A masterclass on cash transfers and how to use High Level Panels to influence Policy

March 10, 2017

     By Duncan Green     

One of the things I do in my day-a-week role at LSE is bring in guest lecturers from different aid and development cash transfer hlp coverorganizations to add a whiff of real life to the student diet of theory and academia. One of the best is Owen Barder, who recently delivered a mesmerizing talk on cash transfers and the theory of change used by his organization, the Center for Global Development, which is one of the most effective think tanks around (although I don’t always share its politics….). Here’s the summary (and here are his powerpoint slides, if you want to nick them).

Owen chaired a recent high level panel on humanitarian cash transfers and presented its work in his talk. The traditional aid response is ‘people are hungry due to drought, flood, conflict etc → there isn’t enough food → we need to ship in loads of food’. Both arrows are wrong: Amartya Sen showed that the problem in famine is not lack of food, but lack of purchasing power among the affected populations – in nearly all of Ethiopia’s famines, the country has produced enough food to feed its people. The second arrow is wrong because giving people cash is usually a much more effective response than shipping food over from the US or wherever: the food often arrives too late, just when local farmers are recovering, and a flood of free food promptly destroys local markets. The evidence is now substantial:

  • Cash transfers are 25-30% cheaper than in kind aid (so more food per dollar)
  • When people are given in kind aid, they typically sell 30-50% of it to get the cash they need, at roughly 30% of the actual cost of the aid – a massive level of waste
  • When you ask refugees, they invariably say cash is better than stuff (eg 80% of Syrian refugees in Lebanon)

Plus it’s good politics – cash stimulates the local economy, so local people are less resentful of the influx of refugees, and is more respectful – refugees don’t all want the same thing; cash respects their right to make decisions about their lives.

Nothing new there – Sen proposed cash transfers in his 1981 book, Poverty and Famines. So why then is only 6% of humanitarian aid currently given over to cash and vouchers (and the majority of that to vouchers, not cash – we just don’t have disaggregated numbers)? As always when good stuff is being blocked, it’s a combination of interests, ideas and institutions:

Interests: US and European farmers and shipping companies lobby ferociously to prevent cash replacing their lucrative contracts. Owen on US food aid: ‘it’s a scandal, people should be prosecuted’.

Ideas: donor countries think poor people make bad spending decisions – better to give them food instead. More recent concerns over money ending up in the hands of terrorist groups

1_cash_transfer_infographic_narrative_web2Institutions: Parts of the UN system in particular exist solely to distribute food aid, but lots of other players, including big international NGOs, are also part of the system.

According to Owen, ‘almost every big change worth pursuing looks like this’ in terms of blockers. ‘Don’t think you’re going to go ahead and change the world just because you have a better idea’. So what’s CGD’s theory of change?

  1. Nail down the evidence (yes, even in these post-truth times, that matters)
  2. Power analysis: who makes the decisions that count? In this case about 7 large donors, not the UN; win them over and the rest of the system will fall into line
  3. Build an influential network through a High Level Panel

Owen is something of a connoisseur of high level panels and reckons there is a particular way to making them effective:

  • Start with what you think is the right answer
  • Be prepared to learn and adapt that answer to improve the concept and proposal, benefitting from diversity of ideas
  • Invest time and energy in finding the best language to communicate the idea, including ‘specific, actionable recommendations’ and an elevator pitch that may actually have to be delivered in an elevator at international meetings (you listening, WDR?)
  • Build credibility with policy makers, eg by doing public polling to show your proposal has support, or getting it into important international documents and agreements (as CGD did with the World Humanitarian Summit)

A High Level Panel creates a team of ambassadors for your idea, so make sure they come from the different communities you are trying to influence.

Some other aspects of CGD’s theory of change are more subtle:

  • if you can show that transforming the existing system on X opens up new opportunities to address problems on Y, then you have a bunch of potential new allies (eg cash transfers will reduce duplication between aid agencies).
  • It concentrates on fixing systems rather than filling gaps
  • Rather than just calling for more aid, it focuses on how to make existing aid go further

CGD and the Panel decided against setting an arbitrary target (eg 25% of humanitarian aid should be CTs) and opted for recommending a process instead as a way to change behaviours: they proposed that a small group of donors should take the plunge and call for tenders for a single unified, unrestricted CT payment for a particular humanitarian situation. If the bids turned out to be cheaper/more efficient than the traditional approach, then boom!

And now they have it: DFID and ECHO (the EU’s humanitarian wing) put out an $85m bid for CTs to Syrian refugees in Lebanon. Because of ECHO procurement rules the bid is open only to the UN system, which has been slow to switch to CTs – sweet. It’s caused a big fuss, but is the UN really going to turn down $85m? Watch this space.

And here’s the 4m animated summary