What Cash Payments Can’t Do: Lessons from #BringBackOurGirls

May 14, 2014

I have had the privilege of living and working in West Africa for the past 15 years. In 2007, I spent several months in northern Nigeria, interviewing grain traders in cross-border markets. These markets were some of my favorite places in West Africa—bustling, chaotic, open-air markets that brought together hundreds of farmers, traders and consumers, all from different villages and cultures, to exchange, talk and trade. I enjoyed walking through those markets, observing, negotiating and asking questions.

Seven years later, things have changed considerably. Northern Nigeria has transformed from a sleepy, somewhat insecure region to a place where ordinary Nigerian citizens are living in fear. 300 school girls were kidnapped on April 15th and have yet to be found. Last week, over 300 people were killed in an open air market in Gamboru, near the Cameroonian border.

Which brings me to cash. 

Cash transfers can be an effective way to address poverty. I’ve personally witnessed the power of cash to help some of the poorest people on earth improve their lives and livelihoods.

But cash transfers have important limits, and as the situation in Northern Nigeria has worsened, one of them has been weighing on me.

Last week I was onstage at CGD for a fun debate on the role of cash transfers in development aid. Paul Niehaus presented his forceful case, made with CGD’s own Chris Blattman, for cash transfers as a transparent benchmark for aid, the way index funds are a transparent benchmark for investments. I sat on a panel arguing for the increased use of cash transfers, next to Jishnu Das of the World Bank and Sudhanshu Handa of UNICEF. 

The three of us argued that cash transfers have important advantages to in-kind transfers, for numerous reasons. Cash gives beneficiaries more choice and flexibility as compared with in-kind transfers. And it is often cheaper to deliver, especially with the advent of mobile money transfers, as we found in Niger. Cash transfer recipients do not often spend their transfers on “temptation goods”, as is feared. That, and a growing body of evidence on the impacts of (unconditional) cash transfers:  My own research in Niger and DRC has shown that cash can help households to successfully cope with food crises and conflict.  Our (tongue-in-cheek) conclusion: Cash is king. 

Our distinguished opposing panel offered numerous arguments on the limitations of cash, the most convincing of which was that cash transfers may have limited use in providing public goods that are crucial to development, such as clinics, schools or roads. What no one mentioned, however, and one that is increasingly relevant in the context of the situation in northern Nigeria, is a public good that we all take for granted: security.

Insecurity adds an additional constraint to a region already fraught with development challenges. If your child is at risk of being kidnapped (or worse) at school, then you no longer send your child to school. If you visit a market and are threatened by gunman, then you no longer visit those markets. Even if you do visit the market, it’s likely that you’ll find fewer traders there, as well as lower supplies and higher prices. If you’re a farmer, it will be harder to sell your output, harder to buy basic goods, and the same dollar (or Naira) won’t stretch as far. At the national and international level, international agencies stop working in those areas and governmental services are no longer provided, further excluding these regions.  Unless a village can survive on everything it produces, development halts.

Can cash transfers help in such a context? Maybe. To be sure, they can increase households’ incomes—but that cash is only useful if it won’t be stolen, if there is a place to spend it and if goods are available on local markets or kiosks. But it’s unlikely that cash transfers would help with the underlying, and more fundamental, constraint to development: security.  There are plenty of examples of the private provision of local public goods, like the community security groups that have arisen in northern Uganda and Nigeria, among other places. But it is doubtful that local security forces would be able to fend off a well-financed, well-armed group such as Boko Haram.

In the absence of such security, no meaningful development can take place. And that is a development problem that cash transfers alone are not likely to solve.  


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.