In 2016, cash transfers and vouchers made up about 10 percent of international humanitarian aid, or $2.8 billion, up from 2.5 percent a year earlier.
Donors and big aid agencies have committed to supplying more aid in the form of cash. International NGO World Vision, for example, expects to provide fully half of its spending in the form of cash by 2020.
Cash aid offers an elegant solution for buying goods and renting accommodation, and injects funds into local economies.
As unconditional cash aid grows in scale, UN agencies and NGOs are having to redefine their raison d’être. Cash threatens the traditional “business model” of many aid groups: a highly specialist aid agency (focusing on supplying just food or shelter, for example) makes little sense if families make their own purchasing decisions.
Financial service providers are taking over a significant role – and a percentage of the value transferred. In Turkey, for example, the European Commission provides cash transfers for 1.3 million Syrian refugees, in collaboration with the Turkish government, state-owned Halkbank, the Red Crescent, and the UN. The two-year contract is worth €650 million.
Why not cash should be the first question asked before starting any aid project, a key 2015 study published by UK think tank the Overseas Development Institute urged. Yet institutional and technical hurdles linger, some based on misperceptions. Cash aid doesn’t succumb to more fraud than bags or boxes of goods. Fears that recipients will spend the cash unwisely – on tobacco and alcohol, say – have also proven unfounded.