Learn more about the use of cash as a tool for humanitarian assistance by the International Red Cross and Red Crescent Movement. If your question is not listed here or you want more information you can also check the Resources section.
What is “cash distribution”?
A cash distribution is one of many ways in which humanitarian aid can be delivered to people in crisis. Traditionally, ‘in-kind’ aid, things like blankets, tents, food and other items, has been the preferred method of assistance. A cash distribution is essentially the same thing, but instead of items, a set amount of money is given to people, who can then use it to buy essential goods in the market.
How is cash distributed to people?
A cash distribution can take many forms; cash transfers, electronic cash, vouchers or cash-for-work programmes. Each method comes with advantages and disadvantages; for example vouchers can ensure that people spend their allocation of cash on selected goods only, but in some situations it can severely restrict what they can buy. Electronic cash via mobile phone transfers or online banking means that spending can be tracked almost in real time, but in places where cash points are limited they might not be the most appropriate way to distribute cash.
The method of distributing cash is linked to the local context, the needs of the people and how safe it is to be distributing cash in a particular situation, both for our staff and volunteers, as well as the people they are assisting.
Is this a safe way of giving people aid? Aren’t they more likely to be robbed, especially if you are giving them cash in an envelope?
Security is certainly something that must be taken into consideration when determining if cash is an appropriate response option. We must evaluate whether cash transfers are more dangerous than other forms of aid. Some people may think cash is more dangerous as it opens people up to being robbed. However, food parcels or building materials are extremely visible and may also be prone to attracting theft or violence. Cash is more discreet. Cash can either be physical money, delivered through a card or even through vouchers. That means, if we are operating in an area with high crime rates and high rates of personal burglary, we can opt to use vouchers instead. Because of the limitation of where you can use these vouchers, people are less likely to want to steal them. We also take into account the security of our volunteers and staff at all times, for example, if cash has to be delivered in person, will this put them at a greater risk than delivering other forms of aid?
What do people spend their cash on?
There are many different things people spend cash on. For example, people might buy food for their family, pay rent or even use cash to access health care or schools. Some of the Syrian refugees we work with in Lebanon, for example, tell us that they use some of their cash grants to make sure their children are able to attend school. Others use it on medicines for their sick children. In other situations, people may choose to spend cash to rebuild their homes, for example, after Hurricanes Irma and Maria, the International Red Cross/Red Crescent Movement provided cash grants to more than 700 families on the British Virgin Islands. This allowed people to get on with rebuilding their lives, at their own pace and in a way that works for them. People might choose to buy tools such as fishing nets or other materials, so that they can get back to work quickly, others may use cash to buy food or to access services such as health or education.
Are people always able to choose where and how they spend their cash?
Cash assistance can be either restricted or unrestricted, meaning that people are either restricted in what they are able to purchase with the money, or are free to decide for themselves. In some places, the choice might be made to restrict the types of goods people can buy; for example it could be restricted to tools in an agricultural programme that aims to increase the yield of crops. In these cases, cash spend is restricted not because we don’t trust people, but because our assessments show that investing in certain areas will produce the best outcomes for people and will be the most efficient way of delivering aid. Other agencies or the government may already be providing unrestricted cash or in-kind aid that covers other needs.
Sometimes we might do cash for work programmes. That means we get people back into work while also supporting them to help their communities.
Example: A 7.8-magnitude earthquake struck Nepal on 25 April 2015. Just 17 days later, a 7.5-magnitude aftershock followed. Nearly 9,000 people died, over 800,000 buildings were damaged or destroyed and many were left without the means to earn a living.
Sitting on the fault line between the Eurasian and Indian Plate, Nepal is at risk of future earthquakes. In fact, experts predict an even larger quake in the future. To that end, ‘build back safer’ has become Nepal’s mantra.
A mason training project, funded by the International Red Cross/Red Crescent Movement, gives people the opportunity to learn how to build safer houses with techniques that help reduce the risk of damage from future earthquakes. At the same time they are earning an income and slowly rebuilding what they have lost.
