Decades ago, some of the biggest NGOs simply gave away money to individuals in communities. People lined up and were just given cash. The once popular form of aid went out of fashion, but it is now making a comeback.
Over time, coordination became extremely difficult. Traveling from home to home costs time and money for the NGO and the same problem exists for recipients when they have to go to a central location. More significant was the shift in development thinking that said giving hand-outs was causing long term damage.
The backlash against ‘welfare queens’ in the US, UK and elsewhere during the 1980s was reflected in international development programming. Problem was that it was all based on unproven theories of change and anecdotal evidence, rather than hard evidence.
Half a decade later, new research shows that just giving people money can be an effective way to build assets and even incomes. The findings were covered by major players like NPR and the Economist.
While exciting and promising, cash transfers are not a new tool in the development utility belt. Various forms of transfers have emerged over the past decade. Food vouchers were used by the World Food Programme when responding to the 2011 famine in the Horn of Africa. Like food stamps in the US, people could go buy food from local markets and get exactly what they need while supporting the local economy.
The differences have sparked a sometimes heated debate within the development community as to what the findings about cash transfers mean going forward. A Technology Salon hosted conversation at ThoughtWorks in New York City last week, featured some of the leading researchers and players in the cash transfer sector.
The salon style conversation featured Columbia University and popular aid blogger Chris Blattman, GiveDirectly co-founder and UCSD researcher Paul Neihaus and Plan USA CEO Tessie San Martin. The ensuing discussion, operating under the Chatham House Rules of no attribution, featured representatives from large NGOs, microfinance organizations and UN agencies.
Research from Kenya, Uganda and Liberia show both the promise and shortcomings of cash transfers. For example, giving out cash in addition to training was successful in generating employment in Northern Uganda. Another program, with the backing of the Ugandan government, saw success with the cash alone.
Cash transfers have been argued as the new benchmark for development and aid programs. Advocates in the discussion made the case that programs should be evaluated in terms of impact and cost-effectiveness against just giving people cash.
That idea saw some resistance. The research from Liberia, for example, showed that money given to street youth would not be wasted, but it was not sufficient to generate long-lasting employment or income. There are capacity problems and much larger issues that probably cannot be addressed by cash alone.
An additional concern is the unintended negative consequences caused by cash transfers. One example given was that of refugees in Syria. Money was distributed to families labeled for rent. Despite warnings not to label the transfer, the program went ahead.
As a result, rents increased. The money intended to help reduce the cost incurred by rent was rendered largely useless. One participant raised the concern that cash transfers in such a setting could be ‘taxed’ by rebels or government fighters. There is a potential that aid organizations could help fund fighting by giving unrestricted cash.
The discussion made it clear that the applications of cash transfers are far more nuanced than they might appear. Kenya saw success in part because of the ease of sending money to people through mobile phones. Newer programs in India, for example, rely on what are essentially ATM cards.
Impacts, admitted practitioners, can go beyond simple incomes. There has been care to make sure that implementing cash transfer programs to not dramatically change social structures in ways that cause problems for the community and recipients. In one case, giving women cash allowed for them to participate in the local markets, a benefit to everyone except for the existing shop oligarchs.
Governments in low and middle-income countries are seeing increasing pressure to establish social programs. The success of cash transfer programs in Brazil and Mexico indicate that it can be an effective way to lift people out of poverty. Testing is underway to bring about more efficient and context appropriate cash transfer schemes.
An important component in the re-emergence of cash transfers is looking back to previous efforts, said one NGO official. The individual’s organization is systematically looking back at communities where the NGO used to work in order to see what happened ten years later. The idea is to learn what impacts may or may not have been on that community in order to inform future initiatives.
“Lots of people have concerns about cash, but we should have concerns about all the programs we are doing,” said a participant.
The lessons from the cash transfer research shows that there is increasing need for better evidence across development and aid programs. Researchers in the group argued that the ease of doing evaluations is improving.
Written by Tom Murphy and originally published as Whither Cash Transfers? A Discussion with the Experts