Cash transfers contribute to community rebuilding Cash transfers have a positive multiplier effect in local economies and boost growth and development in rural areas

Roselyne Sachiti Features Editor
When disaster hit Chimanimani recently, the immediate concern of all humanitarian responders was to help people meet their basic and urgent needs like food, health, water and shelter.

Humanitarian aid to help the affected to make their lives bearable is still coming in from different sectors and more is required as the damage was devastating.

Humanitarian aid, also known as emergency aid, is rapid assistance given to people in immediate distress by individuals, organisations or governments to relieve suffering, during and after natural and man-made disasters.

Government has already started rehabilitating water infrastructure by drilling boreholes across Chimanimani.

Rebuilding support is coming from other partners in the non-governmental sector, United Nations agencies, churches, corporates and individuals.

The reality is the humanitarian aid tap to Chimanimani will at some point dry out, yet communities need to economically rebuild their lives at household level, go back to their way of living and self-sustain.

There is need to focus on economically rebuilding the affected communities from household level to local businesses affected by the cyclone.

Economic stability at household level, through cash transfers is critical and can be a sustainable solution as the primary objectives include poverty alleviation and food insecurity reduction.

In Chimanimani, communities and households lost everything their families, livestock including cattle, goats, chickens among others. Rebuilding their broken lives may take time. When implemented, cash transfers could help them in taking the first steps to reconstructing their local economy.

If anything, assisting individual households and businesses, as well as services that support them, can help speed up post-disaster recovery. This can also have a positive ripple effect across the affected community.

Therefore, focus on rebuilding local economies and supporting local businesses in parallel to, not after, launching a response to meet basic needs is paramount, according to a research by Mercy Corps.

In Zimbabwe, the National Harmonised Social Cash Transfer programme (HSCT) is an unconditional cash transfer programme targeted at ultra-poor households who are labour-constrained.

The programme was introduced in 2011 by the Ministry of Public Service, Labour and Social Welfare (MPSLSW).

Objectives are to enable beneficiary households to increase their consumption to a level above the food poverty line, to reduce the number of ultra-poor households and to help beneficiaries avoid risky coping strategies such as child labour and early marriage.

Cash transfers can be the immediate solution out of most situations that may result in poverty and financial exclusion.

For over a decade, the transfer project, an innovative research initiative, has accumulated a robust body of evidence on social cash transfers in sub-Saharan Africa.

Since 2008, the project has been led by UNICEF, the Food and Agriculture Organisation of the United Nations (FAO) and the University of North Carolina at Chapel Hill (UNC) and has worked together with key national partners namely, governments and local research organisations to assure research is utilised to inform the design and scale-up of national social cash transfers.

The aim of the project is to help governments create better policies and programmes related to social protection by undertaking long-term, multi-country impact evaluation research across the region.

Transfer project focus countries include Ethiopia, Kenya, Ghana, Malawi, Mali, Nigeria, Tanzania, Uganda and Zimbabwe.

At a media training in Arusha Tanzania at the beginning of this week, professor in the Department of Public Policy at the University of North Carolina at Chapel Hill (UNC), who is also a human resource economist specialising in household behaviours in developing countries Sudhanshu Handa (Ashu) said cash transfers contribute to development.

He said cash transfers impact household livelihoods in crop, livestock and non-farm activities. For example, in Zambia, transfers increased farmland by 36 percent, as well as the use of seeds, fertiliser and hired labour, while operation of non-farm enterprises increased by 18 percent.

In Malawi, the ownership of small ruminants increased by 16 percent.

Handa also said cash transfers enable households to transfer from less to more preferred labour activities.

He also said cash transfers have a positive multiplier effect in local economies and boost growth and development in rural areas.

For example, in Zimbabwe and Zambia, cash transfers resulted in a decrease in casual labour as people moved to own-farm and non-farm enterprises.

Even in non-disaster situations, cash transfers play a huge role in development.

Countries like Kenya had a 34 percent reduction in early pregnancies as a result of cash transfers. Delay in early pregnancy means girls spend more time in school.

Educated girls have more opportunities in life.

Research also show that cash transfers also do not result in inflation within beneficiary communities. Six case studies carried out by The Transfer Project prove this.

“Beneficiaries are a small share of the community and have low purchasing power, so don’t buy enough to affect market prices.

“In Ethiopia, for every dollar transferred, about $1,50 was generated for the local economy,” Handa said.

He added that cash transfers at scale are feasible and within any government’s budget.

“As programmes are scaled up and achieve economies of scale, costs decrease compared to large start-up costs.

“In Lesotho, the cash transfer ratio fell from 2,28 to 0,53 after start-up. Simulated scale-up costs estimate that the annual cost of a UCT in 2012 would average 1,1 percent of GDP, or 4,4 percent of general government expenditures.”

He also said there was a greater future demand for social protection services to end poverty. These include old-age pensions, which will help alleviate the burden on the working age population.

“Cash transfers have shown to be effective in helping with human capital accumulation and increasing productivity. A double bonus for maximising the size of the demographic dividend,” he said.

Increased investments in education, especially among the poor and vulnerable groups, from whom return on investment in highest.

In Zambia for example, cash transfers reduce school drop-outs after age 12. Children who benefit from the cash transfers stay in school longer than those who do not receive anything.

In the case of Zimbabwe and Kenya, cash transfers delay sexual debut among young people.

Productive impacts of cash transfers

According to FAO Econometrician, Silvio Daidone, giving cash transfers to poor rural people, unconditionally, can have productive impacts.

“In the presence of credit, insurance, labour and other market constraints, the provision of cash may help overcome market failures, leading to greater productive investment and spending, and potentially creating a household-level multiplier effect. Along with shifting investment and spending, cash may also lead to a reallocation of household resources, particularly labour,” he said.

He added that farmers can invest the cash transfers in agriculture, purchasing fertilisers and other productive inputs.

In Ghana, transfers increased seeds expenses by 60 percent. Then in Zambia, Child Grant Programme (CGP) transfers increased farmland by 36 percent as well as the use of seeds, fertiliser and hired labour.

There was a 17 percentage point increase in use of fertiliser in Malawi.

All the above translate to greater harvests, which result in food security and sustainable livelihoods.

In Ethiopia, harvests increased by 10 percent following cash transfers, Zambia 37 percent, Malawi 11 percent.

Transfers can be spent on livestock accumulation, both for savings and investment purposes. Evidence shows a positive outcome on livestock in countries implementing cash transfers. Those herding small ruminants in Malawi were 16 percent, in Zambia CGP 4 percent, Zambia MCT 23 percent and Zimbabwe 7 percent.

In the case of owning other livestock, Lesotho (pigs) 8 percent, Zambia CGP (cattle) 8 percent and Zambia MCT (pigs) 3 percent.

In Ethiopia, 4 percent raised chickens as a result of cash transfers, Malawi 15 percent,

Zambia CGP 15 percent, Zambia Multiple Categorical Targeting (MCT) 26 percent and Zimbabwe 6 percent.

Cash transfers also increase saving and capacity and coping mechanisms of households.

In the case of Ghana, there was an 11 percentage point increase in share of households saving money.

In Lesotho, transfers reduced the share of households sending children living elsewhere, as well as pushing them out of school.

In Ethiopia, transfers reduced the share of households borrowing while reducing  households purchasing on credit in Malawi.

Cash transfers also improved social networks of reciprocity.

In Zimbabwe, transfers increased the share of households making cash and in-kind transfer within the community.

As the post-disaster initiatives take shape in Chimanimani, cash transfers could help rebuild broken lives.


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