Unrestricted cash means that people are given the choice of what to buy. Often, this is the most effective way of ensuring that people can meet their basic needs. They know best what they and their families need. They also know best where to get these items and how to transport them. Cash can also be used for services rather than goods. For example, it might help people access health services or even pay school fees for their children.
How do you restrict cash?
This can be done in a number of different ways; the easiest way is to place restrictions on how people spend their cash. For example, if we have identified that people need cash support to restore livelihoods (their way of generating an income) we may set conditions as to how money should be spent by individuals. A grant may then be given in stages, people are still free to spend money how they want but they have to demonstrate they are investing their money in the areas we have identified, before receiving the next grant instalment. This helps us to track how recovery is occurring in communities and to ensure that the cash grants benefit not only the person receiving the grant but the market and community as a whole. Another way to place restrictions on how people use cash is by using a voucher system. Vouchers can be restricted to certain shops, markets or certain products.
Example: The devastation caused by Cyclone Sidr in Bangladesh in November 2007 seriously affected the lives of millions of people. With wind speeds reaching 260 km per hour, and heavy rain, the cyclone caused massive destruction, with an official death toll of 3,447.Immediately after the emergency response, the International Red Cross/Red Crescent Movement designed a programme, to enable some of the worst-affected communities to start rebuilding their lives. A key part of that overall programme was the livelihoods programme (helping people get back to work), which helped community members to re-establish their livelihoods.
The International Red Cross/Red Crescent Movement provided conditional cash grants, to enable people to repair or replace their assets. Around 25,000 people received support; all were able to re-establish their livelihoods. Before receiving the grants, we required people to commit to spending the money on their chosen livelihoods programme, to set up an account and to invest a certain percentage of the profits.
Isn’t there a risk of fraud with this kind of aid distribution?
The risks of cash as aid have been extensively studied and there is little evidence to suggest that fraud is greater in cash transfers than other forms of aid. All humanitarian programming, involving cash or not, is susceptible to a certain amount of risk. The International Red Cross/Red Crescent Movement takes great care to monitor cash distributions and will only do so when it is the most efficient and effective way of helping people in crisis.
Cash may be more at risk if it is more tempting to steal and easier to divert. However cash transfer programming may bring distinct advantages for reducing and managing fraud risks. Money transferred using electronic payments (mobile money, ATM cards, or e-vouchers) can be better traced than physical cash and in-kind transfers, meaning that any fraud or diversion is more likely to be picked up.
Using mobile money, smart cards and money transfer agents can avoid the need for transport of cash or for beneficiaries to travel to a distribution point, significantly reducing the risk of diversion compared to physical cash or in-kind aid. This may improve security for staff and beneficiaries if they no longer need to travel through insecure areas to deliver and access aid. This has made e-transfers feasible in contexts where in-kind aid, or physical cash, was not. Cash transfers pose different corruption risks. There are high risks of corruption related to procurement, storage and transport of goods; using cash rather than in-kind distribution avoids some of these corruption opportunities. At the same time, cash can and has been subject to corruption, including aid agency and money transfer staff colluding to divert funds.
Why does the International Red Cross/Red Crescent Movement distribute cash?
At the International Red Cross/Red Crescent Movement we strive to meet the needs of people in the most effective and efficient way possible. Cash assistance is a useful tool where local markets are still functioning and able to meet the demand for essential goods. The needs of no one individual or household are the same. Being given the choice of what to purchase in times of need does not only make sense, it also plays a vital role in preserving people’s dignity.
Cash distributions also allow us to get to people quickly, following a disaster. For example, where roads are impassable but markets are still functioning and people have access to cash delivery mechanisms, often through electronic means, we can reach people really quickly with cash transfers.
Getting back to work is a top priority for people that have experienced a crisis, be that an earthquake or a conflict. Cash can help us get people get back on their feet as quickly as possible and make them more resilient to future disasters.
