Conflict-sensitive cash transfers: unintended negative consequences

Question

What unintended negative consequences have been identified as possibly resulting from cash transfer programming in fragile contexts and how have these been managed?

Summary

Risks associated with cash transfer programmes in fragile contexts include theft, diversion, corruption, security, targeting, misuse by beneficiaries and inflationary effects. However, the literature indicates that – while different – these risks are no greater than those associated with other forms of aid, e.g. vouchers or in-kind goods, and could even be less. Cash transfer programmes have been successfully implemented in fragile contexts, including Afghanistan, Pakistan, Somalia, the Democratic Republic of Congo, Chechnya and Syria.

Evidence of the above risks materialising in practice is very limited:

  • Diversion, theft and corruption – the literature suggests that in most contexts cash can be delivered safely, efficiently and accountably to people. Moreover, in some ways (e.g. being less bulky and visible) cash transfers are less prone to diversion and corruption.
  • Misuse of funds – there is strong consensus in the literature that beneficiaries do not spend cash transfers on vice goods such as alcohol and drugs.
  • Targeting – some issues were found with targeting in the context of the Gaza Strip, but overall (despite the greater attractiveness of cash), targeting of cash interventions was no more challenging or problematic than in-kind assistance.
  • Inflationary effects – in general cash transfers were not found to lead to inflationary effects, though there were exceptions where markets were not well-connected or people wanted similar goods. There is also some evidence that cash transfers have positive multiplier effects on local economies.
  • Armed groups – no evidence was found of cash transfers being diverted to armed groups, or of armed/non-state actors taking credit for cash transfer programmes. Indeed, these were not even identified in the literature as potential risks related to cash transfers.
  • Women – this report found no evidence that cash transfers are more controlled by men and hence disadvantage women.

Mitigation measures identified in the literature focus on the use of technology, notably e-transfers (e.g. through mobile phones, ATMs) and identity verification, as well as use of existing local money transfer mechanisms (such as remittance organisations) and clear, transparent targeting.

Suggested citation

Idris, I. (2017). Conflict-sensitive cash transfers: unintended negative consequences. K4D Helpdesk Report 200. Brighton, UK: Institute of Development Studies.