«Courtenay Cabot Venton, Sarah Bailey, Sophie Pongracz February 2015 VfM of Cash Transfers in Emergencies 1 Acknowledgements The study team is very ...»
Value for Money of Cash Transfers in
Courtenay Cabot Venton, Sarah Bailey, Sophie
VfM of Cash Transfers in Emergencies 1
The study team is very grateful to the numerous experts who were willing to discuss the
study and feed in relevant data. We extend our thanks to the DFID country offices and
all of the relevant partners in Ethiopia, Lebanon and Philippines.
Thanks to Kerren Hedlund and Paul Harvey who provided expert review, and Alexandre Castellano (ECHO) as a member of the technical working group.
Thanks also to Tim Waites and Heidi Gilert from the Conflict, Humanitarian and Security Department in DFID for commissioning and facilitating this work, and for their inputs and expertise throughout.
This study has been funded by UKaid from the Department for International Development. However, the views expressed do not necessarily reflect the department’s official policies.
Cover photo: WFP/Giulio d’Adamo VfM of Cash Transfers in Emergencies 2 Table of Contents
EXECUTIVE SUMMARY 41 INTRODUCTION 6
1.1 OBJECTIVE OF STUDY 6
1.2 OVERVIEW OF VFM 6
1.3 STRUCTURE OF THIS REPORT 7
2 LITERATURE REVIEW FINDINGS 8
2.1 TYPES OF EVIDENCE AND GUIDANCE 8
2.2 KEY FINDINGS ON EVIDENCE 9
3 CASE STUDIES: METHODOLOGY AND LEVEL OF AVAILABLE EVIDENCE 14
3.1 INTRODUCTION 14
3.2 COUNTRY CONTEXTS 14
3.3 LEVEL OF INFORMATION AVAILABLE 15 4 CASE STUDY FINDINGS 18
4.1 ECONOMY 18 4.1.1 INTRODUCTION 18 4.1.2 DISCUSSION OF KEY FINDINGS 18
4.2 EFFICIENCY ANALYSIS 20 4.2.1 INTRODUCTION 20 4.2.2 DISCUSSION OF KEY FINDINGS 20 4.2.3 DRIVERS OF EFFICIENCY 23
4.3 EFFECTIVENESS AND COST-EFFECTIVENESS ANALYSIS 244.3.1 INTRODUCTION 25 4.3.2 DISCUSSION OF KEY FINDINGS 25
4.4 BARRIERS TO SCALING UP CASH TRANSFERS 28
5 CONCLUSIONS AND RECOMMENDATIONS 28
5.1 CONCLUSIONS 29
5.2 RECOMMENDATIONS 31
The objective of this study is to analyse evidence on the Value for Money (VfM) of cash transfers. VfM refers to the optimal use of resources to achieve the best outcomes for people affected by crisis and disaster. The study examines evidence on the VfM of cash compared to in-kind assistance and vouchers and undertakes analysis on how VfM can be maximised. It is based on a global literature review on cash, vouchers and in-kind transfers and case studies in Ethiopia, Philippines and Lebanon. The main findings from the study are as follows.
Cash, when compared to in-kind approaches, consistently emerges as more efficient to deliver. The cost to aid agencies of getting cash to people is generally less than the cost of delivering in-kind aid. However, the overall efficiency of cash as compared with other transfers depends on the prices of commodities that recipients purchase in local markets, which can vary significantly, even within countries, over time and between seasons. Aside from delivery costs, factors that determine the relative efficiency of cash, vouchers and in-kind aid include differences in local and international prices, the degree of competition in voucher markets, the scale of the intervention, the type of delivery mechanism and the degree of market integration. The type of transfer is only one factor that affects efficiency.
The potential for Value for Money gains of cash are particularly evident when cash is considered as a multi-sector tool with a wide range of benefits. The goods and services that households access as a result of cash transfers vary between households and span different aid sectors – results that would be difficult or impossible to replicate via inkind assistance. The specific outcomes of the intervention depend not solely on the transfer but also on the context, programme design and implementation, including targeting and programme quality.
Because cash enables households that receive it to use assistance according to their own capacities, risks and opportunities, a case can be made that cash has the potential to support the resilience of households to manage shocks. However, links between cash transfers and resilience is a hypothesis that needs to be tested, rather than a finding of this study.
The flexibility of cash to provide access to a range of goods and services means that it is uniquely placed to enable VfM gains in the humanitarian system. This is not to suggest that cash is always a more preferable and appropriate transfer, but rather
Key recommendations from the study:
Increase the scale of cash programmes to achieve efficiency gains through economies of scale, where appropriate. The use of market assessments is key to inform the appropriateness of cash and other kinds of transfers.
Rather than using cash to substitute for a single type of in-kind assistance (i.e.
cash for food), use cash for broad objectives that take the place of multiple types of in-kind or voucher assistance (i.e. multi-sector cash transfers to meet a variety of basic needs).
Consolidate cash distribution platforms (in circumstances where this would increase efficiency), maximize coordination and rationalise programmes and actors accordingly, particularly in countries where there are large numbers of agencies engaging in cash-based programming, and as part of preparedness measures in places with high risk.
