Smarter aid: Why digital cash transfers are the future

Nigel Tricks Cash transfers, Food & livelihoods, General, Humanitarian, ICT4D

With mobile internet now widely available across East Africa the arguments for aid through electronic cash transfers are overwhelming. Nigel Tricks, Oxfam’s Horn East and Central Africa Regional Director reflects on a recent visit to drought affected Somaliland.

Two weeks ago, I visited Oxfam’s drought response in eastern Somaliland. We drove across a stark landscape; what should be a pastoralist heartland is now completely devoid of water and almost empty of livestock. Not a blade of grass and barely a green leaf to be seen. The carcasses of camels, always the last to succumb to drought, littered the landscape and we soon lost count of their number. The drought is severe and it is taking a similar toll across Somalia’s borders and into neighbouring Ethiopia and Kenya.

Most people we met had settled near dwindling water sources either just enough to sustain a handful of families or unfit for human consumption altogether. Clustered around every town was a growing camp of internally displaced families, now dependent on the delivery of essential relief from government and aid agencies.

What I saw this time in Somaliland convinced me, if it were needed, that aid is changing.

Telephone masts delivering 3G and 4G phone signals stand sentinel on hill tops across the country
Telephone masts delivering 3G and 4G phone signals stand sentinel on hill tops across the country and access to a signal and a registered SIM card means access to a wonder of modern Africa: digital cash. Any family – regardless of where they live – with access to a phone, can receive money sent at the touch of a computer button from the nation’s capital.

Through a contracted telephone company, money is transferred to a registered SIM card based account and can be withdrawn from local traders. People are free to decide what to use the money for and when, enabling them to play a more active role in meeting their own needs. One man I met in Somaliland told me, “We can decide and buy what food and how much water we need or whether to invest in hay for a lamb or education for a child. The market will deliver; we know the traders and the main roads are good.”

It is clear – humanitarian agencies now have the absolute obligation to accelerate the transition from direct relief to unconditional cash transfers, as the first and the default response. Indeed Oxfam has significantly boosted its current drought response with an increased proportion of cash. In early May, 1,750 families in Somaliland each received US$ 140 expected to meet their most immediate needs for three months.

Cash transfers are a more efficient and cost effective way of getting help directly where it is needed and are equally accountable to tax payer’s money.
The traditional models of humanitarian response where food, water, and other essentials arrive on the back of a lorry have always played a vital role as they are immediate. Cash transfers are a more efficient and cost effective way of getting help directly where it is needed and are equally accountable to tax payer’s money.

Direct distributions also run the risk of risk of duplication as different actors may end up delivering different types of aid on different days, locking families in winding queues in distribution centres, unable to focus on other activities. Worse still, they may bypass fragile local markets, providing basics that would otherwise be locally sourced.

Though less visible, digital cash transfers can be significantly more effective. They enable communities to organise their own water trucks and food deliveries, or buy essential medical supplies in local health centres, thereby reinforcing local businesses and institutions, rather than replacing them. Communities can even club together to repair water harvesting infrastructure, in hopeful anticipation of the rains.

Emergency responses in pastoral areas tend to end with some form of restocking exercise where families are provided with a number of livestock to help restore their traditional livelihoods. Witnessing the growing fragility of that same livelihood for some pastoralists, we must consider that restocking is not for everyone.

If the same livestock is monetized, families can either buy the very animals they seek at choice markets or opt to inject the cash as restart capital for a small business. Others may prefer to use this money to migrate to urban areas in search of paid employment or save some of the allocation for a rainy day.

The benefits cut across. By combining digital cash transfers with market stimulation, aid agencies can avoid cumbersome logistical scale ups, and deliver assistance more quickly, accountably and efficiently, particularly in hard-to-reach areas. A 2014 study by the Cash Learning Partnership on the value for money of cash transfers in emergencies suggests that cash assistance is up to 30 percent cheaper to deliver compared to its in-kind equivalent. As we get better at cash distribution and it becomes more mainstream, this difference will only increase.

In addition, aid agencies can build on established social protection programmes, such as Kenya’s Hunger Safety Net Programme, that are proving themselves in helping vulnerable families take early action and cushion themselves against the worst of a crisis. Through this mechanism Oxfam is currently providing cash assistance to drought-affected families in Turkana and Wajir counties, simply by topping up the money on cards already allocated to registered households.

Saving lives is the ultimate goal in any surge response; but as crises like the one in Somaliland worsen against a back drop of advancing technology and improving infrastructure, aid must keep pace. Aid has to be smarter.

This post first appeared on the Oxfam HECA blog on 17.05.2017

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Lyndsay Stecher