The debate on whether cash transfers are more effective than food aid continues. Governments and organisations seeking to transfer cash to poor households should be aware of the challenges in targeting and the availability and price of food in local markets.

An article from Save the Children, UK (SC-UK), compares findings from the Ethiopian Government’s new Productive Safety-Net Programme (PSNP) in two districts where SC-UK is a partner or has its own cash-based livelihood development programme.

The Ethiopian economy is in steady decline, and there is increasing recognition that the country is trapped in a cycle of annual appeals for emergency food aid: an estimated 6.2 million Ethiopians

have received food aid regularly over the last 15 years. Cash transfers may provide an alternative for both developmental and emergency purposes, chiefly because of perceived low costs compared to importing and transporting food for distribution, and the added flexibility for beneficiaries.

The Ethiopian Government is providing cash transfers in 264 chronically food-insecure districts through the PSNP. SC-UK has introduced the cash-based Meket Livelihood Development Project (MLDP) in Meket to complement the PSNP, and the Reducing Dependency and Increasing Resilience (RDIR) programme in Sekota to provide food and livelihoods support.

Key challenges include:

• The government’s standard 80/20 division of households into those who can work for cash, and those who cannot and receive emergency relief, has been controversial.
• SC-UK’s strategy was to cover the poorest households, but the PSNP’s focus on those with a better chance of moving out of poverty forced them to cover others too and redistribute resources midway through the programme, meaning most families did not receive sufficient resources.
• Food prices rose with the demand created by cash transfers, and worsened with late implementation, but supplies could not keep up: traders may have profited the most.
• Corrective action following price increases was made difficult by the different approaches to aid operating simultaneously.
• Those left out of the programmes suffered the double burden of not benefiting from transfers, and relying on markets with inflated prices.

There is some evidence that a very small number of households benefited from the PSNP, but none to indicate whether it helped poor people transform their livelihoods. It is not clear if increased demand for food boosted local production. However, demand for agricultural inputs increased, along with the area of land under cultivation.

Key lessons include:

• Cash transfers seem better suited to areas with market-oriented infrastructure and institutions, such as Meket, and the use of in-kind transfers, such as food, suited to remote areas like Sekota.
• With Ethiopia’s weak market network and widespread poverty, both cash and food can affect the market, distorting prices: the programmes were not equipped to respond.
• Cash transfers may be less expensive than locally purchased or imported food, but costs are higher if action is needed to address problems of market supply.
• Understanding the impact of cash transfers locally and regionally requires the capacity to monitor, analyse and disseminate market-related information.
• Cash-based programmes need to integrate local infrastructure development (such as roads, banks, data services), skill development, effective targeting, and compatibility with other programmes.

Source(s):
‘Moving from Emergency Food Aid to Predictable Cash Transfers: Recent Experience in Ethiopia’, Development Policy Review, Vol.24 (5), pages 579-599, by Emebet Kebede, 2006
Free online access to this article for HINARI subscribers Full document.

id21 Research Highlight: 9 March 2007

Further Information:
Emebet Kebede
Save the Children-UK
P.O.Box 7165
Addis Ababa, Ethiopia

Tel: +251 6293469
Fax: +251 6293470
Contact the contributor: emebet.k@scuk.org.et

Save the Children, UK

Other related links:
'Cash not food: new emergency response trialed in Southern Africa'

'Is cash the best way to assist poor and vulnerable people?'

'Famine in Ethiopia: is food aid the answer?'

'Food aid: how effective is it?'

Eldis Food Security Resource Guide

Developments - Cash or Food?