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Unconditional cash transfers: What do we still need to know?

Unconditional cash transfers: What do we still need to know?

A few months ago, the High Level Panel on Humanitarian Cash Transfers published a groundbreaking report with important ramifications for development. The panel, chaired by Owen Barder of the Center for Global Development, concluded that unconditional cash transfers (UCTs) should be a larger part of humanitarian aid.

In fact, rather than constantly trying to defend the usefulness of cash transfers, humanitarian agencies should instead be asking, “Why not unconditional cash transfers?” It’s simple to see that this kind of re-focused questioning is nothing short of a paradigm shift for the aid sector.

In the past 15 years, many in international development have expressed increasing interest in cash transfers as a move away from the provision of goods and services. Over this time, studies have found a variety of results on cash transfers’ potential to reduce poverty and improve health and education.

While cash transfers may not quite be mainstream in the development world, they are certainly gaining momentum as a result of this “quiet revolution.”

At the same time, there has been considerable resistance to the notion of cash transfers in some circles, in part because the idea of simply giving money to people without any strings attached is so antithetical to the traditional structure of development assistance, but also because some development experts are not convinced that UCTs represent a long-term sustainable solution to poverty.

Since most humanitarian aid actually affects people for long periods of time, rather than being a short-term response to an acute emergency, Barder and the panel argue that cash transfers, rather than material goods (such as pots, pans, clothing and food), make more sense in what’s actually a more chronic situation. In addition, cash transfers can bring a slew of other benefits, including increased transparency in humanitarian aid, reduced costs of aid delivery, support to local economies, increased speed and flexibility of humanitarian responses and, of course, empowering people to have more control over their own choices.

So far, it isn’t clear that receptivity of unconditional cash transfers in emergency situations is any greater than it is of UCTs as a development strategy, even though it has been widely recognised that cash transfers are more useful in emergency situations than traditional donations of goods, many of which prove to be useless in emergencies.

This shift brings up several important questions: if UCTs are to be the new paradigm of aid, what else do we need to know about them? And given that we don’t actually know everything we need to know about cash transfers, how should we interpret the panel’s recommendations?

First and foremost, we need to be careful that the recommendations are not misconstrued. They aren’t recommending, by any means, that unconditional cash transfers are a panacea. The conclusion is that we should give UCTs much more consideration, not that they are always the answer.

Chris Blattman, a major supporter of cash transfers, had a few interesting words of caution on this very topic several years ago. While he and his colleagues published some very positive research on UCTs in Uganda, he was careful to note that it does not mean this is “the solution.” As he points out, cash transfers can help people living in poverty who want a little bit of money to produce more money. If having enough money to produce more capital is not the issue, cash transfers may not help. The reasons why people may need cash transfers in the first place are complex: widespread political instability, political corruption, economic uncertainty, poor governance. These are much larger issues that still need to be addressed systematically by the wider development community.

Second, although rigorous evaluations of cash transfer programs such as those run by GiveDirectly exist, we don’t yet have all the information we need about their efficacy. As Berk Ozler, for example, has noted, the evidence on UCTs comes from a series of very different types of interventions in very different types of settings. Indeed, it is important to recognise that “unconditional cash transfer” may mean a lot of different things and the details of the intervention can have a significant effect on the outcome. We just don’t have quite enough evidence yet to be able to say which precise methods of implementation work best and which situations are most suited to this type of approach.

Which leads to the next point–the evidence that currently exists on UCTs does not necessarily lead to the conclusion that they can do much for larger systemic problems, particularly those around health and education. It is too soon to tell whether initiatives like GiveDirectly actually result in, for example, better health and education outcomes. While there is some evidence from GiveDirectly’s Kenya study that recipients of cash transfers spent money on healthcare and education, that does nothing to address the fact that health and education systems in countries like Kenya, especially in rural areas, are often severely under-resourced. It is unclear whether simply giving people money to spend on things like education and healthcare actually results in better health and education outcomes down the road.

Despite these uncertainties, the panel’s focus on unconditional cash transfers is a welcome step in the right direction. Focusing on new ways of thinking that directly empower the poor and give them better opportunities to make their own decisions is just what the aid sector needs.

Featured image shows a pile of Kenya shillings. Photo from Flickr.

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Sara Gorman is a Project Manager at Janssen Global Public Health, Pharmaceutical Companies of Johnson & Johnson. She is also currently working on a book about the psychology of healthcare decision making and the public perception of risk (Oxford University Press). Sara holds an MPH, as well as a Ph.D. in English Literature.

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2 thoughts on “Unconditional cash transfers: What do we still need to know?

  1. […] to relinquish control for the benefit of the people and the communities they live in. Cash is a catalyst for change for those who receive it and the humanitarian system as a […]

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