This note presents a conceptual framework outlining how cash transfers can promote and protect livelihoods in both development and humanitarian relief settings. The framework encompasses three spheres and the intersections between them: (1) institutions, politics and governance; (2) capacity and implementation; and (3) local economic and social impacts. Issues common to all three spheres include political context and acceptability, targeting and instrument choice, and beneficiaries’ voice.
Interest in cash transfers over ‘in-kind’ transfers such as food is growing. Cash transfers avoid high transport and storage costs and involve beneficiary choice. Cash transfers may have to complement other types of transfer, however, and be carefully sequenced. Safeguards regarding leakage have to be in place, and potentially inflationary effects on local markets need to be considered.
Cash transfers can promote and protect livelihoods in the contexts of both international development and humanitarian assistance in three ways:
- By moving towards cash-based social protection and away from regular deliveries of emergency food in areas of chronic food insecurity. Questions about the feasibility, appropriateness, effectiveness and impact of cash-based assistance need consideration here. Implementation capacity in emergency-prone areas must be developed so that small, regular payments of cash become a workable option alongside the delivery of food.
- By introducing conditional cash transfers, focusing largely on health and education; this is happening in parts of Latin America but transferability is questionable.
- By partly or wholly replacing high-cost in-kind social protection, such as subsidised food. Here the imperative is to examine the feasibility and cost-effectiveness of cash-based approaches.
Consideration of institutions, politics and governance should include resource availability and potential institutional barriers to the uptake of cash transfers. Capacity and implementation involves technical and infrastructural implementation capacity, and government and stakeholder capacity. Consideration of local economic and social impacts needs to include impacts on markets, consumption and supply and of how to move away from dependency on cash transfers. Core issues at the intersection of all three themes are political acceptability, targeting, instrument choice, and the promotion of beneficiary voice.
- Understanding the complex political context for cash transfers is an essential step in making that context more favourable. The overall political feasibility of cash transfers depends on, for example, the type and extent of political commitment to poverty reduction, and resource availability.
- Political acceptability will also depend on the administrative cost of implementation and on the perceptions of the electorate: prejudices against perceived ‘handouts’ will limit cash transfers to modalities in which the poor are seen to be ‘earning’ transfers.
- Targeting is a political process as much as a technical one, and has implications for the outcomes of cash transfers.
- Beneficiaries’ ‘voice’ means that design and delivery promote the ability of intended beneficiaries to recognise and claim their entitlements. Thus, criteria for inclusion must be simple and transparent, delivery systems robust, and information readily accessible.
- Other overlapping sub-themes include the extent of decentralisation, which links practical implementation costs with political decisions to implement a cash transfer.
- Complementarity and sequencing are issues at the interface of implementation and impact.
- Perceptions of how the poor should move on from receiving cash transfers link political decisions and the local economy: they will influence the volume and duration of benefit of any subset of beneficiaries.
