Sometimes Cash is the Best Cure for Hunger

Sometimes humanitarians believe that food shouldn't be given to refugees who are starving in the wake of wars and natural disasters. Doing so, critics say, makes beneficiaries dependent on handouts and lowers the market price of food in a community, which in turn hurts local farmers and punishes a community's economy.

Many humanitarian organizations—including Action Against Hunger—are increasingly in agreement. Under certain circumstances, many aid groups now believe, the optimal solution to crises of hunger involves giving cash rather than food to needy beneficiaries.

Cash as Salaries

Money can be given outright, but it can also be distributed in other ways. For example, it can be paid as salaries for work programs created by aid organizations, including projects that benefit entire communities, such as rehabilitating water sources or building roads that facilitate bringing food to markets. This approach, of course, presumes that beneficiaries are sufficiently robust and healthy for the work demanded of them; the most vulnerable populations may not be able to benefit from cash-for-work programs. Also, salaries should be set slightly below local rates to prevent disruption of the community's normal job structure.

Cash as Vouchers

Another alternative distributes money in the form of vouchers that define the goods for which the vouchers can be exchanged. This allows an aid group to construct its cash-distribution program to aid the entire community more precisely.

Cash Distribution in the Community

If a community has food available locally, cash distributions flow back and forth among the residents when they shop, stimulating the local economy while empowering spenders who choose which foods to buy and in what quantities. By the same token, beneficiaries may opt to spend their cash on seeds or tools to enhance their ability to support themselves, similarly enhancing their community's cash flow. Equally important, aid organizations find that bringing currency into a community is a lot cheaper than importing tons of rice and flour.

When Cash is Harmful

The ease with which cash can be diverted—to bribe corrupt officials, say, or to buy luxuries, drugs, or weapons—is little different from food distributions, which can be bartered for the same purposes. In general, cash handouts are harmful only when a community lacks sufficient marketable resources. In that case, cash distributions can cause price inflation. Consequently, before money is doled out, aid organizations must carefully assess whether local markets can absorb the largess.

Because cash allows beneficiaries to control spending, their choices may not match the paternalistic vision that an aid organization had in mind when it set up the program. Organizations considering cash distributions must trust that recipients' preferences will be appropriate for the beneficiaries' true needs as distinct from the imagined needs that donors projected in advance. Donors, in short, must value the decisions made by populations whom the organizations wish to aid and to understand that recovery is usually more sustainable if it is controlled by local populations rather than imposed by outsiders.

To date, Action Against Hunger has successfully instituted cash-for-work programs in such countries as Afghanistan, Haiti, Indonesia, Mongolia, and Somalia, and we launched a voucher program in Myanmar. We've been so encouraged by the results that we expect to duplicate these programs elsewhere.