cash coordination initiatives have sprung up in the years since the Grand Bargain commitment, where donors pledged to improve capacity for cash programming. Some of these new platforms, such as the Collaborative for Cash Delivery and the Cash Learning Partnership, are looking at how agencies of all shapes and sizes would need to evolve in order to remain fit for purpose under ECHO’s guidance. On March 27, ECHO hosted a live-streamed public information event for interested stakeholders from the humanitarian sector and the financial services industry about their new approach. A report from the event is expected in the fall, the ECHO spokesperson said — but in the meantime, many still have questions about how the expected coordination between agencies will work in practice. “There’s a massive variability [in how] overheads are charged — some donors have a flat-rate policy, but I know other aid agencies who charge much much higher.” --— Ciara O’Malley, global cash adviser for Care International For example, ECHO’s plan for separating tendering for Components A and B could lead to confusion as to how the combined efficiency ratio will be applied across all program costs, and how organizations working in different components can stay coordinated. “If you’re tendering separately for [components] A and B, and you don’t know what the other component is tendering because it’s tendered separately, how are you to know what has been offered as [an] efficient overall cost ratio of the programme, if you don’t know what the other half is also putting forward and together what that looks like?” O’Malley asked. Because organizations take their overhead costs from the total program award, this would mean budgeting separately for Component A — which contains the less costly but equally important community engagement and coordination work — in line with other agencies working on the program. “There’s a massive variability [in how] overheads are charged — some donors have a flat-rate policy, but I know other aid agencies who charge much much higher, and then again they might absorb a lot of the overhead costs that we might … incorporate into the budget line,” O’Malley said. Still, she believes this isn’t a dealbreaker for the guidance, and that the “onus is on aid agencies to really cost out appropriately what we are providing and doing that together to make up an effective programme delivery.” Another question is around how, and at what cost, agencies can update their financial systems to meet operational standards across a range of contexts, particularly for smaller organizations, or those newer to cash. Alam from Plan International, which has scaled its cash portfolio from $1 million to $45 million in four years, explained that many agencies including Plan International operate on “a very traditional system, calculating [cash and voucher programming] through different grants, but that’s not really a professional way to do it.” “We have only started internal advocacy [on this] now … Our financial system has to be in compliance with international financial systems, like UNOCHA’s,” he said. It’s also unclear yet which humanitarian institution will be responsible for housing and managing collected beneficiary data — a can of worms for legal and security issues. Wherever this platform is housed — possibly on an expanded version of UNHCR, UNOCHA or the International Office for Migration’s current beneficiary platforms — it may need to provide access to a range of humanitarian actors. The benefit of a harmonized beneficiary data system “is [that] you can see ... if your targeted beneficiaries have received assistance from other agencies so you can reduce duplication … [and] inclusion and exclusion errors,” O’Malley said. On the other hand, “while [agencies] might share financial service providers and derive their beneficiaries from the same beneficiary data system as such, they might have different approaches,” she said. For example one could be targeting beneficiaries for cash based on shelter conditions, while another could be focused on multi-purpose cash for meeting basic needs. Finally, many expressed concern that the new guidance will create barriers for smaller or specialist organizations or those that are new to cash, especially local partners and sub-grantees in the cash value chain. “For example agencies that are targeting a specific demographic, like people with disabilities or the elderly, that might require a more nuanced approach than provided by a common delivery system,” O’Malley said. Until humanitarian aid is gender, disability, and age inclusive, she suggested, these specialist organizations must have a place in the shifting architecture.