Once seen as a sure-fire way to build dependence on charitable assistance, cash transfers that give people money with or without conditions are making a comeback. So as the United States struggles to reform its antiquated food aid system, other countries and organizations are turning to one of the oldest forms of aid.
The return of cash transfers is due to growing evidence that they work. From longer-term development programs to immediate humanitarian assistance, cash transfers are en vogue. A recent report published by the International Rescue Committee, an international humanitarian relief organization, showed that giving Syrian refugees money could change lives.
Some 87,700 Syrian refugees living in Lebanon were provided $100 a month via ATM cards, last winter. A lack of money and material possessions make the cold winters in the region particularly harsh. All people in the study received vouchers to buy food. Those living above 500 meters altitude received cash, while those below did not. Researchers compared what happened to people living just above and below the 500 meter threshold.
The idea was that cash could help families buy blankets and other necessities to keep warm during the winter. Recipients were trained on how to use the ATM cards and could spend the money as they saw fit. Surprisingly, most of the cash was spent on food, not supplies for winter.
Even though everyone was given vouchers from the UN’s World Food Programme, it was not enough. Highly restrictive job opportunities for foreigners in Lebanon mean that Syrian refugees earn little to nothing.
The good news was its impact on children. With family income supplemented, more children went to school and fewer worked, compared with those not receiving the cash assistance.
The researchers, Christian Lehmann, an economist from the University of Brasilia, and Daniel Masterson, a political science Ph.D. student at Yale University, said there were other benefits to cash transfers. The Lebanese economy saw $2.13 of GDP generated for every $1 spent by the Syrian refugees.
“This research does not mean there is a new humanitarian silver bullet; $100 a month does not remedy the trauma and loss of being driven from your country,” wrote the David Miliband, president and CEO of the IRC, in an OpEd about the program, for The Independent. “But this research does suggest there is an additional opportunity to deliver better outcomes for people hit by emergencies, and provides a rejoinder to those who would dismiss the humanitarian sector as ineffective.”
Also important is the fact that the refugees liked getting cash. More than 80 percent of beneficiaries say they prefer cash to in-kind assistance (such as food or health kits). There were no shortages of supplies or price spikes. The local economic benefit of cash transfers is consistent with previous research showing that it helps businesses.
While there is a lot of excitement around the study results, they do not necessarily prove that cash transfers are enough by themselves. Those receiving cash also received vouchers for food. While cash is clearly preferable to in-kind goods for the refugees, it might not fully replace physical goods.
What’s clear is the need for immediate action. Households surveyed in the research were in debt on average $500. That number will continue to grow given that families are struggling to meet their most basic needs. The researchers say that cash transfers can help deal with debt, but the small amount given in the study is not enough.
The cost of giving more people more money will be expensive, but should not be ignored. The totality of the impact remains unknown.
“To date, there is very little research on the effect of varying transfer size and the number of beneficiaries. For example, adding a large number of additional beneficiaries may affect local prices, even though this research did not find that outcome. If consumption becomes more expensive, this may result in a lower impact of the program on each beneficiary’s consumption,” Lehmann and Masterson said.
Next week, we will look to Kenya for further evidence on the impact of giving cash to people.