Cash is replacing other forms of aid, even in conflict zones

Wednesday, November 7, 2018

In 2011 war and drought plunged Somalia into famine. Aid was held at the border, for fear of it being stolen. A few NGOs decided to try something different: giving people cash instead of bringing in sacks of food. They used hawala networks—a traditional Muslim form of money transfer—to get cash to aid workers, who handed it out. But most charities hung back, afraid of accidentally running afoul of American anti-terrorism laws.

By the time drought returned to Somalia last year, the spread of mobile-money transfers meant that cash could be sent directly to phones. In April 2017 alone $35m was given out to 2.4m people (a sixth of the population). Individual merchants found ways to bring food in to supply this ready market. Famine was averted.

Cash handouts were not the only reason: the fighting was less fierce than in 2011. But the difference between the two interventions illustrates both the efficacy and the growth of cash aid.

Photo courtesy of AMISOM Public Information.

Source: The Economist (link opens in a new window)

cash transfers, fintech, global development, refugees