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Increasing the use of cash – part of the answer to humanitarian funding cuts?

CALP’s Director Karen Peachey argues that in the face of humanitarian funding cuts we need to be using the most cost-efficient tools available to us and that cash fits the bill. 

2 February 2024 — By Karen Peachey

We know that cash is efficient 

Almost a decade ago, ODI published the ‘Doing cash differently’ report (2015) which included a discussion about the efficiency of cash assistance. It referenced, among others, a four-country study that showed ‘18% more people could have been helped at no extra cost if everyone received cash instead of food’. In the same year, the ‘value for money of cash transfers in emergencies’ report found that ‘cash, when compared to in-kind approaches, consistently emerges as more efficient to deliver’. Naturally, there were caveats about context, scale, and so on, but the headline message was very clear – cash is consistently more efficient than other forms of assistance. 

The efficiency of cash compared to in-kind assistance has continued to be highlighted since then, including in a 2022 literature review published by WFP which finds that ‘while the effectiveness of cash and in-kind transfers is similar on average, the efficiency is generally in favour of cash.’

Humanitarian funding is being cut back 

Fast forward to today and what’s on the minds of most humanitarians – funding.  

Cuts have been hitting humanitarian budgets left, right, and centre, and tough decisions are having to be made by both donors and operational agencies. The impacts were already being felt last year, with fewer people reached in most humanitarian responses in 2023 than in 2022. And there is more in store as traditional donors continue to make cuts. For example, USAID cuts are in progress while Germany’s humanitarian budget for 2024 is set to drop by 500 million euros compared to 2023. This is unlikely to be a short funding blip, given the continued rise of right-wing politics in the west means support for international aid is declining.   

For many, these cuts are a tipping point – with people moving from situations where they are just about managing into situations where they can’t cope. As support declines, it is likely that people’s capacity to manage will be further eroded and more people will need more assistance later on. Lives will be lost as a result of the cuts. 

Could cash be part of the answer? 

Against this backdrop, there is an urgent need to re-examine approaches and ensure best use of aid. 

As cash is more efficient than other forms of humanitarian assistance in most contexts, surely it is one of the ways we can make available resources stretch further? 

Switching from in-kind assistance to cash, wherever appropriate, offers an opportunity of making substantial cost savings and the possibility of reaching more people with more assistance.  

What’s more, as well as helping achieve donor and agency efficiency and effectiveness goals, a move to cash is what most people in crises want. Surely a win-win? 

Yet, the use of cash is nowhere near what it could be. There is huge potential to expand the use of cash across the system given it only accounts for 21% of international humanitarian assistance currently – a far cry from the 50% that research shows is possible if we change the way we do things. 

Time to turn evidence into action 

With swathes of funding cuts coming through the system, there is need for a laser sharp focus on making the best use of the resources that are available.  

So, it’s time to for all of us to re-check the evidence, dust down the arguments, and make sure that decision makers are on top of the efficiency facts when it comes to use of cash.  

In sum, increasing the use of cash provides an efficient, effective, and evidence-based means of making humanitarian funding go further. There is need and opportunity to act and remember, critically, this change aligns with the preferences of people in crisis.  

What more is needed to turn the evidence into action?

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