Crucial insights on the cost-efficiency of different emergency cash-transfer payment mechanisms
We carried out a year-long research project, with support from Concern Worldwide, to explore the factors that determine whether electronic payment mechanisms (such as mobile phones or bank cards) are more cost-efficient than traditional manual distribution mechanisms. This context was delivering cash to vulnerable households in humanitarian contexts such as famines and droughts.
The research question was posed by the Cash Learning Partnership (CaLP), an organisation that recognises the increasing appetite for the use of new technology in the delivery of cash transfers but notes that several barriers – including cost – impede their more widespread take-up. The research draws on case studies of two countries, Kenya and Somalia, analysing the cost-efficiency of seven emergency cash transfer programmes implemented by non-governmental organisations (NGOs) between 2009 and 2013: four using mobile money, one using a smart card and two using a traditional manual distribution method. It shows the administrative cost of delivering the cash transfer, broken down by activity (designing the programme, registering beneficiaries etc.), and identifies the factors that improve or decrease overall cost-efficiency. More broadly, by contributing to the wider debate around value for money, our research has provided an evidence base to support the design of more efficient and effective social protection programmes.
The challenge of improving cost-efficiency is central to the wider debate around value for money in development programming - what matters is not just whether the programme works but how much it costs to run, and whether that money might be better spent on an alternative intervention.
Until now, the body of evidence on the cost of running emergency cash transfer programmes has been limited and often confined to an assessment of their cost when transfers are already being distributed, without taking into account the (sometimes considerable) set-up costs. This research project was established to help fill that evidence gap.
Our team assessed the cost implications of seven emergency cash transfer programmes across Kenya and Somalia. The NGO-implemented programmes were selected to represent a range of distribution methods including traditional manual distribution, mobile money, and smartcards.
We worked with the implementing organisations – Oxfam, Concern Worldwide, and SOS Children’s Villages Kenya – to understand the nature of the programmes implemented and gather evidence on their costs and operations.
Specific activities included:
- undertaking an extensive review of programme documentation, including accounting records and progress reports;
- consulting with programme staff to identify the activities on which expenditure was spent; and
- developing and completing an Excel-based model to analyse the cost-efficiency data.
The team further promoted knowledge transfer by developing a step-by-step guide on the research method to enable other agencies to conduct comparable analyses in the future.
This project has helped improve understanding around the cost-efficiency of different emergency cash-transfer payment mechanisms.
Importantly, our research has highlighted that electronic payment mechanisms are not always more cost-efficient than manual mechanisms. It has also identified a number of key factors that are more critical for determining cost-efficiency, including:
- the state of infrastructure development in the country;
- the attractiveness of participation in the programme for private sector partners; and
- the ability of NGOs to negotiate effectively, for example, by partnering with long-term social assistance programmes.
More broadly, our research provides an important evidence base to support the design and implementation of future cash transfer programmes in emergency contexts.