In my previous article in Afghanistan Times, I argued about the importance of cash distribution for the vulnerable families that live under the poverty line. I have been asked about the benefits of the Cash versus Food distribution. First, distributing cash is another concept of the universal basic income (UBI) which has been a hot topic for economist´s in the 21st century. Andrew Yang, an ex-Democrat candidate for presidency, ran solely on the argument that every American should get a monthly $1000 dollars paycheck in the current ages of technology and artificial intelligence which is taking so many jobs from different sectors. That was before COVID-19. Now each American is qualified for one-time check of $1200 and each Canadian can receive up to $2000 from the government for the next four months.
I believe that if you give a freedom of choice to individuals, they make a better judgement for themselves. The whole concept of freedom and liberty is about personal choice. Any other approach can be costly, time consuming, and honestly, irrelevant. Just like the government´s ludicrous initiative of giving out 1 kgs of grain for households, which I heard most of the grain was given to feed the chickens.
There are mixed outcomes regarding the cash distribution. While there have been many successful cases, there has also been some interesting outcomes like in Western Sudan, Ethiopia, Ghana Guatemala, Nicaragua, Bangladesh, and Kosovo with regards to UNHCR, WFP, Action Aid, and Save the Children. For detailed study please look into UKAID sponsored study for Center for Global Development in 2015 titled `Doing cash differently-How cash transfers can transform humanitarian Aid´
Here are some advantages of Cash:
- Minimum Transfer Costs
- Easily converted
- Permits Beneficiary Choice
- Boosts productivity
Disadvantages of Cash:
- Limited Donor Budget
- Target Difficulty
- Expenditures on nonfood and social Activities
- Security Risk
Advantages of Food:
- Greater Donor Surplus
- Favors elderly, children, and women
Disadvantages of Food:
- Transport/Administrative/storage costs are high
- Losses from rot and robbery/prolong monitoring and accountability
- Less easily exchanged
- Disincentive effects on production and competes with local markets and trades
I have worked for the donor community for the last six years. I know how extravagant the donor choices can be, and at the end of the day, a minute percentage of services is received by the recipients. In the COVID-19 era, it is necessary we put the families in charge of how they want to address their needs and wants. In other countries, researches have shown that if you provide the funds to the women of the family, it can be managed better. There have been similar experiments in Sri Lanka and Bangladesh on impact of micro finance loans on women empowerment. Either way, I encourage the donor community to not expend these funds to prolong salary payments or administrative costs but to distribute the cash effectively within the poor communities. Allow them to make the choices, cut the extra costs and follow efficiency.
The writer is ex-advisor at the Ministry of Finance
Co-Founder at The Economic Club of Kabul