Transfer modalities

This section gives a snapshot of the different resource transfers modalities: cash, vouchers and in kind.
It also explains those elements that should be taken into consideration in order to decide the most appropriate delivery modality.

DG ECHO has developed Cash and Vouchers guidelines.
This is the policy reference document, that includes terms, definitions, decision trees and checklist, that will be illustrated below in the next pages.

10 things you should know about cash transfers

ECHO uses the term modality to define what is transferred to the beneficiaries.
There are three types of transfer modalities:
1. Cash
2. Voucher
3. In-kind

According to ECHO’s Cash and Vouchers guidelines, cash transfers consist of provisions of money to individuals or households, either as emergency relief intended to meet their basic needs for food and non-food items, or services, or to buy assets essential for the recovery of their livelihoods

Vouchers provide access to pre-defined commodities or services. They can be exchanged in designated shops or in fairs and markets. The vouchers may be denominated either in cash, commodity or service (value-based, commodity based or service-based vouchers). Combined vouchers also exist.
Commodity vouchers have been used to provide access to food, NFIs, seeds and livestock for example.
If the vouchers are not tied to a set of predefined commodities or services, then they will be treated as cash payments.

In kind transfers modality consist of direct distribution of the item.
To date in kind modality remains the most used of transfer humanitarian operations.

If the beneficiaries are required to fulfil a specific obligation or activity to receive the transfer, then this is described as a CONDITIONAL transfer. According to DG ECHO definition, the conditionality does not depend on how the transfer is used but rather what beneficiaries are required to do to receive the transfer

CONTEXT SPECIFIC AND EVIDENCE BASED

The Commission will strive to provide flexible resources to support the use of the most appropriate and efficient combination of emergency response tools, including cash, vouchers, in-kind food aid, and other commodities or services.

The choice of the most appropriate intervention and transfer instrument (e.g. cash based or in-kind) must be a context-specific and evidence-based choice which is regularly reviewed. The relevance and comparative advantage of the proposed response option – and the combination of tools to be used – must be demonstrated for the specific situation, based on needs assessments and causal analyses that are as accurate and up to date as possible”, according to the urgency and complexity of the situation on the ground.

MARKET FUNCTIONING AND MARKET IMPACT

SEASONALITY

Seasonality is a crucial aspect that has to be taken into consideration. In fact, the hunger gap can be different in different groups, different location, and in different times of the year (pastoral populations vs. agriculturalists; dry season vs. rainy season vs. harvest season). The seasonality can be very different between rural and urban contexts. Seasonality strongly influences the delivery mechanism.

Some conditional transfers might interfere with the local labour market in the harvest season. In several contexts, conditional transfers were switched to unconditional transfer modality during the busiest period the year (i.e. harvest seasons). Beneficiaries’ preference may change in function of the period of the year. For instance, some beneficiaries may prefer food transfers during the lean season due to higher food prices, while cash is often preferred around the post-harvest period.

DELIVERY MECHANISM

With term delivery mechanism, ECHO refers to HOW the transfer is actually transferred to the beneficiary. Example of Cash delivery mechanisms include cash in envelope, by ATM card, by mobile phone, by bank transfers. Vouchers’ delivery mechanisms can be paper voucher, electronic voucher as card, mobile phone voucher, and so on. In kind commodities can be delivered by truck, by air drop, etc. The choice of the delivery mechanism may is very important and must take into account, among other things of protection aspects, costs, social acceptability, risk of exclusion, availability of the necessary expertise and technology infrastructure, frequency of the transfer envisaged.

Attention should be given to the fact that the choice of a specific delivery mechanism could:
– exclude certain groups among the most vulnerable. Children who head households may not have the right to have a bank account; women may have less access to mobile phones; marginalised groups may have difficulties in accessing documentation necessary for phone ownership or establishing accounts;
– expose people to risks; for instance delivery cash in envelope in unsafe environment

BENEFICIARY PREFERENCES AND DIGNITY

The opinion and preference of the beneficiaries are very important for ECHO and its partners and must be taken into account in all interventions. Different groups, in different locations, at different times of year, may have different preferences. Some group may prefer a transfer modality while other group prefer another one. The same beneficiaries may have different preference in function of the period of the year: some people might prefer food in the hungry season, agricultural inputs at planting time, and cash after the harvest.

The preference for a modality vs. another may not be obvious and be associated to hidden social dynamics that have to be dig out by the implementing agency in order to choose the most appropriate response. Such preferences MUST be assessed through consultations with the beneficiaries and must be taken into account in any action funded by ECHO. This is particularly important also as far as beneficiaries’ dignity is concerned. To choose with them and to make them active part of a process is crucial.

