Rod Dubitsky and Sadna Samaranayake

Cash Versus Cows (Part 1): Looking at the benefits of asset versus cash transfer programs

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Is it better to give a cow or cash? Are such approaches hand-outs or a hand up for the extreme poor? In the development sector, we often pose simple either/ or questions. Yet these simple questions are more complex than may meet the eye, and the answers vary greatly based on beneficiaries’ backgrounds, local contexts, the organizations involved and livelihoods pursued. In most cases the answers to these questions are not “either/or,” but rather, “both, and.”

Ultra-poor “Graduation” is an approach originally pioneered by BRAC in Bangladesh that has evidenced strong impact results via external (RCT) evaluations. It demonstrates a 95 percent success rate in enabling the poorest-of-the-poor to engage in sustainable income-generating activities and financial access. The approach is gaining ground as a viable complement to government social protection and livelihoods programs in countries like Colombia, Chile and Ethiopia. Meanwhile, with increasing press garnered by cash-only transfer programs such as GiveDirectly, important questions are surfacing about whether it is best to provide assets (such as cows, other livestock and productive assets in-kind) or straightforward cash transfers to ultra-poor households. The Consultative Group to Assist the Poor (CGAP) recently published a post on Graduation Transfers: In Cash or In Kind, noting that all CGAP Ford Foundation Graduation pilots transferred physical assets. The post nonetheless outlined the potential benefits, and potential for scale represented by incorporating more cash versus in-kind asset transfers in graduation approaches.

While BRAC has certainly been a proponent of the transfer of physical assets during our 12+ years of Graduation programming with over 1.5 million ultra-poor families, we agree that one size does not fit all. The critical question of cash versus in-kind is a nuanced and important topic and merits closer examination. Below is the first installment of a two-part post examining the question of cash (transfers) versus cows (representative of the many types of physical productive assets – including livestock, seed and agricultural inputs, or a bundle of goods for petty sales – granted to beneficiaries of Graduation programs).

Q: Cash or Cows?
A: Well, both actually, and let’s take it a step further and add “soft loans.”

  • It’s not an either/or – Graduation programs already incorporate both cash and in-kind asset transfers. While physical assets are the better-known transfer component of the Graduation approach, most programs that transfer in-kind assets (including BRAC’s and those supported by CGAP and the Ford Foundation) also provide smaller cash transfers, sometimes referred to as “stipends.” A stipend is a cash transfer meant to provide breathing room, and smoothen consumption as the household moves from manual labor to more productive self-employment, while the physical assets transferred are meant to be productive resources. Therefore, in the cash versus in-kind debate, BRAC believes that in most cases, “both” is the right answer.
  • Sometimes households can even pay back cash transfers – precise targeting is key. Taking the above point further, in a less known variation of BRAC’s Ultra-Poor programming called the Other Targeted Ultra Poor program (OTUP), beneficiaries in a slightly higher income category receive a package that is mostly (roughly 80-90 percent) comprised of a “soft loan,” with a clear expectation of repayment. The experience of over 1 million households in Bangladesh (documented here), that graduated from ultra–poverty through soft loans (a grant/cash transfer that they successfully repaid) seems to indicate that precise targeting opens up yet another option for how asset packages can be delivered. The more pertinent question then becomes: “Cash, Cows or Soft Loans?” thereby inviting pro-poor microfinance institutions to the table as potential implementers. The answer, we feel, is all of the above, supported by rigorous targeting and careful implementation. One size does not fit all.However, where microfinance institutions are potential implementers of graduation programs, it is important to emphasize that the nature of the ultra-poor requires that the loan provided be more lenient than regular microfinance loans. Though they may be able to afford a loan, the lives of the ultra-poor are often too precarious to impose the same repayment criteria as regular microfinance borrowers – hence a “soft” loan is required. In Bangladesh, BRAC’s soft loans to the ultra-poor are cheaper than regular microfinance loans by 5 percentage points, and carry a two-month grace period for repayment.

Q: Cash or cows: What are the key considerations?
A: Household motivations and strong links to enterprise-specific training are vital.

  • Assets get sold for cash, so why not transfer cash in the first place? Examining household motivations is key. In some cases households sell the physical assets transferred for cash. Does this make the case for cash transfers instead? Not necessarily. It’s important to understand what a household is utilizing the cash for. Is it to cover an illness or shock? (A cash transfer or soft loan would have been diverted in much the same way). Or does the household simply increase their consumption? More pointedly, do they actually purchase a different productive asset? The latter indicates a cash transfer would have been better (given the operational and transaction costs of delivering the in-kind assets). The latter also potentially indicates shortcomings in program design (i.e. wrong asset type) or training (i.e. the importance of productive assets and future income wasn’t adequately conveyed). When making the case for cash transfers based on the logic that households tend to sell physical assets granted to them, it’s critically important to understand the household-level rationale behind the choice to sell assets.
  • Successful outcomes depend upon linking the transfer (asset, cash or loan) to specific livelihood training. In BRAC and other Graduation pilots, successful Graduation outcomes (in particular multiple and diverse sources of income) are closely correlated to strong livelihood-related training which, of course, is asset-specific. If you receive a cow and goat, your training is on how to keep them healthy, reproducing, and how to generate revenue from these assets. In BRAC’s OTUP variation mentioned above, where soft loans are linked to an asset purchase and specific training, households must elect what enterprise options they want to pursue from an available menu of choices. Once the enterprise is selected and the client purchases their asset with their loan, the training that is delivered is directly geared at the selected enterprise. We know from many Graduation pilots that choosing livelihoods and ensuring proper training is extremely challenging. It’s the harder, more intensive approach to driving at sustainable outcomes for ultra-poor clients than simply transferring cash. Regardless of where one falls on the question of cash or assets, what is clear is that strong livelihood training enhances the success of clients, and to be most effective, this training must be directed at the particular livelihoods of the beneficiaries.
  • Ensuring overall livelihoods diversity depends more on program design and value chain development, and less on the question of cash or assets in-kind. While cash transfers clearly do result in more short-term general consumption, it is unclear as to whether they result in more diverse livelihoods than asset transfers. Traditionally in-kind asset transfers have been thought to result in clustering of businesses (e.g. lots of chicken eggs). However cash transfers to local populations are also linked to the same effects and a saturation of certain types of businesses. For instance, petty trade operations or livestock operations in line with available training and cultural norms can occur even with cash transfers. Households engage in enterprises that make sense based on witnessing what has worked for their peers and what local market constraints dictate. The implication is that developing livelihood diversity in a given community is equally relevant to programs that transfer cash or assets.

Note: In our next post we examine the question of whether cash or cows are better geared for scaling up Graduation programs. We welcome your thoughts. Please comment below or get in touch with us at

Rod Dubitsky is Senior Advisor and Chief Knowledge Officer for BRAC USA.
Sadna Samaranayake is the Program Manager of BRAC USA’s Ultra-Poor Graduation Advocacy Initiative

cash transfers, graduation approach, microfinance