Humanitarian groups are re-evaluating their work in light of how easy (and efficient) it is to just give cash to those who need help.

There is a new trend within the humanitarian sector – the increasing popularity of simply transferring cash to people in need – now allows for the establishment of a charitable benchmark. In other words, before a donor gives a gift – say, to support an agricultural training program in sub-Saharan Africa, or to provide food in the aftermath of an earthquake in Pakistan – they would first ask themselves if their money would be better spent if given directly to the same aid recipients and letting them decide what to do with the money. A no-strings-attached transfer of funds may sound indiscriminate, but as a panel of development researchers from the Center for Global Development (CGD) and the Overseas Development Institute (ODI) pronounced last year,

“Cash transfers are among the most well-researched and rigorously-evaluated humanitarian tools of the last decade,” and should be thought of “as the ‘first best’ response to crises.” Given that the evidence has shown cash transfers to be an inexpensive and “highly effective way to reduce suffering,” the panel’s report went on, “The question that should be asked is ‘Why not cash?’”

Those three words are together an interrogation that breaks with the foundations of modern charitable giving, placing the onus on donors, big and small, to defend the priority of their own humanitarian prerogatives against those of the people they seek to help. For some, this will be a heavy load. “The aid sector in general is bad at trusting people and reluctant to hand over power and control,” Paul Harvey, a researcher at ODI, has written. “It’s fundamentally premised on the idea of the external experts deciding what is needed and providing it. Cash challenges that.”

Researchers’ excitement about transferring money directly may make it sound like a novel strategy, but in truth its popularity marks the rehabilitation of cash relief as an accepted form of charity. For centuries, giving money directly to those in need was considered one of the quintessential acts of kindness. In Catholic tradition, almsgiving was honoured not as a means of eliminating poverty but for the intimacy it established between giver and receiver. Little consideration was given to how alms were ultimately spent—it was beside the salvific point.

Yet that began to change as poverty became increasingly understood less as a providentially determined state than as a reflection of individual moral failing. Over the nineteenth century, a technocratic mode of analysis echoed this version of stewardship to make a related argument: Those endowed with advanced professional training and research expertise—as in, the men and women who began to populate the humanitarian sector—should make the decisions about how charitable resources could be best used to address global poverty.

It was against this institutional backdrop that cash transfers started gaining in popularity. As early as 1981, the Nobel Prize-winning economist Amartya Sen made a moral and philosophical case for cash transfers as a response to humanitarian crises. Beginning in the late 1990s, in an effort to reduce poverty, governments in Latin America designed conditional cash transfers, contingent on recipients’ complying with some predetermined requirement, such as regular school attendance or health check-ups for their children; by 2011, 18 countries in the region had instituted such programs, and many countries in sub-Saharan Africa developed versions as well. Then, in 2004, the tsunami that ravaged nations on the Indian Ocean prompted a number of large aid agencies to experiment with cash transfers as an alternative to in-kind assistance.

Since then, an impressive base of evidence has developed around the success of cash transfers. The humanitarian sector has become more open to rigorous self-examination, with some organizations using randomized controlled trials to measure their programs’ effectiveness. The findings of some of those evaluations have put to rest one of the governing assumptions behind the centuries-long suspicion of cash transfers: that, if given additional funds, the poor would waste them on drugs, alcohol, or some other antisocial frivolity.

Instead, the research suggests, poor recipients tend to spend money responsibly, on what they think they need most. Researchers have found that a lot of in-kind aid is wasted when it doesn’t match what recipients think they need—they just sell it or give it away. In fact, a recent four-country study that compared cash transfers to food aid found that nearly 20 percent more people could be helped at no additional cost if everyone received cash. And beyond their cost-effectiveness, unconditional cash transfers promote autonomy as a good in its own right, re-prioritizing the discretion of the beneficiary, as opposed to that of the benefactor.

The popularity of cash transfers has gotten a further boost from technological advances. Ten years ago, even if a donor had a preference for cash, many countries lacked the infrastructure to deliver it expeditiously. But the rise of digital payment systems, widespread cell-phone ownership, and increased access to financial services — more than 60 percent of all adults globally have an account at a financial institution or through a mobile device — has made cash transfers a much more viable option.

Given their effectiveness, it is surprising that cash transfers still represent a “niche form of aid,” as the CGD-ODI panel’s report phrased it. The panel estimated that it now represents only 6 percent of global humanitarian relief, though this figure includes conditional and unconditional cash transfers, as well as vouchers that can only be applied to specific types of goods or services. But there is a strong push now to boost these figures.

It’s important to note that even cash transfers’ more enthusiastic boosters do not claim it as a cure-all, and insist that its appropriateness as a humanitarian or development response can still hinge on the particularities of recipients and the regions in which they live. There are still also significant implementation challenges in increasing the use of unconditional cash transfers in impoverished places throughout the world. Many areas still lack the necessary financial and technological infrastructure and have difficulty attracting the private and public investments to develop it. Even in places with the right systems, transfers are still not always possible: In 2013, after a typhoon in the Philippines damaged cell-phone towers and wiped out service in large parts of the nation, aid agencies had to deliver cash to the various islands by helicopter.

But cash can serve as a sort of moral benchmark as well. As Elie Hassenfeld, one of the founders of GiveWell, explains, weighing programs against cash transfers prompts a powerful thought experiment for charities: Would they be willing to take money from someone they’re trying to help, just so they can provide what they insist is needed? Would they, in a sense, be willing to impose a tax on poor families to fund their favored intervention? The same logic can guide individual donors as well. Asking that powerful three-word question—“Why not cash?”—can keep any potential giver honest, forcing them to think more critically, and perhaps even more humbly, about how they seek to do good in the world.

 

By Benjamin Soskis
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