Can cash transfers be an alternative to food aid?

Chandana, a domestic help who works on an ad-hoc basis, rings my mother for assistance of any kind to run her five-member family. She lives in Korail slum but never received any kind of relief since the lockdown to contain Covid-19 began in Dhaka.

In a functioning market, cash transfer is likely to be the most suitable response in emergencies. Photo: Mumit M

In a different scenario, on my way back home after purchasing some medicine from a pharmacy in Gulshan 1 circle, a small congregation of two females and one male drew my attention.

The two women, one of whom appeared to be the mother of the other woman, were bargaining for something. Out of curiosity, I got out of my vehicle and followed their conversation.

The woman was trying to sell a small sack containing approximately 5 kgs of rice, 1 kg lentil, 1 kg onion and 250 ml soybean oil. The man was initially unwilling but eventually bought it for BDT 200. With this money, she would probably buy other essential foods.

These two scenarios bring forth different realities – some are getting more than they need, while some are receiving nothing at all and that rice and lentil are not the sole food item people need for nutrition.

In the past, government, development agencies, NGOs, individuals and business enterprises have always come forward in providing in-kind food aid to the vulnerable affected by any disaster and the Covid-19 pandemic is no exception.

During the past few weeks, we have witnessed quite a few government, institutional and personal initiatives to support the vulnerable who have been worst hit by the pandemic.

Most of these humanitarian initiatives extend support through in-kind contributions such as food items, as mentioned earlier. The scenario, however, started to change sometime back. The prospects of cash as a good alternative for such in-kind assistance is being explored now.

Can cash be an alternative or complement to in-kind assistance? Perhaps yes, and now, more than ever. When COVID-19 hit Bangladesh, the government took no time to initiate open market sale and provide food aid.

Unfortunately, this was largely undermined by the misappropriation of food relief by the dealers. There are allegations in some cases that the distribution was based on the political affiliation of the recipients.  Given this situation, the in-kind food aid modality needs to be carefully examined to curb such malpractices.

Bangladesh is gradually shifting toward digitalisation. In this regard, the most successful sector is perhaps the financial sector, both in terms of mobile financial service and online banking transaction.

There was a time when bringing the target beneficiaries under the state’s social safety net was a mammoth task. Everything was manual and forgery of identity, dual identity, the inclusion of more than one member from a single family were common malpractices.

But with the digitalisation of National Identification Document (NID) and mobile ID, these risks can be almost fully obliterated. Once there is a digital repository of the vulnerable, they can easily be brought under the social safety net programmes and have cash transferred to them. But the efficiency of digital cash transfer will largely depend on a functioning market.

In a functioning market, cash transfer is likely to be the most suitable response in emergencies – people can purchase according to their priority, from food, leading to diversity in food consumption, to supporting other livelihood needs.

It is pertinent to mention that the Food Assistance Convention, which came into force in January 2013, provides the rationale for cash transfer as a mainstream humanitarian support instrument. The overarching objectives of this convention are to save lives by reducing hunger, improving food security and the nutritional status of the most vulnerable population.

Distinct from the previous Food Aid Convention,  food aid is no longer the only instrument through which signatories and parties to the convention can realise their pledges, contribution in the form of cash is now widely accepted.

One challenge with in-kind food aid in Bangladesh is that prices of essentials such as rice and lentils sharply increase in response to the growing demand. The high prices of these daily essentials contribute to more spending on procurement by donors who support the most vulnerable in the community.

This calls for the need for making informed decision on when to transfer cash or food, considering appropriateness and effectiveness in achieving the desired objective. But this does not necessarily mean that aid response should be exclusive of food transfer.

Food consumption behavior, nutrition, market scenario, cost of the transfer, risk factors, gender parity and likely impact on the community, household and market need to be carefully examined to analyse the situation. If these are taken into account, cash transfer can be used as an alternative to existing in-kind assistance, including food and non-food items, home rebuilding equipment, livestock and seeds.

A study commissioned by the Overseas Development Institute (ODI) concludes that providing people in emergencies with cash or vouchers as a humanitarian instrument reaps good results (Harvey, 2005). It is possible to target and distribute cash safely. When people overwhelmingly spend on essentials, cash provides a stimulus to local economies and it is often more cost-effective than commodity-based alternatives.

Lack of transparency in the selection of beneficiaries, lack of accountability of the authority and participation of the vulnerable are major challenges in making in-kind humanitarian assistance effective and successful.

With the emergence and rapid growth of mobile financial services, these governance issues can be addressed efficiently to successfully implement any humanitarian assistance programme.COVID-19 pandemic is no exception.

A study conducted by Inter Media in April 2019 shows that 71% of adults owned a mobile phone and 35% of them are digitally included via a registered mobile money account and/or a bank or NBFI account that offers digital access. This percentage has gone higher in 2020.

There are several MFSs including bKash, Rocket, Nagad through which cash transfer can be done within minutes. All that is required is a digital repository of the vulnerable.

In this regard, experience from a pilot project commissioned by  BRAC is noteworthy. A rapid assessment among 242 participants of BRAC’s Ultra Poor Graduate Programme indicated that 84% (204 respondents) had a mobile phone and 37% (89 respondents) already had a bKash account. 115 participants were then given support to open bKash account and 38 provided bKash number of a trusted friend or family member. 94% of the participants successfully received the cash transfer.

As of 23rd April, 6,242 participants, including those from the pilot project, received cash transfer of BDT 1500. The entire process took only three to four days. In partnership with Grameenphone, BRAC will provide cash aid to 1 lakh families. This will perhaps pave the way for mainstreaming cash transfer instead of food aid through MFSs.

Nevertheless, the suitability and success of cash transfer and food aid to improve food consumption rely to a great extent on the settings and purpose of the selected aid instrument.

The modality should be chosen considering the possible trade-off, cost of achieving the objective, hazards and risks (in case of COVID-19, the risk of getting infected in distributing food aid and partisan view in selecting beneficiaries), the convenience of the beneficiaries.

The policymakers can take cues from the existing experiences and start an informed dialogue on cash transfer in emergencies, such as COVID-19 pandemic, through MFSs.

The dialogue should bring together senior-level policymakers, stakeholders from both public and private sector MFSs, NGOs and sector experts to develop a policy and advocacy position. If the government can mainstream cash transfer through MFSs, it will be a leap forward towards realising Vision 2021 by the year 2021, the golden jubilee of the nation as a true Digital Bangladesh.

This was first published in the Business Standard on 4 May 2020. Click here to read in the newspaper. 

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