Development experts mull cash transfers amid shrinking aid budgets

Telegraph

12-05-2025

As aid budgets are slashed across the world, some experts believe that big savings could be made by transferring cash directly to those in need, rather than going through charities and NGOs.
Tom Fletcher, the Secretary General of the United Nations coordinating body (Ocha), has put cash programming at the heart of his vision to reform the aid system. He recently said that a shift towards cash would 'enabl[e] the responsible transition out of areas of work that we can no longer sustain'.
But are cash transfers – where money is sent directly to those affected via mobile phone – really the answer to saving more lives?
The idea is simple enough: send donor money directly to those in need and you will save millions by cutting out the aid worker middle man. Better still, the money will be better spent because recipients are best placed to understand their own needs.
But what's the reality? Cash transfers have long been experimented with by the aid community and they have shown mixed results.
There is solid evidence that cash transfers can be an efficient and effective way to distribute emergency aid.
Cash transfers can also remove the need to expose aid workers to dangerous environments. Last year was the deadliest year on record for humanitarian personnel, with at least 334 aid workers killed in 2024, according to the UN.
Cash transfers are even being used to mitigate climate disasters. In Nigeria, cash is remotely sent to vulnerable communities ahead of the flood season, enabling them to take preemptive measures like early harvesting, stockpiling food and moving livestock.
The Calp network – a group of global organisations focussed on humanitarian cash and voucher assistance – accepts that cash programming is not always feasible.
Cash transfers only work if there is a functioning market. Pumping money into an area with a critical shortage of food and water will not help.
As Danny Sriskandarajah, former head of Oxfam GB, puts it: 'The financial side of development is only ever part of the problem.'
In Gaza, for example, Israel's aid blockage has sparked rampant inflation – a $100 cash transfer designed to sustain a family for a few weeks would now only buy a single bag of flour.
'The challenge with the cash led model is that if it's not supported by effective investments in civic institutions and public bodies, then you're not necessarily going to get the transformation that we're all after,' added Mr Sriskandarajah.
For instance, Ukraine recently saw the largest and fastest cash programming scale-up in history: more than $1.8 billion of cash and voucher assistance was rolled out in the first three months of the war.
It was possible because aid agencies piggybacked on existing government systems to reach the most vulnerable.
But in places like Sudan, where the civil war has decimated social order in many regions, those systems no longer exist.
Moreover, cash transfers rely heavily on digital communication.
Global digital coverage now stands at around 92 per cent but some 2.6 billion people – a third of the world's population – still do not have internet access.
There is also a serious risk of cash transfers being stolen or diverted. In many countries across West Africa, such as Chad and Burkina Faso, national governments are highly sceptical about cash programming for fear it could end up fuelling crime, including kidnappings and weapons purchases.
'We have to be honest and say there's never a context where there isn't a risk of loss and diversion. Particularly in these complicated conflict economies, cash will end up in the wrong hands,' said Cate Turton, director of the Calp network.
'It's not a magic solution. But it's the best solution we've got for reaching really vulnerable people in difficult places and empowering them to make sensible choices.'
As rapidly shrinking aid budgets force agencies to slim down, some are calling for the use of direct cash payments to be stepped up. They see cash as a way to make limited funds go further, but are they right?
This isn't the first time that there have been calls for cash transfers to be made greater use of.
In 2016, the Grand Bargain – an agreement between humanitarian organisations and donors to make the delivery of aid more efficient – included a commitment to increase cash programming.
By 2022, the volume of humanitarian cash assistance doubled from 10 per cent to about 20 per cent. However, it has since flatlined. Experts believe that, had momentum continued, cash assistance could easily make up 30 to 50 per cent of aid today.
Rory Stewart, former UK Secretary of State for International Development, said that now is the time to put cash back on the table.
'During the era of ever-expanding aid budgets, everyone could keep doing what they were doing, even if it wasn't working, sprinkling in more cost-effective aid at the margins,' he told The Telegraph.
'The Grand Bargain made all the right noises, but vested interests prevailed. Now that funding's been slashed, there is no longer room for anything less than the most impactful aid.'
Mr Stewart is a senior adviser to Give Directly, an American NGO specialising in cash transfers. It is one of the agencies spearheading cash transfers in crisis zones.
In eastern Democratic Republic of Congo (DRC), where over 500,000 people have been recently displaced by violent fighting, GiveDirectly was able to tap into existing and common mobile infrastructure to reach the most vulnerable.
It used cell tower data and satellite-enabled remote targeting to identify and wire cash to displaced families on the run, allowing them to meet their immediate needs such as food, water, and shelter, without sending aid workers into a volatile environment.
'The uncomfortable truth is that much of traditional aid delivery has been driven by institutions trying to justify their own existence – hiring more staff to run more complex programmes,' said Mr Stewart.
'Cash challenges that model. It asks: why not just trust people? If budgets are shrinking, we must focus on the most efficient, effective, and dignified forms of assistance. Cash is all three.'
But it is not all plain sailing. In 2023, GiveDirectly reported that the group's own staff on the ground stole at least $900,000 over six months from one of its projects in the DRC.
Ultimately, however, it's not the technology which will determine the success or otherwise of cash transfer systems.
Even if they become universally accepted as the most effective way to distribute aid, they will not function without cash to feed them. The real question the humanitarian system faces is: where will the money come from?
'The fundamental challenge facing the system today is that there's tens of billions being pulled out of aid budgets. Being more efficient isn't going to make up for that,' said Mr Sriskandaraja.