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Crushing on Cash

Cash is the new international development darling — lauded by researchers and practitioners as the new standard for foreign aid.

Delivering cash to individuals rather than aid in-kind (such as cows, building materials, training), has gained increasing prominence in the past 15 years. It shows promise as a means to increase the efficiency and effectiveness of foreign and domestic aid. Moreover, cash allocations can offer recipients choice over how to best meet own their needs. Branko Milanovic, former lead economist in the World Bank’s research department, wrote nearly a decade ago of the comparative dignity of cash allocations, “By delivering aid in cash, we do not tell poor people what they should do (go to school or get a job in a factory), and how they should spend their money. We just allow them to decide, without paternalism, on their own. And we improve, ever slightly, their condition.”

Even in the area of food aid, donors have begun to express a strong preference for cash over in-kind food assistance. For example, Julia Stewart-David of the European Union aid body ECHO has said that when ECHO considers aid requests from international NGOs, “We no longer measure food aid contributions in wheat/tons equivalent .… Our presumption now is rather, ‘Explain to us why you can’t do cash’.” The volume of food aid delivered has fallen dramatically in recent years as more assistance is provided in the form of cash or vouchers; donors delivered 5.4 million metric tons of food in 2009 across the world, down from a high of 15 million metric tons in 1999.

Is cash assistance the best option for households in the midst of chronic or acute food crises? Instead of replacing one de facto response (in-kind food aid) with another (cash), food assistance programming should begin with assessing the most suitable food security intervention given the situation and the preferences of the population. Beginning with the presumption that cash is the benchmark rather than starting with an open-ended analysis overlooks recipients’ preferences and overlooks the differential effects cash, vouchers, and in-kind distributions can have on a variety of objectives.

Most individuals agree that the additional choice that a cash transfer affords recipients relative to an in-kind transfer is nearly always better for recipient empowerment. However, for highly food-insecure households, such choice may have a negative impact on food security. While in-kind food aid is rarely nutritionally appropriate, often consisting of large quantities of commodities like maize and pulses, a recent study in Niger found that food aid, relative to cash, resulted in better nutrition. Why would this be? Wouldn’t food-insecure households provided with cash be best equipped to choose the foods to improve their situations?

The Niger study found that impoverished, food-insecure households had needs beyond food, including agricultural inputs and weather-proofing houses before the rainy season. Those receiving cash tended to use the cash to cover such non-food expenditures while those who received in-kind food were more likely to consume it rather than to sell it (often at a deep-discount) and use the cash for other expenses.

Food-insecure individuals and families in many locations routinely face impossible tradeoffs between competing needs (e.g., food or shelter) and may make choices that diverge from policymakers’ objectives (e.g., improved food security). This does not mean that cash isn’t warranted, but it does mean that the choice between cash and food in-kind should be approached with consideration of the context, the program’s objectives, the preferences of recipients, and an awareness of the tradeoffs that they face.

To begin with, asking recipients what mix of transfers they prefer and why provides important insights into how to strengthen food security. Results on whether households want cash, food, vouchers, or a combination are usually mixed. Take findings from just one country, Kenya: while many food-insecure individuals embraced cash, others expressed a preference for aid packages that include some amount of food. For example, 68 percent of periodically food-insecure respondents in rural northern Kenya reported in 2009 that they would prefer to receive food security assistance in the form of food or as a mix of food and cash. Only 31 percent stated they would choose to receive cash alone. Similarly, in urban Mathare, a settlement of 500,000 people bordering Nairobi, 32 percent of respondents reported a preference for allocations including some food over cash or vouchers alone.[1] And in rural Makueni in Eastern Kenya, 39 percent included food in their preferred allocation. Our discussions with respondents revealed many reasons for individual preferences for receiving at least some food directly, including concerns ranging from security (especially in urban Mathare), to control of resources within a household, to market access and associated transactions costs.

When to deliver in-kind food, vouchers, or cash, and with which, if any, conditions, is very much an open question.[2] It is an important question, and, rather than accepting a new, simplified de facto response, one that should continue to be examined.


[1] Households were presented with the following scenario:

A hypothetical program to deal with food insecurity in this area offers a choice between a food aid basket worth 1,800 shillings, 1,800 shillings in cash, vouchers worth 1,800 shillings, or a combination of two or three of these options, worth 1,800 shillings total. The frequency of the transfer, the household member receiving the transfer and how and where the transfer is delivered will all be the same irrespective of whether the transfer is food, vouchers, cash or a combination. Given a choice of food, cash, vouchers or some combination, which would you prefer?

[2] There is an emerging literature on the role of soft conditionalities on cash, such as labeling, that can nudge people toward spending the cash in the way the policymakers see best. See: Benhassine et al. (2014) “Turning a Shove into a Nudge?: A labeled cash transfer for education.”“labeled-cash-transfer”-education