Saturday, March 12, 2011

Guest Voices: Hard Cash in Hard Times

Continuing our series of posts from Concern Worldwide is a story about giving cash instead of food aid in Zimbabwe. Writer Cormac Staunton says this is a big change from the traditional response to humanitarian aid and may be a big improvement.

Sophia Chitsatse was 65 when I met her in Nyanga, Zimbabwe, a widow looking after four orphaned grandchildren. Although she was a farmer, she struggled to grow enough food for her family to last from one harvest to another. As a result, she had been receiving food aid rations from the World Food Program (WFP) for several years.

This is the traditional response to a humanitarian crisis, to directly provide people with what they need most. It is hard to argue with the logic; if people are starving, they need food. If people’s belongings have been washed away, they need essential items like soap, cooking utensils, and clean water.

But in the last number of years there has been an increasing focus on improving the way in which the world responds to emergencies. In late 2009, Sophia Chitsatse benefited from a new approach: instead of receiving food aid, Sophia was given cash.

We do it all the time in the western world. We have state pensions, unemployment benefits, and child-welfare payments. There are differences and debates as to the extent to which these should be provided, but most people agree that the best way to provide this assistance is through money, rather than goods.

Taking the same approach to a humanitarian crisis has many advantages, backed up by numerous studies. For one thing, giving cash is generally cheaper. There are huge costs involved in trucking and shipping large quantities of commodities across the globe.

Cheaper, of course, does not necessarily mean better. But providing cash has been proven to be very effective, because it allows people to prioritize their own needs. Women like Sophia can now choose the food they want to buy for their families, and how much. They can also choose whether, in addition to food, they need soap or toothpaste, or a blanket. These aren’t always easy choices. But it is better that they are made by a family, rather than by a third party. Allowing them to make decisions gives power to the poorest and most vulnerable. It also results in the better outcomes, as each family purchases precisely what they need.

Of course, in some humanitarian crises, the goods that people need are simply not there. Providing cash in such cases is meaningless and can even be dangerous. The cost of scarce goods would sky-rocket and could make a bad situation worse.

However, often a crisis is not caused by scarcity, but because people cannot access the goods they need. Food might be available in a market, but people do not have money to buy it, or it is prohibitively expensive. This problem is made worse by the global rise in food prices. This points to another advantage to providing cash: the effect it has on the local economy.

Flooding local markets with free goods can undercut local suppliers and put local traders out of business. Cash, on the other hand, can stimulate local markets. When I met Sophia in Zimbabwe I was conducting a study to compare “multiplier” effects of cash versus food aid. The study—the subject of an upcoming Working Paper for Trinity College, Dublin—looked at food aid and cash transfers distributed by the WFP and Concern Worldwide in rural Zimbabwe in 2010. Building on previous work by the economist Simon Davies with Concern in Malawi, the study created a “Social Accounting Matrix” for the region where both cash and food distributions took place.

The model, quantifying how all the economic groups in the region interact, was used to calculate and compare “multipliers” for cash and for food aid. A multiplier measures the effects of injecting something into the economy, including benefits beyond the help given to the initial recipients of aid. The results showed higher multiplier figures for cash than for food aid.

Food did have some multiplier effects, for example, when it was used to barter for other items. But the majority of the food was consumed and where it was bartered, the deals that people got were often not very fair.

On the other hand, people like Sophia were now able to buy food from local producers and traders. Even though many people were suffering from a food shortage, some producers had enough to sell and local traders were able to respond to the demand for goods that the cash injection created. Prices did not increase significantly.

There’s more. Sophia was also able to use the money to pay school fees and keep her grandchildren in school. The money she and others spent on these fees also allowed teachers’ pay to be “topped up”. Others told us that they paid fees at local clinics that covered maintenance, carried out by local workers. The teachers and the laborers would spend these earnings, buying food from a local trader, who in turn bought suppliers from a local producer.

This is the multiplier in action. At each stage, the added value of the cash is increasing and the cycle continues until the money leaves the local market. The study showed that in Zimbabwe, as far as the local economy was concerned, cash had a much more positive effect than food aid. The benefits were felt by more people– many of whom were only marginally better off than the poorest that the programme was reaching– than just the initial recipients.

While the advantages of giving cash are becoming clearer, there is still much to work on. Agencies are increasingly looking at new, better and safer ways to distribute cash, including the use of mobile phones and smart card technology, which has been pioneered by Concern in various countries, most recently in Niger. There is a need to look at what happens when projects are scaled up to see if many of the positive impacts still hold. Caution is also needed to ensure that cash is only used in appropriate settings, and that agencies are fully able to assess the impact of cash.

But for women like Sophia–who now spends less time working on other people’s land and more time on her own, who’s grandchildren are staying in school and who is getting a fairer deal for the things she needs–it is clear that cash is a more appropriate, effective and empowering way to help people in times of crisis.

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