While further research on specific areas such as multiplier effects would be valuable, there is already a significant body of evidence on the effectiveness of cash. The primary focus should be on systematically documenting future interventions and collecting data that can be used to analyse the efficiency and effectiveness of the transfer provided, thus supporting good programming and decision-making.
From a practical perspective, the diversity of budgeting and reporting systems across partners makes comparative analysis on VfM difficult. A common protocol for demonstrating costs and outcomes would greatly benefit understanding moving forward, as would guidance on ex ante analysis of the value for money of different transfers to inform decision-making.
The objective of this study is to support the analysis and maximization of Value for Money (VfM) of cash transfers in different emergency contexts, leading to the development of DFID guidance. It reviews evidence on the economy, efficiency and effectiveness of cash, vouchers and in-kind transfers, in order to support a more
structured analysis of the VfM of different transfers. Specifically, the study:
i) Reviews evidence on the VfM of cash transfer programmes, through a literature of global evidence and case studies in Ethiopia, Lebanon, and Philippines; and ii) Develops DFID guidance on analysing the VfM of cash transfers in emergencies to inform decision-making on appropriate responses.
This report summarises the main findings from the three case studies and literature review, which are annexed. The guidance on VfM analysis is a separate document.
VfM refers to the optimal use of resources to achieve the best outcomes for people affected by crisis and disaster. DFID’s approach to VfM is made up of three components,
referred to as the 3 e’s:
Economy relates to the price at which inputs are purchased. Inputs can include the price of in-kind goods, banking fees, vehicle and storage rentals, staff salaries, truck rentals and the cost of consultants.
Efficiency relates to how well inputs are converted to the output of interest, which in the case of humanitarian programmes is usually access to certain goods and services. Cost-efficiency analysis spans both economy and efficiency, focussing on the relationship between the costs of a programme and the value of the assistance delivered to beneficiaries. Efficiency also includes costs to recipients, such as paying for transport or the opportunity cost.
Effectiveness relates to how well outputs are converted to outcomes and impacts, such as food consumption, food security, improved nutrition, school attendance, increased use of health services / improved health, improved livelihoods, asset accumulation, market impacts and social cohesion. Cost-effectiveness analysis examines the cost of achieving intended programme outcomes and impacts, and can compare the costs of alternative ways of producing the same or similar benefits.
VfM of Cash Transfers in Emergencies 6
This study investigates the 3 e’s for the three main types of emergency transfers:
Cash: Recipients are given money, and can use it however they see fit.
Vouchers: A voucher is a paper, token or electronic card that can be exchanged for a fixed quantity or value of specified goods or services at shops or markets participating in the scheme.
In-kind: Agencies directly transfer commodities to people, such as food, water, shelter and other non-food items.
1.3 Structure of this Report
Following this introduction, Section 2 summarizes findings from the literature review.
Section 3 describes the case study approaches, level of information available and challenges faced in collecting evidence. Section 4 summarizes the key findings from each of the country studies. The conclusions and recommendations are presented in Section
5. Annexes A, B and C contain the full reports for each of the study countries and Annex D contains the literature review. This summary report draws key comparative findings and lessons learned across the three case studies.
VfM of Cash Transfers in Emergencies 7 2 Literature Review Findings A literature review was conducted to inform the design of the case studies, analysing existing evidence on the cost-efficiency and cost-effectiveness of emergency cash transfers, including comparisons between cash, vouchers and in-kind assistance. It identifies trends, gaps in evidence and critical questions for understanding the VfM of emergency cash transfers.
2.1 Types of Evidence and Guidance
There are three main types of comparative evidence on efficiency and cost-effectiveness
of different transfers:
Controlled research using randomised approaches to compare different aid modalities;
Non-randomised pilots that provide different types of assistance and directly compare them;
Ex post comparisons between different approaches not implemented side by side.
The literature review located twenty studies falling into these three categories, of which eight used randomised methodologies and three were non-randomised pilots. There are also numerous (150+) evaluations / studies of cash and voucher programmes that do not make comparisons with alternative approaches. The vast majority of comparisons are between cash transfers and food aid. This is because cash was pioneered as an alternative to food aid and increasing access to food continues to be a common objective of cash transfer programmes, even though the expenditures made by recipients span the sectors by which aid is organised.
While there is no shortage of general guidance on deciding when cash transfers are appropriate, there is little specific guidance on analysing efficiency and even less for cost-effectiveness / VfM. A recurrent theme from the literature is that these are important issues to consider but that such analysis is difficult for many reasons, including because agencies track their costs in different ways and because benefits of different transfers are diverse and not easily compared. The guidance that does exist concerns mainly ex ante analysis, since it is meant to assist decision-makers in determining whether cash is the most appropriate response. Gaps in ex ante costeffectiveness analysis are not specific to cash transfers and apply more generally to decision-making on humanitarian interventions. In reviewing how aid agencies make decisions on responses, Maxwell et al. found many agencies cited cost-effectiveness as
2.2 Key Findings on Evidence An analysis of VfM requires understanding the costs and results of different transfers.