SCALING UP FINANCIAL AID

There’s widespread support for scaling up the proportion of financial aid for the benefit of all.

FINANCIAL AID COULD BE APPROPRIATE IN UP TO 80% OF HUMANITARIAN CRISES ▾

  • As the Global Public Policy Institute notes in a 2016 report: “In principle, cash transfers are suitable for most humanitarian contexts. The main exceptions are countries in which governments object to large-scale cash transfers, conflict zones or remote locations that are systematically cut off from markets and areas where the technical transfer of cash would be too costly or risky.
  • “Current or recent examples of such exceptions include besieged areas within Syria; remote areas cut off from transport networks in South Sudan (e.g., during the rainy season); areas cut off from markets following the earthquake in Nepal; and areas with severe movement restrictions during the Ebola crisis. These examples show that in most emergencies, only specific pockets are unsuitable for cash programming and that government resistance to cash programming remains rare.
  • “Based on the current picture, we expect that the broad majority, or between 70 and 80 percent of all humanitarian contexts, will be eligible for cash transfers”. However, the authors of the report point out that this does not mean that financial aid would be used exclusively in these situation: in some circumstances the money might be combined with in-kind aid and other forms of humanitarian assistance.

THIS SUGGESTS THE PROPORTION OF HUMANITARIN FUNDING FOR FINANCIAL AID COULD RISE FROM TODAY’S 6% TO UP TO 50% ▾

  • Despite the evidence of its advantages, financial aid accounts for just 6% of the $25 billion of humanitarian aid provided in crises – up from 1% three years ago.
  • Based on the current allocation of humanitarian funding across sectors, the Global Public Policy Institute (GPPI) estimates that 37% to 42% of the total humanitarian budget could be allocated to cash-based programmes – mainly to unconditional financial aid, without any strings attached, and only in exceptions to vouchers.
  • According to the GPPI study, the allocation of financial aid would vary between sectors. For example, the highest proportions of financial aid would be for food (90%), shelter (70%) and agriculture (70%), while health and education would attract a lower proportion (both 30%).

MANY POLICYMAKERS, MEDIA COMMENTATORS AND OTHERS THINK FINANCIAL AID SHOULD BE SCALED UP ▾

  • The Grand Bargain, which is a 2016 commitment by 50 of the world’s leading donors and aid agencies to improve the delivery and effectiveness of humanitarian aid, made increased cash-programming (financial aid) one of its 10 core commitments. The specific commitment is: “Increase the routine use of cash alongside other tools, including in-kind assistance, service delivery (such as health and nutrition) and vouchers. Employ markers to measure increase and outcomes.”
  • The Secretary-General of the UN, Ban Ki-Moon, said, “Where markets and operational contexts permit, cash-based programming should be the preferred and default method of support.”
  • The High-Level Panel on Humanitarian Financing (2016) called for “the use of unconditional and predictable cash in humanitarian settings to be rapidly scaled up.” It added that “giving aid directly in the form of cash is often a highly effective way to reduce suffering and to make limited humanitarian aid budgets go further”.
  • The UK’s Independent Commission on Aid Impact said that DFID “should consider options for scaling up contributions to cash transfer programmes”; the UK’s Prime Minister, Theresa May, endorsed this view.
  • Newsweek wrote: “Of course cash-based approaches are not a panacea. They do not replace investments in infrastructure or education. Nor are they immune from challenges in terms of implementation. But what all of this does suggest is that those who genuinely care about ensuring taxpayers get value-for-money from the aid budget should be shouting for more cash, not less.”
  • Bloomberg wrote: “Findings from around the world suggest that giving cash over goods or in-kind transfers is cheaper and more cost-effective. It is comfortable for richer people to think they are richer because of the moral failings of the poor. And that justifies a paternalistic approach to poverty relief using vouchers and in-kind support. But the big reason poor people are poor is because they don’t have enough money, and it shouldn’t come as a huge surprise that giving them money is a great way to reduce that problem—considerably more cost-effectively than paternalism.”
  • Atlantic magazine wrote:  “A new trend within the humanitarian sector—the increasing popularity of simply transferring cash to people in need—now allows for the establishment of a charitable benchmark. In other words, before a donor gives a gift—say, to support an agricultural training program in sub-Saharan Africa, or to provide food in the aftermath of an earthquake in Pakistan—they would first ask themselves if their money would be better spent if given directly to the same aid recipients and letting them decide what to do with the money”.
  • Slate magazine wrote: “Giving cash to poor people, no strings attached, is an amazingly powerful tool for boosting incomes and promoting development. Overall, the message is that taking a huge bite out of global poverty may be easier than most people realize. Poor people just need more money.”
  • DFID noted in a literature review that cash transfers were already “one of the more thoroughly researched forms of development intervention”. It concluded that “there is convincing evidence from a number of countries that cash transfers can reduce inequality and the depth or severity of poverty”, as well as “contribute directly or indirectly to a wider range of development outcomes”.
  • The Center for Global Development wrote in a recent report,  “The barriers to cash transfers are no longer technical but political.”

SCALING IT UP COULD ALSO MAKE THE HUMANITARIAN SECTOR MORE EFFICIENT AND CLIENT-FOCUSED ▾

  • The Overseas Development Institute’s Paul Harvey said: “The aid sector in general is bad at trusting people and reluctant to hand over power and control. It’s fundamentally premised on the idea of the external experts deciding what is needed and providing it. Cash challenges that.”
  • The High Level Panel on Humanitarian Financing said in its 2016 report: “Too often, decisions about what aid is provided are driven by the mandates and interests of humanitarian organisations, rather than by the needs of people and communities they are trying to help. This Panel believes that cash transfers should be the benchmark against which other forms of humanitarian aid are judged. Humanitarian agencies should always ask: ‘Why not cash? If not now, when?”
  • Under-Secretary General of the IFRC, and former Prime Minister of Haiti, Garry Conille said: “Cash is an equalizer, putting power in the hands of the people who need it most, and removing or reducing the role of many intermediaries in the current bureaucratic system, In the current system, all the financial resources and decision-making power is concentrated in a complex web of Governments and donor institutions, UN agencies and international organizations. Too few national and community-based local organizations receive too small a portion of the resources – determined in part by demanding donor-driven requirements for accountability and reporting – and too few resources for building the capacities of local civil society organizations.”
  • The World Bank’s Chief Economist for the Middle East and North Africa, Shanta Devarajan, said: “Cash transfers have the potential to shift not just poverty-reducing policies but also the balance of power between government and its citizens, in favor of the latter”.
  • The International Rescue Committee’s Senior Director of Economic Recovery and Development, Radha Rajkotia, said: “Cash keeps us honest. It helps really home in on how we might design our programs differently so that we might reduce time and cost and be just as effective.”
  • Bloomberg wrote: “So let’s abandon the huge welfare bureaucracy and just give money to those we should help out.”
80%

Financial aid is appropriate in 80% of crises, either on its own or with in-kind aid, according to one study.

42%

The same study calculated that 42% of the humanitarian budget could be more effectively allocated to financial aid, compared to the current 6%.

“Where markets and operational contexts permit, cash-based programming should be the preferred and default method of support”

–Secretary-General of the United Nations

 

“The barriers to cash transfers are no longer technical but political”

-Garry Conille, Under-Secretary General of the IFRC

 

“It is not a magic bullet, and its pros and cons have to be assessed and scrutinized with an open mind”

– The Center for Global Development

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