Cash-based transfers: 6 reasons why it works

Cash transfer programmes are at the frontline of national governments’ responses to the COVID-19 pandemic. Ranging from bank notes to e-money and debit cards to value vouchers, cash transfers are integral to many countries’ social protection systems, buffering the worst socio-economic effects of the crisis. In 2019, WFP transferred US$ 2.1 billion — 38 percent of its total assistance — to 28 million people in 64 countries across the world.

But what effect did cash transfers have on people’s lives? What can we learn from the evidence?

A new evidence summary captures lessons from 23 WFP-commissioned evaluations and inter-agency humanitarian evaluations published between 2014 and 2020. It brings together evidence from Ethiopia, Sierra Leone, Jordan, Kenya, Lebanon, Nigeria, Syria, El Salvador, Guatemala, Somalia, and others.

The summary highlights six main effects that cash-based transfers had:

1. Food security gains

The majority of interventions where cash transfer programmes were applied — whether conditional or unconditional, and regardless of the modality (cash, voucher, a combination or ‘choice’) — indicated improved food security for beneficiaries for programme duration. Where unrestricted cash was provided, high levels of expenditure on food were reported.

In June 2019, Mohammad Bahomaishan, his wife, Sahar and their three young children — Islam, Talin (pictured) and Muna — were enrolled in WFP’s food assistance programme. In Jordan, over 90% of beneficiaries spent most of their cash on food. WFP/Mohammad Batah

2. Enhanced livelihoods

An evaluation of the collective response to Typhoon Haiyyan and an evaluation in Kenya, found that conditional cash transfer programmes, such as cash for assets which included carpentry training, were more successful than unconditional cash transfers in supporting people to regain livelihoods.

In Kenya, host community traders — contracted to serve refugee beneficiaries — provided goods, labour and other services to refugee neighbours in return for cash.

In South Sudan, the Food Assistance for Assets programme focuses on asset creation activities that enhance food availability — such as crop farms and vegetable gardens — and food access — such as community access roads. WFP/Gabriela Vivacqua

3. Improved dietary diversity

The use of cash/vouchers, as opposed to in-kind delivery, was shown to enhance dietary diversity in South Sudan and Zimbabwe, as cash could be used to buy a variety of foods not included in in-kind assistance.

In Lebanon, Jordan, Egypt and Iraq, WFP beneficiaries in receipt of cash transfers had higher dietary diversity scores relative to non-beneficiaries.

In 2016, Ahmad’s family crossed the Syrian mountains and entered Lebanon. With no income, no money, nothing of worth and no way to eat beyond begging, Ahmad’s family was desperate for food. An e-card allows families like Ahmad’s to buy the food that they need, when they need it. WFP/Edward Johnson

4. Investment in education and health where cash transfers were conditional

In Ecuador, the use of cash transfers conditioned on nutrition and health training was found to support beneficiaries’ investment in the education and health of their families.

In Ecuador, WFP supports 26 shelters and canteens in the provinces of Azuay, Carchi, El Oro, Esmeraldas, Guayas, Imbabura, Pichincha, Santo Domingo and Sucumbíos. Partner organisations receive value vouchers that can be redeemed for healthy food products, which allow providing hot and nutritious meals for this vulnerable population. WFP/Paola Solis

5. Increased dignity

The use of cash — as opposed to vouchers, and whether conditional or unconditional — had positive effects on beneficiaries’ dignity in Somalia and Ecuador.

In Ecuador, for example, beneficiaries reported they were less likely to be treated as ‘second class’ customers by vendors. In South Sudan, the predictability and timeliness of cash transfers also supported dignity.

In South Sudan, WFP’s Food Assistance for Assets (FFA) meet short term hunger gaps while helping households build resilience against future shocks and stresses. In the photo, Achok (25) visits the Sukkuthaar Market to buy food for her family after selling vegetables. WFP/Gabriela Vivacqua

6. Supporting local economic development

Evaluation found positive effects of cash transfer programmes on local economic development. For example, in Lebanon, a WFP-commissioned study found that, for every US$1 spent directly on cash transfers, an additional US$1.51 was generated in local economic activity.

In Zimbabwe and Kenya, cash-based interventions supported local markets by stimulating demand for local goods; in Kenya, the monthly volume of sales by local traders increased by up to 94%.

Oppah Kanongara (aged 32) is a single mother who lives in Harare, Zimbabwe. She and her three children are receiving food assistance from WFP in the form of cash transfers. WFP/Claire Nevill

However, it must be stated that some evaluations also found negative effects on the local economy where cash transfer schemes were extended over time. For example, in Jordan, an evaluation of WFP’s cash-based response to the Syrian regional crisis recommended that WFP carefully monitor the local rental market and informal lending to ensure that cash did not have a negative effect on rent prices or create increased pressure for beneficiaries to pay off debts.

What lessons emerged from the evidence?

The summary provides 12 lessons to help enhance the positive effects of cash-based programmes, and to reduce any risks which might impede effectiveness.

1. Prioritize analysis, even under emergency conditions
2. Plan across the humanitarian–development nexus from the design stage
3. Adopt a coordinated approach
4. Maximize the benefits of technology while keeping beneficiary experience in view
5. Build flexibility into transfer values for maximum effectiveness
6. Address national priorities and secure political will to ensure sustainability
7. Prioritize sensitization of local communities to reduce social tensions
8. Temper beneficiary modality preference — often for unrestricted cash — with contextual conditions
9. Communicate targeting criteria with a focus on equity
10. Embed robust safeguards against beneficiary exploitation
11. Build in gender and protection concerns from the start
12. Adopt a systematic approach to accountability to affected populations

Read the full evidence summary on cash-based transfers here.