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Transforming Humanitarian Aid with Cash Transfers – with Degan Ali and Owen Barder
00:21:11
How can we make humanitarian aid better? Give refugees cash. That’s the main recommendation of a high level panel convened by the UK’s Department for International Development (DFID), and chaired by CGD’s Owen Barder. How would that...
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Foreign.
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Hello, and welcome to the CGD podcast with me, Rajesh Merchandani. Today, images of razor wire being installed along European borders where there was none, or heart rending pictures of dead children washed up on Europe's shores. These bring home to us the urgency and scale of the humanitarian crisis in the world today. Simply put, more people are in need and for longer. But while European governments agonize about the thousands, mainly from Syria, trying to find safe haven and a better life, let's remember that far, far more people are not on the move, but are stuck in neighbouring countries, in refugee camps, or more likely in informal communities among local populations. How can we do better by them? How can we make humanitarian aid better? And by better, I mean more efficient, more responsive, more transparent. That's what a high level panel convened by the UK's Department for International Development, DfID, has been considering for the past few months. Their report has just been published. Their main recommendation, we should give refugees cash. Two of the panel are here with me today to discuss this. Degan Ali is the Executive Director of Adeso, a humanitarian development organization working in the Horn of Africa. And the panel chair is CGD's senior fellow and the Director of our Europe Programme, Owen Barda. Welcome to you both.
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C
Thanks, Rajesh.
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A
Thank you.
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B
Owen, let's start with you giving refugees cash. Why is that better?
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C
Well, some of the reasons you just mentioned, it's more efficient, more transparent, more accountable. But the main reason is that people themselves know what they need. If you give people food and what they really need is medicine, or if what they need is education or shelter, then if you give them cash, they can choose that. And what the panel found, looking at the evidence for where cash has been tried, is the overheads are lower. It helps stimulate the local economy, so it helps traders, it helps distributors in the economy and suppliers. It increases the support in the local population for having refugees in that area. But most of all, it gives people the dignity and the choice to decide for themselves what they need.
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B
You say where it's been tried. So there have been trials already. In fact, about 6% of humanitarian aid is given as cash. Your report is saying that we should do more because we are able to do it. But Degan, let's talk to you because your organization has experience of giving recipients cash. Cash transfers is what we're calling it. Tell me about that experience. What did you do? How was it?
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So Adeso has been doing cash since about 2002, and the first large documented cash transfer in Somalia and Probably in the horn was done by Adeso in 2003. And for us it just made sense. It was the right thing to do. We understood the local context. We knew that pastoralists who had experienced a very severe drought at that time had a diverse need. We knew they needed water. We knew that the food aid that was being given was not appropriate, that it was being given to the livestock, maize that didn't have machinery to make soft so that people could eat.
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B
So they were given food aid agencies.
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And they were giving it to the livestock. They couldn't eat it. We also knew that they had accumulated huge amounts of debt that they had taken out to local traders because they didn't have the capacity to pay back. So the local social support mechanism was allowing them to extend credit to these poor people. But because they were extending credit, the market was collapsing because the poor couldn't pay back. And then when I say extending credit, I mean this is for basic needs, this is for food, this is for water, those kinds of essential needs that pastoralists usually get this credit during dry season and during the wet season when the rains are good, they pay back. And this wasn't happening. And the normal cycle was broken because there was no wet season, there was no rain, it was a severe drought. So the local economy was collapsing. All the shopkeepers were closing down their stores. They had incurred so much debt. And the whole chain up to the large cities like Bosaso was completely collapsing. So for an outsider coming in, they would have said, oh, cash can't work here because the shopkeepers, the traders, the markets don't work because everybody's closed. But we understood that the reason the market was not working was because there wasn't enough cash being injected into the market. And so when we did our first cash transfer program in 2003, in less than 24 hours, the shopkeepers were reopening and supplying goods to the people. So this idea, this notion that markets are weak and markets cannot handle cash, we actually have experienced the opposite, that markets get stronger when you inject cash into the system. And there was this view from the international aid community, what I mean by the international aid system, I mean the UN agencies, the big large ingos, everybody was saying, this is crazy. How can you give cash to poor people? They're going to use it for guns, they're going to use it for drugs like Mira or.
