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A Better Way to Deliver Aid

CGAP | Dr. William Brindley & Douglas Sabo

11/26/2012

Whether providing relief to farmers in times of drought, delivering resources to rebuild after an earthquake or meeting basic health or education needs, providing timely and flexible support is critical for non-profit organizations to operate effectively.

To increase the speed of delivery and put decision-making power into the hands of beneficiaries, the international aid community has made a concerted effort over the last decade to transition away from the distribution of in-kind goods to the direct transfer of cash payments to assist those in need – a transition that has been accompanied by innovation in the delivery of payments.

For example, after the 2010 earthquake in Haiti, international humanitarian organization Mercy Corps used mobile phones to provide money to Haitians to buy basic food staples. Just a month later, the Chilean Red Cross provided money using TarjetaRED debit cards to 8,400 Chilean families to purchase construction materials to rebuild their homes after an 8.8 magnitude quake. And in response to the devastating flooding in Pakistan later that summer, the Pakistan government distributed money to over 2 million families using the Visa Watan prepaid card.

In the case of Haiti, a CGAP study found that compared to cash, electronic vouchers used by humanitarian groups eliminated three days from the delivery of aid, with mobile money distribution cutting the delivery time from 12 to five days.

This transition is not limited to emergency relief situations but also extends to development programs to support advancements in health, education, food security and overall poverty alleviation. For example, Juhudi Kilimo, a microfinance institution based in Nairobi used M-Pesa to disburse and collect microloan payments via cellphones. This shift, according to a report by USAID, resulted in an over 50% cost savings for clients. In addition, clients, and in particular women no longer faced the risk of carrying lump sums of cash between the microfinance office and their businesses.

Turning Steel into Mobile Money.Photo Credit: Anjali Banthia

However, the vast majority of aid and development disbursements are still made using physical cash. While this approach can be more effective than in-kind donations, distribution of physical cash carries significant overhead costs, opens the door to corruption and security concerns, and misses opportunities to increase financial inclusion.

For beneficiaries, receiving physical cash does little to connect them to a broader network of formal financial services.

A recent study commissioned by the Cash Learning Partnership, a consortium of humanitarian organizations focused on the delivery of money in times of crisis, noted a growing recognition by humanitarian organizations and others of the benefits of electronic payment systems, including improved security for staff and recipients, reduced fraud and better control of expenditures.

This growing recognition among nongovernmental organizations (NGOs), governments and the private sector is evident in the recently launched Better Than Cash Alliance, an organization supporting governments and organizations making the transition to electronic payments.

Transitioning aid and development payments from cash to electronic can produce lasting benefits for people – including dignity for the recipients, greater financial inclusion and faster local economic growth.

By leveraging new technologies that enable this transition, the development community can improve the efficiency, transparency and overall impact of its programs.

To encourage more innovative thinking in the delivery of aid, Visa and NetHope have partnered to invite the NGO community to put its best thinking forward by coming up with programs and projects to modernize the distribution of payments. Through the new Visa Innovation Grants program, Visa is making available $500,000 in grants to humanitarian and development nonprofit organizations to support innovation, implementation and adoption of electronic payments and transfers within their programs and organizations. Applications are being accepted now, and grantees will be announced in early 2013.

We need to unleash better ways to deliver aid. These grants are just one way to spur the innovation needed to continue to bring humanitarian and development aid into the 21st century.

You can read more about the Innovation Grants here.

----------------Dr. William Brindley is the Executive Director and CEO of NetHope and Douglas Sabo is the Head of Corporate Responsibility, Visa Inc.

You can follow them @BillAtNetHope and @dsabo