Cash is key to ending extreme poverty

As the nature of humanitarian disasters changes, putting more people in need and for longer, how we respond needs to change too. Over the past years, new approaches to protect the lives of those affected by crises – short and long-term – have been trialled, with cash assistance proven to be one of the most effective at both saving lives and making limited funds go further.

Cash assistance is delivered through cash transfers or the provision of a voucher. The term ‘cash transfer’ means assistance in the form of money - either physical currency or electronic cash - to individuals, households or communities. Vouchers are provided in paper, token or electronic form. They can be either cash vouchers, which have a cash value (e.g. £15) and can be redeemed for goods up to that value, or commodity vouchers, which can be redeemed for a specific quantity of certain goods and services, (e.g. 5kg of maize). Or, they can be a combination of the two.

There are different ways of delivering cash transfers and vouchers, such as smart cards, mobile money transfer, cash in hand, bank transfers, electronic vouchers and paper vouchers.

In our experience, where it is possible and appropriate to provide cash assistance, there are more positive outcomes than traditional assistance provided in kind. For example, cash assistance can be more efficient as it is fast, flexible and adaptable. The amount, time and duration of disbursement can be scaled quickly to respond to an emergency and longer-term recovery needs or to restore livelihoods, and at lower costs.

Another big benefit of giving cash and vouchers is its value for money. For example, cash and vouchers provided in response to the 2011/12 Somalia famine delivered over twice more aid to beneficiaries compared to traditional food aid because of the savings on transport, storage, handling and security costs [DFID].

However, in addition to operational gains, cash assistance is preferable because it puts vulnerable people’s immediate needs first, while also allowing space for long-term development. People are empowered with the choice to purchase what they value most – be it food, shelter, household supplies or medical assistance – therefore gaining access to a wider range of commodities. Moreover, looking at the wider impact, cash transfers can stimulate the local economy and strengthen local markets as the money is usually spent locally. Cash is not only a way of helping people in need get back on their feet, it incentivises and supports entrepreneurship, enabling them to take control of their own futures.

Cash assistance is also an essential response to support people through the coronavirus (Covid-19) pandemic. Covid-19 has had an unprecedented impact globally in terms of access to and the capacity of healthcare systems to respond. Moreover, as we witnessed during the Ebola crisis in 2014 or in cholera outbreaks, physical distancing is a choice only a minority can afford in low-income countries. The pandemic has caused economies to grind to a halt due to devastating lockdowns that have forced many to lose their livelihoods. It is estimated that at least 100 million people are being pushed into extreme poverty due to lost income and the lack of access to essential services, and that 122 million people face extreme hunger.

Recognising the impact that Covid-19 will have on incomes, countries in many regions have started responding with social protection to support households – through wage subsidies and social assistance measures, which include cash and voucher transfers. Accountable cash transfers at scale and speed are an essential response to support households through Covid-19, alleviating the socio-economic impacts and risks from Covid-19 on the most vulnerable.

The purpose of development is to help people in poor countries become independent and stand on their own two feet. Cash assistance, with self-reliance at its heart, does just that.