In Nepal, for example, cash has been a critical part of the International Red Cross/Red Crescent Movement Movement’s overall emergency response, together with the provision of food, water and sanitation, healthcare and basic household items. Just a couple of months after the quake, more than 41,000 families received unrestricted cash grants to buy desperately needed shelter materials. Further payments in December 2015–January 2016 helped nearly 50,000 families purchase winter clothes and blankets. Some of the most vulnerable farming families have also been given grants for tools and seeds to help them restart their livelihoods.
As the provision of unrestricted cash in emergencies becomes increasingly common, the Nepal experience has shown that when local markets are still functioning, cash can provide a quick and effective way to get aid directly to people in need at times when disruption and damage to key infrastructure make distribution of supplies costly and difficult — particularly in remote, mountainous areas.
How do you know cash distributions are actually effective?
As one of the oldest and largest humanitarian organisation, founded on the principles of humanity, we take how we deliver aid very seriously. We need to get to people as quickly and as efficiently as possible, and we are constantly learning and revising how we do that, all based on evidence.
Everything we do is grounded by carefully assessing, planning and evaluating and we have dedicated teams who work on making sure that happens. The International Red Cross/Red Crescent Movement is made up of 17 million volunteers and a quarter of a million staff, all with different skills and expertise in helping people in crisis. We work with some of the most experienced people in dealing with humanitarian crisis; they have first-hand knowledge and experience of the benefits of delivering different types of aid, whether that be through cash grants or any other form of aid such as water, shelter, food or health. We take their advice very seriously.
During the 2011 famine in Somalia, which killed more than a quarter of a million people, aid agencies used remittance companies to provide cash transfers to more than 1.5 million people, helping them to survive and recover. Several organisations have carried out research into the benefits of cash assistance. The Overseas Development Institute, for example, has highlighted the benefits of distributing aid in the form of cash. It has even gone as far to say cash transfers are one of the best researched and most rigorously evaluated tools in humanitarian assistance.
What if someone buys a non-useful item with their cash?
Many of the concerns around cash centre around the perceived idea that cash can be used to buy anything, whereas in-kind goods will not be sold. In practice, this assumption is often incorrect, with in-kind transfers frequently sold to access preferred items or cash.
The misuse of cash is a commonly-cited argument against cash transfers; evidence actually suggests that this rarely happens. In fact, there is good evidence to support the argument that cash does not lead to the purchase of goods such as alcohol and tobacco. Almost without exception, studies found no significant impact of spending on so-called ‘temptation goods’ and in fact, evidence actually suggests that there is a decrease in spending on these goods in response to cash transfers.
Evidence suggests that cash and in-kind programming present broadly similar risks. In-kind aid has been found to be frequently sold to access preferred items
The evidence actually shows that people buy whatever they most need. The Overseas Development Institute found that people spend the vast majority of cash in fairly predictable ways – during the Somalia famine, cash transfers were mainly used to buy food and repay loans. Sometimes there are surprises. In Lebanon, for example, while UNHCR provided cash to Syrian refugees to cope with the harsh winter conditions, most actually directed their additional income towards food and water, because that is what they needed the most. It is not that they did not need fuel – it was that they needed other things more. The element of choice is critical. Rather than having aid agencies tell people what they most need, cash enables people to make their own choices.
We mustn’t forget are talking about people that are experiencing the worst moments in their lives, hunger, floods, earthquakes, and conflict. These people should not be treated with any less dignity or respect than anyone else. They know best how to look after themselves and their families, and organisations like the International Red Cross/Red Crescent Movement have experience and expertise in delivering care and aid in the most efficient and dignified way possible. It is incorrect to assume that the people we are assisting will spend cash in ‘non-useful’ ways.
What about if markets are far and people need to travel long distances to spend their cash?