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That would be the knee jerk reaction.
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That would be the knee jerk. And that was the knee jerk reaction. So there was huge opposition and quite scandalous, I would say. From humanitarians who have this very paternalistic idea of poor people. They assume that they will always spend it on the wrong thing and that we know what's best for people and they don't know what's best for themselves.
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And did any of them spend it on the wrong thing?
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No.
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None of them.
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None.
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None of them?
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None of them. External evaluations consistently done over 10 years, there has been no evidence that antisocial behavior, that it resulted in conflict, that resulted in beatings against women, all these Westernized perceptions about what poor people do, none of that existed, none of that happened.
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B
Owen, Interesting evidence there from Degan and her organisation's experience, but there are potential problems. She's talked about how people did not waste the money or squander it, but say, after a natural disaster, when there are no local markets where they can buy things, or perhaps the instinct to survive or just fill your stomach because you haven't eaten for so long might make you buy the wrong things. If you were not given the nutritional supplies from aid agencies, how do you address that?
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C
So there are some things that the market isn't readily going to supply or which people aren't immediately going to buy. So things like security for people, things like nutritional supplements for malnourished children, aid agencies still need to bring those things in. But the vast majority of what we provide for people, they will buy and they will judge for themselves what kind of food, what kind of shelter, what kind of transport they need. So there will be a small number of cases where markets don't are disrupted, for example, by an earthquake or floods. But we should not, as Degan has just eloquently reminded us, we shouldn't assume that markets won't work and can't fill the gap. If you give people money, if you give people money, markets and entrepreneurs will respond pretty quickly, and that's a much better way of meeting people's needs than bringing in boatloads of food, often inappropriate food from the United States or Europe, and it's a much better response. So, yes, there will be a small number of cases where cash isn't the right answer, and the panel is very clear on that. But the presumption should be that we give people cash unless we have a very strong reason not to. And at the moment, the presumption is the other way around, that you have to argue, as Dagan did, and managed to persuade the international community, but she shouldn't have to do that. The international community should be asking itself, why not cash? And if not now, when?
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B
So it should Be the kind of primary response should be based around cash.
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C
That should be the starting point. It should be the central part of every humanitarian appeal. Recognizing that there will be cases where cash isn't the right answer or particular products or services for which cash isn't the right answer. But the presumption should be, why not cash? And if not now, when.
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B
We talked about the issues of people not squandering it, or would they? And your evidence suggests not, we talked about local markets operating. But Degan, cash is inherently risky for people to carry around in emergency situations. How did you address that issue?
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Let's not forget that cash is being sent every day to people all over the world, whether primarily through remittances. Yeah. There is more money sent through the remittance system than there is by the aid agencies.
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Three times as much.
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Yes, three times. So we all know how large the remittance tax structure is in Philippines, how much part of the economy it is in India and all of these countries. So cash is already moving. So in Somalia, what we did is we piggybacked on the existing remittance structure. So we used the money transfer companies that were already setting remittances to distribute the cash. Unfortunately, it's still very old school in the sense that the remittance companies are giving out cash.
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Physical notes.
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Physical notes to the people. But that's changing now. There's mobile money in Somalia, so now we're using mobile payments. And in the future, in countries outside of Somalia where the network coverage is very good, in some parts of Kenya, many parts of Asia and Latin America, it's through these cards, digital, you know, through these ATM like cards. And that's the way the future. And, and there's a recognition that the aid system needs to recognize that there are more options available that are less risky. But also at the same time, we shouldn't forget that the physical movement of food is also very risky. When you have truckloads of food moving from one checkpoint to another checkpoint to another checkpoint, food is being slowly pilfered off those trucks and is being given as you know, as bribes to local chiefs, local elders or warlords or whatever that was happening for 20 years in Somalia. So food aid is not necessarily less risky and less prone to corruption.
