A MILLION-DINAR QUESTION: Can Cash Transfers Drive Economic Recovery in Conflict-Driven Crises?

Over the past twenty years, the use of cash transfers in development and humanitarian interventions has experienced exponential growth. Both evidence and ethics have contributed to its rise. Extensive research has demonstrated how cash transfers can serve as critical lifelines in both acute humanitarian emergencies and more stable development contexts, whilst also providing recipients with greater flexibility, dignity, and choice. However, there exists a dearth of evidence on the effectiveness of cash transfers in protracted crisis contexts, where poverty, hunger, and the resulting humanitarian needs are increasingly clustered.

Donors and governments are urgently asking: Is cash equally effective in protracted crises, where conflict and insecurity are pervasive, markets and livelihoods are broken, and state capacity to respond is limited? Can cash assistance be designed to both protect against the immediate effects of protracted crises and build resilience to future shocks, thereby reducing future humanitarian need? Specifically, given the extended length of need in protracted crises, how might humanitarian cash transfers be intentionally designed to address both short-term needs and longer-term recovery?

The Research

To answer these questions, our team designed and conducted a Randomized Controlled Trial (RCT) to test the impact of deliberate variations in the distribution schedules of cash transfers among conflict-affected households in the Anbar, Salah-al-Din, and Ninewa governorates of Iraq. This study leveraged the Cash Consortium of Iraq’s (CCI) ongoing multipurpose cash assistance program to distribute cash to 827 eligible participants subdivided into three treatment groups. Treatment groups received the same value of cash at varying schedules – either 1) one lump-sum of 1,200 USD, 2) three equal monthly transfers of 400 USD, or 3) two installments of 200 USD followed by a third installment of 800 USD. Half of the participants in each treatment group also received a behavioral insight-driven financial health education designed to support future-oriented financial planning. A group of beneficiaries was also randomly selected to serve as the control group and was scheduled to receive their cash transfer a month after the final transfers in the treatment group were delivered.

The Findings

In addition to allowing households to meet critical basic needs in the short run, receiving cash was found to improve recipients’ longer-term economic recovery prospects by boosting and stabilizing their employment and productive asset ownership.

Regardless of the modality in which it was delivered, cash enabled households to meet their critical food consumption needs more fully, including better dietary diversity and less reliance on distressful coping strategies than their control group counterparts. The cash transfers also allowed households to invest more in meeting other critical needs and developing their family’s human capital through increased expenditure on shelter, education, and health.

In addition, Iraqis who received cash were better able to retain or acquire new assets, such as mobile phones and livestock, which can help them generate income and act as capital stores to cope with future shocks. Treated households, on average, were also better able to maintain regular employment in the face of major economic contraction in Iraq.

This stabilizing effect of cash on asset ownership and job retention did not, however, translate into additional income for recipient households during the period of the study. While cash provided households with needed resources to invest in improved livelihood strategies, turning these into greater income requires market demand for products and services, which are often lacking in protracted-crisis contexts. Further, vulnerable populations typically targeted for cash assistance may not have adequate skills or access to harness relevant opportunities. These findings point to the limitations of cash transfers alone in supporting sustainable poverty escapes in protracted crises.

The outcomes presented above were associated with receiving a cash transfer, regardless of modality. Variations in cash transfer schedules were, however, found to affect the timing and strength of key outcomes. Larger lump-sum payments emerged as the most effective method for promoting expenditures on basic needs (such as shelter repair), human capital development (such as education), and productive household assets. Smaller tranche payments, on the other hand, were best suited to immediately stabilizing and smoothing household consumption and improving short- and medium-run food security. These results largely mirror findings from more stable contexts and should provide greater impetus for humanitarian donors to offer more flexibility in the design of cash transfers in protracted crises.

The Implications

Regardless of the modality in which it was delivered, receiving cash allowed households to meet critical basic needs in the short term and improved their longer-term economic recovery prospects by boosting and stabilizing their employment and productive asset ownership in the face of multiple shocks.

Our study findings come at an opportune moment in the Iraqi and global context. First, as Iraq transitions from an active conflict towards more stability, the Government of Iraq, donors, and practitioners are seeking more durable solutions. Additionally, as the impacts of COVID-19 exert downward pressure on global economies, host country governments and donors alike are seeking evidence on the most effective use for limited investments. These results hold important implications for how policymakers, donors, and practitioners can fund and design cash programming to support economic recovery in protracted, conflict-driven crises.

The full technical report is available here.

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