Before any implementation of a programme, whether that be to give out cash, vouchers or in-kind aid such as food parcel and blankets, all logistics are assessed and evaluated. If we find that people have to travel far to visit a market, we assess the public transport, is it accessible, is it safe, is it affordable? We also take into account how people would feel about it.
What if someone needs more than just cash?
Cash is not a one size fits all solution. In some cases, cash may only make up one part of the International Red Cross/Red Crescent Movement’ response. In Jordan, for example, the International Federation of the Red Cross and Red Crescent Societies and the Jordanian Red Crescent Society are providing vocational training for vulnerable women, both Jordanian and Syrian refugees, to help them become more independent and earn and income for their family. These women may also receive cash support to help supplement their income and keep them on their feet. In time these women will become more resilient because of the new skills they have learnt and require less assistance from us.
What about very rural communities, where will people buy things?
Even in very rural communities, markets can often function and recovery can actually be supported more quickly with cash distributions, meaning that people can get back to normal more quickly. This is all taken into account when we first assess a crisis and plan how best to respond.
Cash can also be used to help rebuild rural communities after a disaster a hit. For example, in Nepal, after the devastating earthquake in March 2015, we worked with the Nepal Red Cross Society to distribute a cash grant for seeds and tools to help local farmers regain their livelihoods. Farmers were able to buy their tools and seeds in local markets, thereby reinvesting in their community and in return being able to grow crop to feed their families sell in these same markets, once again.
Are you able to use cash in conflict areas?
It is easy to see why people may think that cash distributions may be impossible in difficult conflict contexts. Careful assessments must be made about security and how cash may affect markets or local relationships, but if there are functioning markets and demand is able to be met, cash distributions can still be an effective way to deliver aid. In some cases, for example where there are problems with access and delivering in-kind aid, cash offers a solution.
It is important in all crises to assist people in the way that they feel will most be useful to them. Just because someone has experienced a crisis, through no fault of their own does not mean they should be stripped of their autonomy and dignity. We listen to those we help and we evaluate the situation to establish the best and most efficient way we can support them.
How do you decide who ‘qualifies’ for cash distribution?
Each crisis is different but two principles guide all distributions of aid: need and vulnerability. Our teams of cash specialists work with local Red Cross/Red Crescent partners to establish those most in need. The project staff will also take into account the amount of funding available, levels of need and vulnerability and then make a decision on who qualifies for a cash distribution.
How much cash do you give per person or family?
The amount of cash given to each individual varies from crisis to crisis and from country to country. Many factors are taken into account when calculating how much cash to give, such as currency fluctuations, the state of the market, average household incomes, and even the current season, as this may affect harvests and yields. We have to be responsible when delivering any form of aid. Our aim is to help people through a crisis but we must bear in mind how this assistance can affect the local economy or markets.
How do you know your cash programmes are working?
We conduct regular evaluations on all of our overseas programmes, whether that be cash or a different form of assistance, to study their effectiveness and efficiency. This involves robust monitoring and evaluation systems.
Do you pay private companies to deliver cash?
We work in partnership with local financial providers, such as banks, mobile, telecom and local remittance companies.
If this method of aid distribution is so good, was all the aid money spent on blankets and food stuffs a waste of time?
The use of cash distributions has risen over the years as humanitarian aid agencies have recognised it’s potential to reach even more people with more appropriate forms of aid. This does not mean that in-kind aid has been a waste of time, as often cash distributions are best provided alongside in-kind aid and in some contexts, in-kind aid might also be more suitable. However, as with other sectors, the humanitarian sector is constantly seeking to improve and innovate the way it works. Cash as aid is simply one of those innovations.
Are you saying that the other ways you distribute aid aren’t effective?
Every crisis is different and so are the options for humanitarian agencies to respond to them. At the beginning of a crisis we assess how likely it is that an intervention will be effective, given what we know about the situation at hand. Sometimes this will be through cash or the most effective form of aid could still be in-kind donations or service provision.