The right to food is not the right to be fed, but primarily a right to feed oneself in dignity

(FAO 2005)

COST EFFICIENCY AND EFFECTIVENESS

Cost efficiency and effectiveness of a transfer modality have always to be taken into consideration in the developing a response option.

Where possible, the cost-efficiency of an alternative response should be compared on the basis of the desired project outcome.

For example, if the objective of the project is to improve food access, the comparison between response options should be based on the cost of delivering a specific quality and quantity through in-kind food distributions compared to delivering sufficient cash value to purchase an equivalent quantity and quality on local food markets, including the cost of different delivery mechanisms.

See more: decision tree use.

 

TARGETING

A variety of targeting mechanisms can be used. The choice of the methodology will be determined by the context and the nature of the crisis. In an emergency context, timeliness may prevail over efficiency. In a protracted crisis scenario, more elaborated, in-depth methods will be preferred.

Where an initial geographic targeting process will be followed by a household level targeting process using community-based methods, demographic, socio-economic criteria, selftargeting mechanisms or a combination of these approaches. Verification exercises, including home visits during implementation, are regarded as crucial to effective targeting.

Check here for more information.

SECURITY CHALLENGE AND CORRUPTION

For all modalities important pre-conditions must be fulfilled, including assessments to consider the security, protection and corruption implications of transporting, handling and distributing large quantities of cash.
Some of the more innovative distribution systems may be used to mitigate risks of corruption and security for the agency involved in distributions. Implementing partners must therefore carefully assess and select the most secure and effective transfer modality and delivery mechanism to avoid risk of related beneficiaries protection and corruption.

Cash can be easier to hide though and may be easier to distribute discreetly and thus could turn out to be a safer modality as compared with more visible commodities.  For all transfer modalities the partner must monitor security and corruption during the implementation of the action and define the circumstances that would justify a switch to in-kind or cash distributions as appropriate.

HOST GOVERNMENT POLICIES

State actors, local authorities and development actors should be invited to take part, whenever is possible, in the process to identify the best transfer modality and delivery mechanism including the amounts and frequency of the transfers to the beneficiaries.

The choice of the transfer modality by a partner of ECHO must take into diligent account local legislation and local policies.

Whenever possible and depending on the specific circumstances, an action funded by ECHO should demonstrate that the existing social protection and / or social safety nets are clearly understood and consider if it is feasible to use them as a way or channel to reach out the most vulnerable beneficiaries. However this should not prejudice the need to act to address the urgent humanitarian needs of the affected population on the most rapid way as possible.

Preparedness actions prior a crisis and aimed to be ready to use government social transfer system in place for humanitarian transfer may therefore put an implementing partner in a most favourable condition to receive funds from ECHO in some contexts.

GENDER SPECIFIC RISKS AND POWER RELATIONS

Recognising the different needs, capacities and roles of women, girls, boys and men, the EU and its Member States will systematically seek to mainstream gender considerations within humanitarian food-needs assessments, in the design of humanitarian food assistance responses, and in analysing their impact.

Intra-household roles and relations must be considered. The decision on who to distribute to within the household should take into account:
– the household dynamics,
– the different roles each gender plays,
– the objective of the programme,
– the potential impact this may have on how the cash is spent.
Empowering women through a cash distribution can create potential risks or have potential benefits, which should be monitored and mitigated.
More information can be found in the specific topic.

NECESSARY SKILLS AND CAPACITY OF THE ORGANISATION

For implementing a Cash and Vouchers program adequately, the partner organisation should have some basic skills.
In-house knowledge of cash and/or voucher programs, and ability to work across function and sector to ensure high-quality market-based program delivery are essential.
Knowledge of new approaches for delivering cash effectively should be always up to date. This can be done through constant update of the staff, and through capturing lessons learned in the application of cash or vouchers activities.

Multi-purpose cash-based assistance

Multi-purpose cash-based assistance can be defined as a transfer (either delivered in several tranches regular or as an ad-hoc payment) corresponding to the amount of money that a household needs to cover, fully or partially, their basic needs that the local market and available services are able to meet appropriately and effectively.

Multi-purpose transfers demand greater coordination between humanitarian actors and donors to assess needs and to translate this into a single monetary value, the Minimum Expenditure Basket (MEB). Realistically, humanitarian assistance will contribute to this figure. Beneficiaries will be faced with the need to prioritise how best to use the assistance received so as to ensure that their basic needs are covered.
In June 2015 the Council of the EU adopted Conclusions on multi-purpose cash-based humanitarian assistance recognising this type of aid as an efficient and effective response to humanitarian needs. This is a major step by the EU Member States which makes EU humanitarian aid more people-centered. The Council has reaffirmed its endorsement of the ten Common Principles for Multi-Purpose Cash-based assistance and invited the EU and its Member States, as well as their humanitarian partners, to take the principles into account in designing and implementing responses to humanitarian crises.

