More Cash and Less Food Aid

Posted on August 24, 2011

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Originally published in The National:

As famine continues to devastate southern Somalia, much attention has been directed to its political causes – in particular, the Islamist group Al Shabaab. Parts of Kenya and Ethiopia have been equally affected by drought, and they are facing humanitarian emergencies, but southern Somalia is the only place to have been classified as having a famine.

There is widespread agreement that Al Shabaab’s blockage of emergency food aid is to blame. Now that food aid is being allowed into the country, however, there are allegations that up to 50 per cent of it is being stolen and sold at local markets. Beyond that, some food is stuck in warehouses at the Mogadishu port, waiting for safe delivery channels to be established.

Clearly, emergency food aid is not a silver bullet. But it is the primary intervention offered by many humanitarian organisations working in the Horn of Africa, including the World Food Program.

WFP alone plans to spend $767 million (Dh2.8bn) on relief for the region in the next six months. More broadly, the UN is requesting US$2.4 billion for relief efforts. But food aid would not be the best use of this money.

In northern Kenya, a pilot cash transfer programme has helped prevent food insecurity from escalating into famine. A similar cash transfer programme should be adopted by the aid organisations working in southern Somalia.

The Kenya programme, known as Hunger Safety Nets, is reaching more than 61,000 households in four districts in northern Kenya. It provides each of those households with an unconditional cash transfer of 2,150 Kenya shillings (US$23) every two months. Individuals can use the money for anything – food, health care, clothing, or to repay debt. Most households began receiving payments in 2009.

Full evaluation of the programme’s first phase will not be complete until next July, but early results show that households receiving the cash are better able to feed themselves, spend more on education and health, and are better able to protect their assets.

Shunu Diramu, a woman in Marsabit, has received cash transfers since April 2009. At that time, “a meal for the family was luck”, she said in an interview she did with a data management officer for the programme this year. After receiving the first transfer, she decided to save a portion of each transfer so that she could restart her business selling household goods. After a little over a year, she had been able to save enough to do that. “I now have something to do and something to rely on,” she said.

The Hunger Safety Nets programme is being funded by DFID, a British government department, and run by a consortium that includes Oxfam GB, CARE, Equity Bank, and Oxford Policy Management. The Kenyan government has been minimally involved in the first phase.

Since government involvement is not necessary, an unconditional cash transfer like Hunger Safety Nets could be implemented successfully in southern Somalia.

In fact, a small-scale cash transfer programme was implemented by a consortium led by Oxfam GB and Horn Relief in 2006. The programme targeted pastoralists and agro-pastoralists in southwestern Somalia, and it reached about 16,000 households with a one-time US$50 distribution. According to an independent evaluation of the programme, the money was disbursed to the intended recipients, and it succeeded in reactivating community credit and trading systems.

Critics of cash transfer programmes argue that there is the potential for corruption or graft, particularly if influential individuals co-opt the money that was meant for needy households.

In Somalia, such graft is already happening with food aid. Because cash transfers are a much less obtrusive form of aid, there is the potential to put less costly, more effective anti-graft mechanisms in place. Everyone can see lorries of food aid lumbering down a road, but it’s possible to deliver a cash transfer without drawing the attention of the local militia.

The Kenya programme’s cash administration is managed by Equity Bank, using a system of smart cards and local agents who already have cash on hand from an existing business. In Somalia, there are no commercial banks, but the hawala form of money transfer is widely available. Hawala is primarily a mechanism for Somalis living abroad to transfer money back home. Hawala firms (many of which are based in the Middle East), already have the systems in place to transfer funds internationally. Funnelling humanitarian aid through hawala firms could have the benefit of strengthening Somalia’s financial sector.

Unconditional cash transfers also make financial sense for donors. A 2005 study by the Overseas Development Institute found that cash transfers were 6 to 7 per cent cheaper than local food purchase in Ethiopia, but 39-46 per cent cheaper than imported food aid. It’s important for donors to use their limited resources as efficiently as possible.

Cash transfers can function both as short-term relief and as medium-term social protection. As agriculture experts have pointed out, the long-term solution to end famine is sustained investment in agriculture development in Africa. But 12.4 million people in Somalia need help now.

Cash transfers can provide immediate assistance to the hungry, and they can help households get back on their feet so that it’s possible to embark on building productive farms and livestock holdings.

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Posted in: The National