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C
One of the themes of the high level panel's conclusions was that this partnership with the private sector is potentially really important for the humanitarian system. There are private sector companies, people like MasterCard and Visa or ebay, and new companies that are emerging m pesa for mobile payments. They have the expertise to move money securely. And it makes much more sense for the humanitarian system to work with those private sector actors to deliver money to people. And so the humanitarian system can focus on what it needs to focus on and use this expertise that is doing it, as Dagan says, every day to deliver money to people.
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B
And then how would you. But how would you make sure that, say, the ATM cards or the debit cards people are given are secure and only for them?
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C
We should use private sector actors who are already in the business of doing that. I mean, people like MasterCard and Visa are in the financial security business. That's what they do. That's what they know how to do. That makes much more sense than, as Dagan says, trying to shift lorry loads of food around the country. When you've got this infrastructure increasingly in place to deliver food, to deliver money.
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To people securely, what's the potential impact of using more cash on the traditional aid in inverted commerce industry?
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My goal is that it's going to drastically reform the aid industry. That's my hope.
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That's actually a recommendation of the panel, isn't it, that this could help reform the aid industry.
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C
That's right. In a sense, there are two big recommendations. One is we should make more use of cash. And the other is that as we move to cash, we should use that to reform the humanitarian aid system.
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A
Yeah. So I mean, I have this vision of a world where someone in Kenya or Somalia or in Nepal after an earthquake immediately gets either a payment through their phone or gets a biometric card where all their needs are topped up every single month and they no longer have to maneuver through this complicated clusters and figure out who gives shelter, who gives food, who gives health, and everything is used through the market system. And they swipe this card at a clinic or they pay through the MSA mechanism, they go to a clinic and get their health services through the MPASA system. So we do away with this silos of needs assessments, these silos of response planning and all of these things that currently exist that are very complicated for, for the average beneficiary, the average person who's affected by a crisis to maneuver through. And it's highly inefficient currently. I mean, we keep saying that we need to do coordination better, but we're not doing it. So let's just face the facts and use this opportunity of cash where we're actually giving a holistic package to an individual, either on the phone or a card. Let's use that opportunity to reform the current structure that exists.
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B
I can't imagine aid agencies are going to be potential.
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A
No, they won't. It's extremely revolutionary and challenging to their core way of doing business and to agencies who are currently invested in the system.
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C
Yes, it is a big change, but it shouldn't be revolutionary to organize this public service around people rather than around staff. The moment our aid agencies are organized around what it is that they particularly produce. World Food Programme is a food agency. UNICEF is providing water or shelter. This makes no sense. We should be organizing around people. And the best way to do that is to give people cash and enable them to choose. So it is a big change, but like all public service reform, it'll be tough, but it's absolutely the right thing to do.
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B
How are you going to sell this politically? Because aid agencies, if they are as challenged as you say they will be, are not going to support this, are going to be lobbying governments not to take on more cash because it's not in their interest. How are you going to make governments adopt this? And also because they're going to be a bit wary about what they say to their voters.
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A
I think this is what we have to do better as the ones who want to reform this system is to give a very strong cost efficiency argument. I think that's where ultimately, where, I mean, where the crux of the issue lies. If you can convince the average taxpayer that for a dollar that the UK government or the American government is giving out to a beneficiary will go further, that dollar will actually assist maybe two people instead of the current way, where it's assisting one person, more bang for their buck, as they say, then I think that's a very powerful argument about cost and efficiency.
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B
That brings to mind the example of US food aid, which was cited in one of the kind of preparatory papers for the panel. There was a study done, I think, between 2001, 2012, which showed that the US had spent almost $18 billion on food aid, of which more than half had gone to American contractors. That's the point you're making, that you could help twice as many people.