10 COMMON PRINCIPLES FOR MULTI-PURPOSE CASH-BASED ASSISTANCE TO RESPOND TO HUMANITARIAN NEEDS
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Multi-Purpose Cash Transfer Video

Decision tree to support response analysis

Available on the Thematic Policy Document No. 3 – Cash and Vouchers: Increasing efficiency and effectiveness across all sectors

Mandatory information to be provided in a proposal to ECHO

As stated in Article 11 of the General Conditions, where the implementation of the Action requires giving financial support to beneficiaries, the Humanitarian Organisation shall provide the following information in their proposal:

(i) the maximum amount per beneficiary;
(ii) the criteria for determining the exact amount;
(iii) the purpose;
(iv) the definition of the persons or categories of persons receiving it;
(v) the criteria for giving;
(vi) if conditional or not, and if yes the reasons and the types of activities requested to be done by the beneficiary;
(vii) appropriate monitoring and supervision mechanisms.

The Cash Atlas, developed by CaLP with ECHO and other donors support, is an interactive mapping tool that aims to visually represent the use of cash transfer programmes during emergencies across the globe.
ECHO strongly encourages its partners to use this Atlas and to regularly update its database with the actions funded by the European Commission.

For in-kind food assistance, the Commission is a leading advocate for local procurement, based on the need to reduce costs, limit transportation delays and prevent market distortions. Importation of excessive quantities of in-kind food aid can have a deflationary effect on local food prices, to the detriment of local producers.

This also to provide economic opportunities for small farmers in countries where purchases are made.

However, the operational challenges (e.g. the urgency and speed with which bulk purchases need to be made) and risks (e.g. of raising the expectation of long-term demand on the back of a short-term operation) need to be carefully managed to avoid inflationary impacts and disrupting the development of efficient local markets.

While procuring food in an ECHO funded Action, specific requirements to ensure appropriate quality are listed in Annex 3 of the FPA.

Accountability and Complaint mechanism

Beneficiaries humanitarian assistance are exposed to the risk of having entitlement reduced/taken (kick-backs, forced or “voluntary” sharing, harassment, larceny and violence). While risk can be reduced in all phases of the action, a complaint mechanism is an essential element to reduce abuses, rectify targeting errors and spot frauds.

Complaint mechanisms should have SOPs and designated responsibilities among staff to classify and pursue cases, whistleblowing and privacy policies; Awareness is particularly important; too often beneficiaries are not informed of the existence of the mechanisms.
Complaint mechanisms should be distinct from a “customer service” which is designed to handle forgotten PINs, wrong spelling of names…. not frauds and abuses.
To reduce conflict of interests, partners may opt to have the complaint mechanism handled by their accountability/monitoring department, separate from operations. Nevertheless, it is good practice to outsource the complaint mechanisms to specialized institutions (monitoring, audit).

Regarding GMOs (Genetically Modified Organisms), and in support of the “do no harm” principle, humanitarian food assistance partners are expected to safeguard the interests of their beneficiaries in the selection of food commodities and agricultural inputs (concerning safety, appropriateness and effectiveness), whilst also conforming with the relevant national policies and legislation in the country of operation.

Some practical examples on how to use cash and vouchers.
The Cash Learning Partnership (CaLP) is a global partnership of humanitarian actors engaged in policy, practice and research within cash transfer programming. To know more please check information here. CaLP is supported, among other donors, by DG ECHO especially through the Enhanced Response Capacity program.             The World Food Program developed an initiative called Cash for Change, funded by ECHO through two grants under the ERC funding. To facilitate the appropriate deployment of scalable cash-and-voucher transfers across WFPs humanitarian operations, the program developed training material, equipped internal training teams, developed standard operating procedures and updated WFP manual. The Cash for Change largely contributed to the increasing use of Cash Based Transfers from 3% in 2010 to 27% in 2014.

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EUROPEAN CIVIL PROTECTION AND HUMANITARIAN AID OPERATIONS

TOPIC 3\

Trends

TOPIC 4\

HFA overview

TOPIC 8\

HFA toolbox

TOPIC 10\

Targeting

TOPIC 14\

Gender and HFA

TOPIC 17\

Coordination

TOPIC 18\

LEGS

TOPIC 20\

Food utilisation

TOPIC 21\

IPC

TOPIC 22\

Market Assesment

TOPIC 23\

HFA Indicators