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Press Release - 12 April 2007

Cash aid schemes bring benefits beyond famine relief

Aid initiatives that give people at risk of famine cash instead of food can be a more efficient way of helping those in need, according to the first academic study of this kind of scheme.

They allow people whose crops have failed because of drought to not only buy food but also spend the money on the education of their children, their healthcare or on fertilisers for next year’s crops.

The schemes therefore bring benefits to the wider community and support long-term development, as well as helping those in most need to avoid starvation, the research by the University of Bath found.

The research was carried out on a scheme in the Dowa region of Malawi run by Irish-based NGO Concern Worldwide and funded through a $1.5 million grant from the UK Department of International Development.

The unpredictability of Malawi's weather left hundreds of thousands of people short of food in one region, despite a 600,000-tonne surplus of maize last year. In Dowa less than three per cent of households had sufficient stocks of food to last until after the harvest.

Through the Dowa Emergency Cash Transfer programme, people most at risk are given cards which enable them to withdraw funds from mobile banks that visit their villages.

They can then choose to spend the money where they wish, at local markets or on other goods and services. They do not have to rely on food handouts for which they often have to walk many miles in order to receive, carrying heavy bags of food on the way home.

“Although cash aid might not be appropriate in every case, the Concern Worldwide programme in Dowa has proved to be successful both for the people who receive the aid and the wider community,” said Simon Davies from the Department of Economics & International Development at the University of Bath, who carried out the research.

“People living in some parts of Malawi are in desperate need but despite the nationwide surplus of maize the people in most need can’t afford to buy it.

“Where goods are available to buy, cash aid can be a more efficient means of helping those in need by quickly injecting purchasing power into the local economy. In Malawi, the market was able to respond to the increased demand for maize, ensuring that adequate supplies were available for those who had been hit by the drought.

“Beneficiaries of the programme are able to decide for themselves how best to spend their money, increasing the efficiency of the aid programme compared to in-kind aid. The research shows that people choose to use a part of the money to finance health and the education of their children.

“Schools in the region in particular noticed dramatic improvements in fee-paying rates, drop-out rates and concentration of pupils, as a result of being fed. Beneficiaries also chose to invest in fertiliser increasing the chance of having a good harvest next year.”

As cash circulates around the economy, the programme also benefited others in the local community including local commerce and small farmers and traders who sell directly to the public.

These businesses usually suffer from a lean couple of months between December and March each year when potential customers lack funds. This year, businesses reported improved sales thanks to the programme.

“An important argument for the ‘switch to cash’ is that recipients buy the food they need locally, hence keeping local markets and businesses going during drought periods,” said Dr James Copestake, who has overseen the research.

“Estimating the magnitude of these indirect benefits or multiplier effects, is a technically delicate task, made far more difficult by the need to go out and collect much of the data first-hand.

“This is one of very few studies that looks at this effect, and the first that has been based on a cash transfer programme, and brings new insight into the benefits of this kind of scheme for some of the world’s most vulnerable people.”

Similar schemes have been run by aid agencies such as the Red Cross since the 1990s, and were a common way of distributing aid following the 2004 tsunami.

The report Making the most of it: a regional multiplier approach to estimating the impact of cash transfers in Malawi is available online - see Related Links.

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