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Cash or Cows?

By Pierre Ferrari
Source:  MD Magazine

The importance of a multifaceted approach to development.

In a world where 1.2 billion people live on less than $1.25 a day and 842 million are undernourished, all efforts to help the poor and hungry should be considered and pursued if found valuable. There will never be a single solution to end hunger and poverty. The underlying challenges are multifaceted, and the interventions must create long-term systemic change. As president and CEO of Heifer International, I have witnessed how robust community development work is a critical component to ending extreme poverty and hunger.

Some may ask: “Why give cows, seeds, training and so on? Why not just give cash?” A new model of unconditional cash transfers has been developed, and it seems straightforward enough: individual donors give cash to an organization, which passes the cash along to people in a low-income country, who can then spend the funds however needed. While there is certainly a time and a place for direct, often conditional, cash transfers, I do not believe we will soon see a time where simply giving cash to impoverished people will be the primary approach to ending poverty.

Cash transfers, both conditional and unconditional, are not new; they have historically been provided by country-level governments. They have been shown to improve incomes for beneficiaries. Cash can help an individual start a business, send children to school, pay for a new roof. Studies examining these models show that the majority of the cash is spent on consumable goods like food and health care. These are unquestionably important needs to be met. But the approach is far from providing a sustainable exit out of poverty, because it does not adequately pave the road to self-reliance. While purporting to be the more efficient use of donor dollars, the question remains: who will continue to fund the massive cash flows that would be required to adequately reach the billion people living in poverty?

The success of cash transfers depends on the right conditions and favorable external environments. The majority of the world’s poor live in rural areas, where infrastructure like roads may be nonexistent. Access to financial institutions, mobile devices or other mechanisms for receiving a cash transfer is a significant assumption. One has to wonder how many of these conditions and favorable environments were the results of work already done by development organizations.

Another important point to consider is that economic measures alone do not fully represent social progress. Development practitioners have established indices to evaluate the success in improving overall well-being, and accepted societal benchmarks play a role. The ability of a society to meet the basic needs of its citizens, to establish durable systems that allow citizens and communities to improve and sustain the quality of their lives, and create the means for all individuals to reach their full potential—that is the best definition of social progress. Building social capital unlocks potential in families, communities and economies through a commitment to shared responsibility and resources.

A problem I see with the cash only approach is the belief that a single intervention—disbursement of cash without training, mobilization and so on—is enough to create lasting impact. Development is a dynamic discipline; with learning from evaluation and research, approaches to development change over time. Development efforts that use multiple levels of intervention are refined and better positioned to address the problems of poverty and root causes like social inequities, gender discrimination, conflict and lack of access to land and other natural resources.

A recent World Bank study stated that this year migrant workers will send $414 billion home to developing countries. That is almost four times as much as foreign aid from developing nations. Remittances are essentially unconditional cash transfers, but from family rather than donors. Some countries’ economies depend heavily on this infusion of cash; in 2013, 48% of Tajikistan’s GDP will have come from money sent home from abroad. These infusions of cash—sometimes two to three times the local wages—certainly increase consumption in the communities receiving the remittances. But the unintended consequences of this system cannot be ignored: broken families, dependency, fewer local farmers and other skilled workers, increased reliance on imported goods. Less diverse, weak economies that rely on cash from citizens who have left to find work elsewhere is not a sustainable solution to poverty.

Easing hunger and poverty is not enough. We must end it. Communities must be able to bounce back in the face of disaster, and not be pushed back into the poverty from which they emerged. Broad social mobilization, training and the formation of cooperative groups leave behind resilient communities. Changes in fundamental values, especially an increased sense of loyalty to the community (rather than just to oneself and one’s family) and increased collective self-reliance are fostered over time and through robust community development efforts. Single, unconditional cash donations simply do not do this.

A study conducted by the Overseas Development Institute and partners found that while cash transfers positively impacted household poverty, the research recommended improvements in program design, notably social assistance packages including health care, basic services and income-generating activities. It also recommended greater coordination with diverse service providers. These findings indicate that direct cash giving programs cannot operate in a vacuum.

We have two weighty challenges in front of us: achieve zero extreme poverty by 2030, and establish sustainable food systems that can feed 9 billion people by 2050. Cash alone cannot do this. Training in environmentally friendly agriculture, improving the quality of the world’s livestock, developing social capital, improving gender equality and ensuring better nutrition are proven components of development that creates lasting change. 

subjects Charity | Multilateral Aid | Poverty and Hunger | Accountability | Development

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