International aid cash transfers – an effective tool for independence, or a waste of British taxpayer’s money?

17 November 2017

Entwined with the history of imperialism is how richer countries give money to poorer countries – something they have been doing in various ways since the 19th century. People usually think of international giving as programmes, or aid goods packages, however a growing trend is appearing to complement or replace these interventions – cash transfers. Cash transfers are"The provision of assistance in the form of money (either physical currency/cash or e-cash) to beneficiaries (individuals, households or communities)”. Essentially, organisations transfer money to those most in need, to replace the distribution of goods, or to complement a project. But are they effective?

At the beginning of this year the Daily Mail ran a front-page piece criticising the British government’s cash transfer schemes saying they were a waste of British taxpayers’ money and open to fraud, kicking off a heated debate on the value of cash transfers.

The issue of corruption was echoed by the Telegraph and Nigel Evans, member of the International Development Select Committee, who compared the scheme to being on the dole. The Express called it the £1bn scandal, and Kelvin Mackenzie of The Sun lambasted the scheme, saying we should know from our own benefits system that handing out cash is never the answer.

In the face of this criticism Theresa May defended their use, and a report by the Independent Commission for Aid Impact contested the claims in the Mail’s article, and gave the programmes an overall endorsement with room for improvement.

The unfortunate fact remains that nearly 90 million people need humanitarian aid. Countless leading institutions, such as the Overseas Development Network, have found that giving people cash instead of goods like food and clothes is better as it’s simpler, and helps more people, more effectively. Cash transfers preserve people’s dignity and give them autonomy, they are very often cheaper and faster than sending goods or providing services, and they boost local economies. People are better suited to decide what they need than outside agencies: up to 70% of Syrian refugees in Iraq have sold goods they received and didn’t need, and the difference between what these goods sell for, and the cost of providing them, is a waste of limited resources.

Another worn out argument is that people will use these cash transfers for alcohol, tobacco or gambling. According to a six-country study conducted by the Food and Agricultural Organisation, there was no evidence in increased expenditure on alcohol and tobacco from cash transfers, and in Lesotho alcohol expenditure actually decreased. The study also found a 36% increase in the use of farmland and overall production in Zambia; the majority of programmes showed an increase in secondary school enrolment; and all cash transfers lead to positive multiplier effects in local economies.

The Rotman School of Management at the University of Toronto also found cash transfers to be a positive and effective tool for affecting change. Significant findings include a reduction of 47% in the poverty gap in South Africa, a 30% increase in child immunisations in Peru, and a 24% increase in the secondary school pass rate of girls in Bangladesh.

 

I think it is important to keep in mind, however, that cash transfers are only part of the solution. They cannot immunise children, clear mines, or protect children in conflict. They can’t be eaten when there’s no food to buy, replace infrastructure or ensure political stability. They cannot build resilience to mitigate the impact of crises, for which they then are often used to alleviate. While there is clear argument for cash transfers, they are neither a panacea for the global humanitarian financing gap, nor a long-term solution to ending conflict. They are an invaluable antiseptic bandage before the lifesaving operation, and it is time for the global community to see the value that cash transfers can have.

What do you make of cash transfers? Tweet us @OfficialCause4 to let us know.

 

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