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Finance & Innovation

9 reasons why cash transfers should be go-to form of humanitarian aid

Flickr: Prefeitura de Olinda

Unconditional cash transfers--cash with no strings attached--may finally be getting the respect they deserve. Such programs constitute only about 6% of global humanitarian aid, but that’s up from less than 1% in 2004, and this gradual broadening of examples has provided analysts with lots of evidence to review.

And review they have.

A new report by the Center for Global Development makes the case that cash transfers should no longer be treated as test-cases that need to be assessed, as decoration on the peripheries of humanitarian work. Instead, they should become the center of all aid.

In other words, cash transfers should be the starting point of aid. More traditional forms of aid like improving sanitation and water systems and providing health care and resources are still essential but they should provide adaptive, supportive roles.

Cash transfers...

1) Allow people to get what they actually need

Typically, aid organizations decide what to provide people in need of assistance: health kits, bags of rice, water purification kits, etc. Generally these are well-researched decisions, but they might not totally mesh with the reality on the ground for every person and family. By distributing cash or digitally secure cards, people can accurately determine what they need--water, food, medicine--and then go buy it without delay.

There’s a common view that people don’t know what they actually need. But that denigrates the intellect, understanding and willpower of people receiving aid. Countless programs show that people who receive money do a better job at spending on what is needed than aid organizations do.

2) Increase transparency

With cash transfers, the amount of people affected by aid can be easily determined. The total amount of money collected can be fairly divided among a target population and then additional humanitarian aid can provide support. Digitally secure cards can provide another level of transparency, by demonstrating exactly what money was spent on.

3) Increase accountability

Bureaucratic snarls can siphon lots of aid money as teams decide how to procure goods, how to store them and to distribute or implement them. Projects that require government authorization can be stalled for months or even years, siphoning funds. Projects that do not turn out as expected or do not have the intended impact can siphon funds. Basically, a lot of traditional humanitarian aid work runs the risk of being squandered.

Cash transfers avoid all of these potential problems and can demonstrate to donors that their money is being put to good use by the people who need it. The people who are receiving the aid will also know for sure that the presence of organizations is beneficial to them.

4) Reduce costs and make aid go further

Giving cash directly cuts out all sorts of mediating layers. Cash does not require transportation, storage, maintenance and other layers commonly associated with aid work, which will cut down costs and allow budgets to go further.
A study in Niger, Ecuador, Uganda and Yemen found that 18% more people could be helped if everyone received cash instead of food.

5) Support local economies

Cash transfers allow people to spend in their communities. This helps out small businesses, which could lead to more jobs. It encourages entrepreneurship--more jobs. It also allows people to invest in their own work and supplement their incomes.

6) Gain the support of local communities

Sometimes aid organizations do not mesh with communities in need of aid. Sometimes they are hobbled by bureaucratic or resource constraints and can not fully execute their work. In such cases, humanitarian groups can be seen as nuisances or even imposing forces.

With cash transfers, communities can immediately experience the benefit of aid groups and their good intentions and will work with them to maximize results.   

7) Increase speed and flexibility

Again, cash does not need to go through various layers of distribution or management and does not take a long time to implement. Because of this, aid groups can spot problems and readily tackle them by distributing cash. Organizations can also limit or expand or target cash dispersal depending on contextual needs.

The World Food Programme found that cash was more efficient than food aid by 25% to 30%.

8) Increase financial resilience of communities

Cash and digital cards allow communities to become better acquainted with financial systems. This could mean opening bank accounts, learning how to better budget money and discovering investment channels.

9) Give people control over their lives

Nobody likes to have their lives shaped by the whims of another person or organization. Everybody likes some degree of autonomy. In places in need of aid, autonomy is often the first thing to go as livelihoods become uprooted. Also, traditional aid may be inconsistent and may not meet the needs of each person on a regular basis, causing people to routinely worry and stress.

Cash transfers give people some control over their lives. They allow people to decide exactly what they need on a regular basis. This independence can also carry over into other areas of a person’s life. When daily needs are no longer stressed over, people and families can begin to plan for the future.


Cash transfers will not eliminate traditional aid organizations. Not at all. They will simply make the humanitarian world more efficient, transparent and effective. And they will materially improve the conditions of the people in need of aid, which is the ultimate goal of all efforts.

They will allow aid groups to better adapt and respond to the needs of a situation and focus more on long-term solutions.

I’m a huge supporter of cash transfers and think they should be used much more regularly.

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