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The potential for joint programmes for long-term cash transfers in unstable situations

A report commissioned by the Fragile States Team and the Equity and Rights Team of the UK Department for International Development

Paul Harvey and Rebecca Holmes

Humanitarian Policy Group & Overseas Development Institute, London

August 2007

SARPN acknowledges ODI as a source of this document: www.odi.org.uk
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Summary

This paper examines the potential for jointly funded long-term cash transfers to form part of social protection in unstable situations. It argues that there are three essential challenges:

  • Financing – how to provide longer term, more harmonised and predictable funding for social transfers in unstable situations;
  • Actors and delivery capacity – which actors or combinations of actors could deliver social transfers at scale (governments, NGOs, UN agencies, or the private sector);
  • Mechanisms – the form a social transfer should take (food or cash).
Social protection is increasingly recognised as an essential basic service for the poor alongside health, education and water. That social protection can be provided in fragile states remains less well understood than it is in more stable contexts (DFID, 2006). There are two approaches to this problem that have shown considerable potential: social transfers in the form of cash and joint programmes. Cash transfers are becoming more common in emergency situations and are increasingly regarded as a key part of social protection strategies. Emerging evidence suggests that they can help to tackle hunger, increase incomes, improve the educational attainment and health of the poorest families and contribute to growth (DFID, 2005; Harvey, 2005). In a number of fragile states, delivery structures are being developed that combine different actors, be they state, UN, NGO, or donor actors, into a relatively tight programme structure. Joint programmes typically involve a single approach, some kind of management or oversight agent, and basket funding in order to ensure harmonisation.

Unstable situations / fragile states

DFID defines ‘fragile states’ as ‘those where the government cannot or will not deliver core functions to the majority of its people, including the poor’ (DFID, 2005). The main concern in this paper is a sub-set of fragile states: those involved in ongoing situations of conflict or instability. Humanitarian aid has long served as an instrument of last resort in fragile states and is attractive because it is largely delivered outside of the state by international aid agencies. The humanitarian principles of neutrality, impartiality and independence provide an ethical framework that can enable agencies to continue working during conflicts.

Humanitarian aid, however, has its limitations. The reach of humanitarian actors is often limited and the resources they have at their disposal inadequate, so needs may not be met adequately. In long-running crises, what is designed as a shortterm instrument for meeting acute needs ends up as an inadequate instrument for meeting long-term needs. Precisely because humanitarian aid is primarily delivered by international actors, there are concerns that it undermines national and local capacities. Finally, humanitarian aid has been dominated in budgetary terms by the delivery of food aid and this dominance can mean that alternative response such as cash transfers are not considered. These limitations explain the longstanding concern with finding new and more effective mechanisms for international engagement in long-running crises (Harmer and Macrae, 2004).

Social protection

There has been a tendency to see any sort of welfare in developing countries as unproductive and unaffordable. The ‘Catch 22’ of social protection is that ‘the greater the need for social protection, the lower the capacity of the state to provide it’ (Devereux, 2000; Devereux, 2005). This viewpoint is now starting to shift with a growing recognition that long-term safety nets may be a key component of social protection strategies, that they may be affordable even in poor countries and that they may themselves have positive impacts on growth and development.

Cash and emergency relief

There has also been growing interest in and experience of the role of cash transfers in emergency relief. Until recently, relief provision has been dominated by the in-kind provision of assistance. Food aid has traditionally dominated emergency responses and this has often been tied to domestic surpluses in donor countries.

There are a number of key concerns about using cash as an alternative. These include that it is harder to target, more prone to corruption, inflationary in weak markets, disadvantageous to women and impossible to deliver safely in conflict environments. Recent experience has suggested that these concerns can be overcome.

Cash transfer projects have not had inflationary effects, women have been able to have a say in how money is spent and cash has not been more prone to corrupt diversion or insecurity than inkind assistance. Evaluations have suggested that the use of cash can be more cost-effective than inkind assistance and create positive multiplier effects in local economies. Overwhelmingly, recipients have been found to spend cash sensibly on immediate basic needs and investments in livelihoods as well as to access health and education services. Cash transfers have been successfully delivered during conflicts in Somalia, Afghanistan and the Democratic Republic of the Congo (DRC), and have formed an important part of post-conflict strategies, for instance, in Mozambique.

Resource transfers and delivery of services in fragile states

While experience with delivering cash in emergencies is relatively new, significant experience exists of the delivery of other forms of resource transfer, notably food aid, and of maintaining services such as health and education in fragile states. Delivering any sort of resource or service in unstable situations is clearly difficult and at risk of being diverted by warring parties or caught up in the dynamics of conflict (Collinson, 2003). There is a tendency, however, to underestimate the scale of what is already being provided. Significant resources, requiring considerable implementation capacity, are often already being delivered by aid agencies. There may be existing capacity that can be drawn on to deliver cash transfers.

