The Influence of Cash Assistance on Disaster Response and the Humanitarian System

by Pablo V. Holm-Nielsen

PhD fellow from KU and Global Disaster Management Delegate at the Danish Red Cross

Pablo V. Holm-Nielsen defended his PhD thesis “The Influence of Cash Assistance on Disaster Response and the Humanitarian System" at the University of Copenhagen, financed by the Danish Red Cross. The thesis explored how Cash and Voucher Assistance (CVA) has revolutionized the global humanitarian sector and how the humanitarian organizations need to further adapt due to the technological advancements, sector transformations, and evolving disaster dynamics.

The thesis findings show that CVA has created systemic shifts within humanitarian organizations, impacting coordination, power dynamics, accountability, and localization efforts. CVA proves to be a clear example of the need for effective change management in the humanitarian sector, particularly in adopting innovative technologies. The multipurpose nature of CVA challenges traditional sectoral boundaries, creating a further struggle for coordination. CVA and particularly Multi-Purpose Cash Grants (MPCG) does not fit well in the cluster system since it does not differentiate between sectors.

Furthermore, the role of the private sector in CVA implementation remains ambiguous, with fintech evolution expecting to reshape financial aid channels. As CVA gains prominence, the humanitarian landscape will diversify, demanding adaptive responses from organizations and a commitment to humanitarian principles. All ingredients for a paradigm shift are present, however traditional humanitarian organizations are not ready for it.

Change, transformation and disruption due to CVA

The shift towards CVA in disaster response has significantly impacted humanitarian organizations and the humanitarian system, bringing about change, transformation, and disruption. CVA is considered a disruptor that has compelled behavioural changes within the humanitarian sector, resembling a discontinuous, emergent, and modular transformation. CVA's influence extends beyond organizational structures to the very approach of humanitarian work. While initial obstacles such as financial inclusion have been addressed, CVA continues to evolve, shaping the future of humanitarian aid delivery.

Within organizations, CVA needed the creation of new roles and skill sets, challenging traditional procurement procedures and starting new activities such as market assessments. However, managing this change proved uneven across organizations, often reactive and organic. Yet, the rapid adoption of CVA highlighted the adaptability of smaller organizations and emphasized the importance of leadership and donor support. Moreover, CVA brought about improvements in accountability and quality control, fostering greater transparency and empowering affected communities. It also facilitated a shift towards more granular, flexible aid distribution, while exposing and addressing duplicity in aid efforts.

However, despite these positive shifts, challenges remain in addressing power imbalances, enhancing coordination, and aligning funding streams with actual needs. The future development of CVA within the humanitarian system requires addressing these issues, sharing the lessons learned to drive further transformation and efficiency. Ultimately, CVA represents a paradigm shift in humanitarian aid delivery, potentially supporting a more responsive and inclusive system.

Drivers for further change and transformation

Several key drivers contribute to change in the humanitarian system: the increasing use of MPCG, localization efforts, and the influence of financial technology (fintech).

MPCGs challenge traditional aid approaches by empowering recipients to allocate funds based on their priorities rather than predefined mandates. While MPCG accelerate recovery, they also challenge traditional sector-based organizations and reporting. The effectiveness of MPCG may monopolize resources, diverting attention from specific sectors. Despite their benefits, MPCGs intensify competition among humanitarian agencies and organizations.

Localization emphasizes empowering local actors in aid delivery. While MPCGs theoretically support localization by fostering community decision-making, their implementation often overlooks local nuances, undermining true localization. Crucial to localization is the willingness of international organizations to give up power and influence and the creation of networks of local organizations led by national professionals.

Fintech introduces novel financial tools that challenge traditional aid mechanisms. As financial transactions become increasingly digitized, humanitarian organizations must collaborate with the private sector to adapt. Long-term partnerships with the private sector are essential for developing context-specific solutions, necessitating a shift in procurement practices. However, implementing new technology requires overcoming organizational learning barriers and fostering a culture of innovation and collaboration. The role of the private sector in disaster response has not been defined despite their engagement being inevitable.

The future of humanitarian transformation influenced by CVA

The future of humanitarian aid influenced by CVA, is intricately tied to the evolving landscape of disaster response and technological advancements. CVA, now a common approach covering 20% of humanitarian spending, is seen as an established modality. However, it's crucial to recognize that some humanitarian activities won't transition to cash assistance, necessitating specialized organizations. Despite this, CVA has undergone stages of innovation and currently sits in a phase of sustained change, poised for further evolution due to both internal and external factors.

Humanitarian professionals often underestimate the ongoing transformation. The extent of CVA's increase will shape future transformations, influenced by the size of humanitarian aid and the involvement of new actors and new delivery channels.

Effective change management procedures are crucial for adaptation, but the humanitarian sector, being generally resistant to change, faces challenges in this regard. Furthermore, the humanitarian system itself needs redefinition, with CVA potentially offering solutions to coordination, power dynamics and inclusivity issues.

The humanitarian organizations that will succeed in the future humanitarian system will likely be those who

• Are prepared for a fintech disruption by establishing change management as part of their adaptability to the changing environment
• Work on the individual motivators or their staff and management that should incentivise them to give up power and support the future of localization
• Define their role and relevance in the humanitarian activities that will not be carried out by CVA, strengthening their specialization if necessary
• Review their identity as members of the transformation of the humanitarian system and identify both the internal and external requirements that will influence their ways of working.
• Establish long-term relationships with the private sector where their role and identity demand it to further develop their CVA and data management capabilities in innovative ways
• Identify which skillsets and profiles will be necessary for carrying out all of the above

References

The PhD thesis can be found here in the CaLP website. The thesis is based on 4 studies, of which 3 are published in peer reviewed scientific journals.

“The transformative effect of cash and voucher assistance experienced by humanitarian organizations” (available here),

“The stagnation of innovation in humanitarian cash assistance” (available here),

“The influence of cash assistance on the localisation agenda in Kenya’s humanitarian sector” (available here) and

“The influence of cash assistance on the future of the humanitarian system”.