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Yes, I mean, I think, I mean, in the us, unlike the, unlike uk, we have strong lobbyists who don't want food aid reform. There has been a movement within the US for food aid reform and the bill that was tabled was actually very close to passing for the first time in history. The problem is you have the shipping industry and the farming industry who don't want that change to happen, but you could actually get support from very conservative Republicans. On this message, if it was around cost efficiency. I mean, we're all experiencing this desire by our taxpayers and everybody, the Tea parties, they're all about efficiency and less government. Well, what is better than actually showing that a dollar would go further? So I think that's what we are not doing very well. We're not packaging the message in a proper way to the taxpayers.
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C
I don't think we should make out the humanitarian system to be the villain of the peace. The people who work as humanitarians, who often put their lives in danger, often live in great discomfort, are not doing it out of greed or stupidity. These are people who genuinely want to do the best they can for the populations that they're helping, and they're working within a dysfunctional system. But there are many, many people in the international humanitarian system now who know that it's a good idea to give people cash for the kinds of reasons that Dagan has described. And it is now really a question of having the donors who are providing the money and the mandates to these organizations to change that relationship, for the donors to be asking for cash to be provided in humanitarian situations and for the donors to be willing to provide that money for those cash transfers when they're put in place. So let's not paint the international institutions as resisting change here. It's really a question of how the system as a whole changes and shifts from the equilibrium it's in being organized around things, to the equilibrium it needs to be in, which is to be organized around people.
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B
That's a good point, actually, because, you know, even in my experience as a reporter, my previous incarnation covering natural disasters, you do arrive on the scene. Aid agencies, humanitarian workers are the first in living in terrible conditions, as with the people there, and they are on the ground saving lives. So let's not take away from the good work that they do. The point you made about getting donors on board, can we take from the fact that DFID has convened this panel, the conclusion that the UK government is on board with this?
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C
Well, this is a report to DFID rather than by DfID, so we shouldn't conclude that the UK government agrees with every recommendation that we've made. But, yes, they and the European Union humanitarian organisation Echo, have both led the way in supporting the use of cash transfers in humanitarian situations. And there is a growing movement now across governments to find a way to do this. And part of what the panel was trying to do was to navigate how we could accelerate that and how we could make that change. And what we concluded is that if we don't deliberately and consciously change gear, then the growth of the use of cash transfers will be too slow and too limited that we really need to accelerate that. And we've made a series of 12 recommendations that are designed to change the system in key ways so that we actually end up with much more use of cash and so that we end up with the broader reforms that the humanitarian system that using cash can facilitate.
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B
And with the World Humanitarian Summit coming up next year and with the crisis that we're seeing on Europe's borders right now with refugees, this is extraordinarily difficult, timely.
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C
That's right. This is the first world Humanitarian Summit. It's going to be taking place in Istanbul in May 2016. It's a once in a generation opportunity to tackle some of these long standing problems. And it's terrific that DFID has convened this panel to generate evidence and ideas so that on the table for the summit are some concrete proposals for how we can make changes and degen.
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B
Last word to you. What would be your key message to policymakers listening to this?
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I think the efficiency and cost argument is very important, but I think that, I think it's just about doing business differently and doing it better. I think it's about we need to realize that cash can have so many ramifications both in cost in reforming the system. And we keep saying we want to do better. There's this transformative agenda that's led by the UN and donors. There's all of these agenda, the whs, all of these things. And for me, there are very important recommendations out there. But one of the key ones is around cash. I think cash has the ability to really have, to really spread its tentacles and have impact on the structure as a whole.
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In a good way.
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In a good way. And I think we need to use this opportunity that we have. As Owen has said, this is a generational opportunity with the whs. And what the panel has come up with, I think it's about courage and it's about doing the right thing.
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B
Okay. Degan Ali from Adeso, Owen Bardon, my colleague here at cgd. It's been really interesting to talk to you both. Thank you very much for joining me.
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A
Thank you.
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C
Thanks, Rajesh.
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The report is called Doing Cash How Cash Transfers Can Transform Humanitarian Aid. You can read it on our website, cgdev.org go there as ever to find out about everything that CGD is working on. And please also remember to join me, Rajesh Merchandani for the next podcast from the center for Global Development.