The Indian Ocean tsunami crisis: humanitarian dimensions

Tsunami relief and reconstruction assistance:
in-kind, or in cash?

There has been a massive international response to the Indian Ocean earthquake and tsunami. Attention is now turning to how the huge sums of money pledged can be spent effectively. Clearly, both the needs for immediate relief and then to assist people in rebuilding their livelihoods are massive and daunting. How best this can be achieved will have to be the subject of more detailed and in-depth assessment as a fuller picture emerges. However, some patterns are already evident. The UN flash appeal, for example, calls for $977 million, of which $214 million is for food assistance and $222 million for shelter and non-food items. Should these funds be spent providing people with the food, shelter and non-food items that they undoubtedly need, or would it, in some circumstances, make more sense to give people the money so that they can buy what they need themselves?

An ongoing HPG study is examining the role that cash, rather than in-kind assistance, should play in the response to emergencies. This work has found that cash approaches remain under-utilised in humanitarian response. Aid agencies still generally provide people with items such as food, shelter materials and water containers, rather than giving them the money to buy these items themselves. The study has also found that there is a growing amount of experience with cash and voucher approaches, with cash being provided in the form of grants and as payment for taking part in public works projects in places as diverse as Somalia, Ingushetia and Mongolia, in response to both conflicts and natural disasters.

The arguments in favour of cash-based approaches are that they can be more cost-effective and timely, allow recipients greater choice and dignity, and have beneficial knock-on effects on local economies. There are, however, fears that giving people cash will create additional risks relating to insecurity and corruption, and that targeting cash may be more difficult than targeting commodities. There are concerns that women may be less able to gain access to cash, that cash may be misused by the recipients, that it may have negative effects on local economies and that it may fuel conflicts. Some argue that cash-based responses sound interesting, but in practice commodities are what is available and what relief agencies have the skills and experience to deliver.

A strong body of evidence is starting to emerge to the effect that providing people with cash in a wide range of emergency situations works. It is possible to target and distribute cash safely, people overwhelmingly spend money on basic essentials, cash provides a stimulus to local economies and it is often more cost-effective than commodity-based alternatives. Cash projects have not generally resulted in sustained price rises and women have been able to participate. People can be trusted to spend money sensibly, and they value the greater choice and dignity that receiving cash rather than in-kind assistance gives them.

Tsunami refugees in Banda Aceh, Indonesia 5 January 2005. REUTERS/ Yuriko Nakao, courtesy www.alertnet.org.

The evidence also suggests that, in some situations, cash may complement commodity-based distributions. Cash should not necessarily therefore be seen as a replacement for other forms of aid, but as an additional instrument. The body of experience that these conclusions are drawn from is still small, and there is a need for caution, but there is sufficient evidence to argue a case for further development of cash- and voucher-based approaches, and for piloting their application on a larger scale.

Given these tentative conclusions, what can we say about the role that cash responses should play in the response to the tsunami? Judging whether or not cash is appropriate depends on detailed, context-specific assessments. There is a need to assess whether markets are still functioning, whether people will be able to buy the goods that they need at reasonable prices and whether cash can be delivered safely and effectively to the people who need it. There may be a particular need for caution about the appropriateness of cash-based approaches in the conflict-affected areas of Sri Lanka and Indonesia.

Initial assessments are beginning to show that markets are starting to re-open and that, inland from the devastation caused by the tsunami, trading networks are being re-established. These are relatively well-developed and sophisticated market economies. This suggests that relief and reconstruction efforts should consider when and where cash-based responses may be appropriate. These might be in the form of grants to enable people to purchase essential items for immediate needs, to rebuild livelihoods, or to support shelter reconstruction. Or they might be as payment for participation in public works programmes that focus on clearing the devastation or rebuilding damaged infrastructure. As detailed assessments and programme designs get under way, the option of providing cash instead of, or as well as, in-kind assistance should be firmly on the agenda.

The HPG study on the use of cash and vouchers in emergency response will report later in 2005. For more information contact the project leader Paul Harvey.