Cash Transfer Programs - Leveraging Social Change

November 2017

Jeff Paddock

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Grassroots economic development often takes the form of literal cash, but one recent innovation has shown it’s more than that. I’m going to move away from financial projects, for a moment, and visit the world of humanitarian aid. In this field, organizations focus on responding to crises, natural disasters, and conflict areas where the need is immediate. Typically, we think of food donations or non-food aid like health services and emergency care. Although these are all key in responding to a crisis, the humanitarian sector has developed a unique way of targeting multiple pillars of the community at once. It’s a new form of aid called Cash Transfer Programming or CTP.

 

In this article, we’re going to investigate the nuts and bolts of cash transfers. We want to look at the three types of CTP, analyze what they’re good for, and identify any take-aways we might use to pursue our grassroots development goals. As innovations go, this method is especially important to the grassroots context, because of how involved it is with the local people. CTP may be the most intense example of a community project in economics, given the nature of the environments in which they occur. While economic development takes decades of negotiation and steady progress, cash transfers involve intimate interactions with the community for rapid recovery. There are three ways to do it.

 

The Mechanisms

 

The first is called conditional or un-conditional cash grants. These transfers meet basic food and non-food needs to purchase assets. Essentially the affected individual, household, or community receives a specific sum of money to use in their own recovery. The usage might depend on an agreement with the community like sending their kids back to school (if the school is functioning). This would be an example of a conditional cash grant. It’s useful only if the organization is sure of the community’s priorities, but isn’t as flexible as it’s brother. Un-conditional grants are simply cash with no strings attached. It is especially helpful in the initial response phases of a disaster or conflict when people need help fast. It highlights one of the beauties of cash aid – both in development and humanitarian efforts – because it gives the locals the power to buy what they need, not what the organization deems appropriate.

 

The second way of doing CTP is called commodity or cash vouchers. The vouchers are paper or electronic tickets that people can use at local markets. Each one has selective features vendors will recognize like stamps, cereal numbers, or watermarks. In the case of electronic vouchers, aid organizations will typically give out plastic debit cards. Vouchers are good for a set number of goods (commodity vouchers) or a certain amount of money (cash vouchers). We can learn something from a voucher system, because the assumption up until now has been that CTP benefits people as long as the market is functioning. However, that isn’t always true and a voucher system is an important reminder of how important it is to know your local markets. Not only do voucher programs have to assure the markets are working post-crisis, they have to set appropriate prices, find commodities relevant for recovery, and carry out the program without interrupting economic norms. A voucher program reminds us of just how crucial it is to understand the community context before trying to leverage it.

 

The third and final way is called cash-for-work projects, which might look familiar to some of us. The aid organization pays wages in exchange for work on a public or community project. This form of CTP has the dual objectives of providing the targeted community with a temporary income and meeting identified community needs. Rebuilding roads, water systems, and public facilities are all examples of this kind of programming. What should strike us about this type of CTP isn’t only that it relies heavily on the ideal of a community working for itself, but also the emphasis it puts on cross-cutting issues like age, gender, and disability. At first glance, cash-for-work appears to benefit only able men. Humanitarian organizations, though, have training to address the most vulnerable, meaning sewing, food preparation, and other services pertaining to low-skilled labor are part of the CTP protocol.

 

The Lesson

 

CTP is so much more than just cash, as Marianna Kuttothara knows very well. Marianna is a regional response advisor for CTP at the American Red Cross. She makes it clear that CTP is a tool for a multisector approach, supporting projects that build shelters, provide medicines, and target the livelihoods or local workers. Cash is flexible enough to cover it all. The real meat of the job is getting it right. While development experts have time to get to know and understand the community, humanitarian organizations don’t always have that luxury. If you’re going to give conditional cash transfers to rebuild 68 homes, you have to assess the conditions first. Is the timber market functioning? Are they producing the type of wood the community uses for housing? Is it reasonably accessible? Is the community aware of it? These are the intense assessments that experts like Marianna are responsible for in a short amount of time. Preparedness, she says, and communicating with national Red Cross societies beforehand, is key. We might learn a thing or two from their rigorous protocol.

 

When I asked Marianna how CTP fit into the field of economic development, she said that relief and recovery initiatives like hers served as a transition tool. Frequently, a CTP project will identify a need in the community and set up a mechanism to address it, whether that’s grants, vouchers, or employment. This creates a safety net for the time being, until the community or a development organization can take up the torch and build upon that foundation. In this way, CTP helps determine the appropriate method of aid; it helps us find the economic norms that the community already runs on. Cash grants give control of the money to the community, while vouchers force us to address the reality of market conditions. Meanwhile cash-for-work programs make us think about how to include the financially vulnerable in our projects. This is truly a grassroots strategy in disguise and we ought to consider its methods in all our economic development settings.

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About the Author

Jeff works on the ethical considerations of economic development and cash aid programs around the world. He currently works in Honduras, supporting local community projects through micro-finance and holds two degrees in Philosophy and International Affairs.