For humanitarian response, a cash-based payment consensus

Patrick Lamboi (right) and David A. Kargbo (center), who work for Splash, make cash transfer payments to women in Freetown, Sierra Leone. Photo by: Dominic Chavez / World Bank / CC BY-NC-ND

A fundamental shift in the way humanitarian aid is delivered is underway. Still in its early stages, the push toward cash or digital payments in response to disasters or refugee crises could alter the landscape permanently.

While cash and vouchers currently account for about six percent of total humanitarian spending, according to a September 2015 report from the Overseas Development Institute, countries signing on to the Grand Bargain at last month’s World Humanitarian Summit pledged to increase the use and coordination of cash-based programming.

While the Grand Bargain fell short of setting specific targets, many nongovernmental organizations and others who deliver humanitarian aid are setting internal targets to deliver anywhere between 20 to 50 percent of the assistance they provide through cash-based payments.

In the not-so-distant future, a family may be more likely to receive a voucher, debit card or cash to buy the goods and services they need rather than a bag of rice or a blanket. Proponents, and the language of the grand bargain itself, define the benefits as providing “greater choice and empowerment to affected people” and strengthening local markets.

Why not cash?

While in the past the conversation may have centered around the validity or usefulness of cash or digital humanitarian payments, the World Humanitarian Summit seems to have heralded an era of “why not cash.”

Cash should be considered an option from the start, not just as a second-best option, said Monique Pariat, the European Commission’s director general for humanitarian aid and civil protection.

“Our approach is to systematically ask the question: Why not cash?” she said at the summit.

While that seems to have emerged as one slogan of the push toward cash payments, many were also asking the question of “when” — as in when cash should be deployed.

“What we believe is context should drive the mode of intervention and the modality for intervention and support,” said the World Food Program’s Executive Director Ertharin Cousin at the summit.

And there will be cases when cash isn’t the right solution. When, for example, there isn’t a market, where people can’t access the goods they need, or there are security concerns for beneficiaries.

Certainly creating the kind of systemic change proposed may not be easy, in large part because it’s often difficult for organizations that have been working in a single way for many years to change and adapt. While there are individual examples of cash aid like the digitizing  of payments to ebola response workers in Sierra Leone, the challenge is getting from programs that reach tens of thousands to millions, according to Mike Adamson, the CEO of the British Red Cross at WHS.

“If this is a revolution, we have to use this as a chance to break the system,” said Danny Sriskandarajah, the secretary general of Civicus, at the summit. “What is the end to which cash is the means? Because if it’s simply about delivering efficiency then we’ve lost an opportunity because it has to be about transformation.”

Barriers to growth

Changing the way a system functions is not without its challenges, and there are a number of barriers as organizations look to scale up the amount of aid delivered in cash or vouchers.

The variety of delivery mechanisms for direct payments poses one — be it debit cards that operate on a open or closed system, vouchers for specific services, digital payments through mobile money platforms or cash itself.

A world in which 30 different agencies are providing some form of payment to beneficiaries through a variety of mechanisms quickly becomes a chaotic and uncoordinated picture. This shift must be accompanied by a new system for delivering aid that doesn’t have the same challenges of duplication and competition as the current system, said Owen Barder, a vice president at the Center for Global Development.

“What we need is a single large central cash payment as the main means of supporting affected populations,” he said at WHS.

Others echoed this need for institutional infrastructure to manage cash payments and protect against concerns related to money laundering or funding terrorism. Some organizations are limited in their ability to scale cash payments by their concerns about meeting accountability requirements.

“If your accountability mechanisms are built around counting the number of bags of rice, that’s just different from the accountability mechanisms you need for distributing millions of dollars in cash because you need to be able to show where it’s gone to and how, it’s more demanding,” said the British Red Cross’ Adamson.

The evidence shows that there isn’t more leakage or waste in a cash system than in a system that provides goods, he added, but the delivery mechanisms and partnerships needed are different. To create these cash systems banks, mobile phone companies and others will be part of the conversation and the solution.

Companies like Mastercard and Western Union have recognized the opportunity to engage and are actively working to see how they can play a part in the shift to cash or digital payments.

They have also identified key barriers.

Hikmet Ersek, the CEO of Western Union, which knows something about transferring large amounts of money, said that regulations likely pose the greatest challenge — from anti-money laundering regulations to reserve bank rules and exchange rate controls.

Two other hurdles to increased cash payments are technology and understanding the right type of assistance to give in a particular situation, according to Paul Musser, the vice president for international development at Mastercard.

While there is an overwhelming number of technologies that could assist, they may not always be available or accessible — phones or ATMs may not work after a disaster, for example, or there may be no access to banks or mobile money.

“We believe cash is not right in every case, [or] community,” he said. “We need to have careful conversations … and start with the need and work backwards.”

That reverse design process of looking at the recipient and then figuring out the appropriate technology or delivery mechanism is the key to developing the right intervention, Musser said.

Today the vast majority of humanitarian aid distributed following a disaster is in the form of goods — be it food, clean water, shelter or other needs. But an alternative is emerging — humanitarian payments.

Moving forward

These challenges mean that as the humanitarian aid community reaches for its target for cash-based aid, it will have to build new systems and collect data to inform programs and track progress along the way.

That means determining the mechanisms needed to shape a response, including determining how much to give, at what intervals and how it’s linked, said Christian Huber, an advisor for humanitarian policy and IHL at Diakonie Katastrophenhilfe.

Having better data is also critical to shaping those policies. And at the moment there is not enough evidence or quality data, said Eloise Todd, the global policy director for the ONE Campaign.

“It’s very hard to make these policy choices because there’s simply not enough evidence out there — there needs to be scaled up programming of how to get those transfers to the very poorest of society and see if that could have a catalyst effect for them,” she said.

That data should emerge as more organizations are deploying cash-based aid and measuring their results.

And there are a growing number of examples: “bamba chakula,” cash transfers for food aid in Kenya’s Kakuma and Dadaab refugee camps, which have reached 173,000 households; World Vision’s Last Mile Mobile Solutions system, which uses bar-coded photo cards to allow recipients to access both food aid and cash and reached more than 100,000 in the Philippines following Typhoon Haiyan; and the distribution of payments to ebola emergency workers in Sierra Leone, which the Better than Cash Alliance recently studied.

Sharing those stories and what did and didn’t work as well as the advocacy of cash as a tool with local actors, beneficiaries and authorities is still an important part of the process, Huber said.

“There’s still a lot of hesitance,” he said. “[We] have to continue strategic engagement on what does it mean.”

And that’s a good reminder that while the issue of cash-based payments is gaining momentum, it’s still merely 6 percent of humanitarian aid delivery, lacks clear targets in the Grand Bargain and has a long way to grow if the existing system will be upended and transformed.

Devex associate editor Elizabeth Dickinson contributed to this report.

EDITOR’S NOTE: Deloitte financially supported the reporter’s travel to Istanbul to attend the World Humanitarian Summit. Devex retains full editorial independence and responsibility for this content.

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About the author

  • Saldiner adva

    Adva Saldinger

    Adva Saldinger is an Associate Editor at Devex, where she covers the intersection of business and international development, as well as U.S. foreign aid policy. From partnerships to trade and social entrepreneurship to impact investing, Adva explores the role the private sector and private capital play in development. A journalist with more than 10 years of experience, she has worked at several newspapers in the U.S. and lived in both Ghana and South Africa.