Financing

There is a need to attempt to move away from inadequate, short-term and project-specific funding in unstable situations. In spite of recent reform initiatives, funding for humanitarian aid is typically short-term and tied to annual and often underfunded appeals. Similar issues exist in development financing. Despite commitments to greater harmonisation and alignment, fragmentation of donor funding and the lack of alignment with government systems continue to be key concerns that are particularly relevant in fragile states.

The ability to deliver longer term, more predictable funding would deliver key advantages for both aid agencies and disaster-affected populations. For aid agencies, a move to longer term funding would enable them to plan much more strategically, to invest more in staff skills and capacity and to make longer term commitments. For disasteraffected populations, a key advantage would be predictability. One of the important drawbacks of humanitarian assistance is that it is often unreliable. Predictable cash transfers enable households to plan them into livelihood strategies, making it more likely that cash can be spent on productive investments.

Donor governments have started to develop new financing mechanisms to provide support in fragile states. As Leader and Colenso (2005) argues, various ways of pooling funds such as multi-donor trust funds and joint programmes can promote a more programmatic and long-term approach to service delivery. Emerging experience suggests that a range of financial instruments can be developed to provide more harmonised, predictable, multi-year funding in fragile states.

Actors

Providing assistance to enable people to meet basic needs requires some sort of delivery capacity. Ideally, social transfers should be provided by the state but, in the cases we are interested in, either it does not have the capacity to deliver, or donors are unwilling to work with it for political reasons, or it does not have control over all its territory. In situations where the state is weak there may be a role for other organisations (NGOs, private sector organisations, or UN agencies) in supporting and augmenting the capacity of a state-run programme. Where it is not possible to work with the state at all it might still be possible to deliver long-term social transfers purely through non-governmental actors. Even if transfers are provided primarily through non-state actors, there is still a need to respect state sovereignty. One way of approaching this is by what has been labelled shadow systems alignment, which aims to ensure that the capacity of the state to deliver services in the future is not undermined.

The organisations with existing capacity to deliver large-scale resource transfers in unstable situations are those involved in food aid delivery, mainly the World Food Programme (WFP) and key NGOs. There seems to be no reason why WFP should not interpret its mandate as one of providing the most appropriate resource to combat hunger and therefore be able to provide food aid or cash depending on which was most appropriate in any given context (Stites et al., 2005; Clay, 2004).

Options, contexts and next steps

So what does all this mean for the options available for providing long-term cash transfers in unstable situations? In delivering more long-term, harmonised and predictable funding, part of what is needed may just be additional funding to allow needs to be more adequately met in long-running crises. There may also be options for exploring the potential for different forms of joint funding and for transferring resources from short-term food aid to longer term social transfers. Which actors or combination of actors could deliver social transfers will always be context-specific. It is probably most helpful to view the options as a continuum with minimal state involvement at one end and state leadership at the other.

Thinking about where it might be possible to consider long-term cash transfers in unstable situations is difficult because the point is always to attempt to provide them in challenging contexts. Examples might include Nepal or the DRC or parts or Sudan. Some minimum criteria that could be envisaged are:

  • A market system that would respond to a cash injection, enabling people to buy goods in nearby markets at reasonable prices;
  • A way of delivering cash safely to people;
  • Sufficient security for monitoring and a sufficient presence of implementing agencies in the field;
  • A willingness by authorities to accept and engage with a social transfer programme.
It does seem as though it should be possible to explore further the potential for long-term and large-scale cash transfers in particular unstable contexts. This would include exploring the potential to provide a small but regular cash grant to hundreds of thousands of beneficiaries over a multi-year time scale. It would aim to involve national government and local authorities in the policy, and its design and implementation, to as great a degree as possible. Ideally, a joint programme approach would be taken with funding from a range of donors. UN agencies, NGOs and private sector actors would probably be involved in implementation. Significant resources should be allocated to monitoring, evaluation and documentation of learning. This would present an exciting opportunity to move forward from the often fragmentary and insufficient assistance provided to people through humanitarian instruments to providing more predictable, more appropriate and more effective support to people unable to meet basic needs in fragile states. There are some clear next steps that arise from this analysis. There is a need for:

  • Context-specific feasibility studies to examine the potential for long-term cash transfers in selected unstable situations;
  • Engagement with governments in unstable situations about the role of cash transfers in social protection policies;
  • Engagement with key non-governmental actors with the potential capacity to deliver large-scale cash transfers at headquarter and country levels;
  • The development of pilot projects to examine the feasibility of large-scale cash transfers in unstable situations.




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