The Nordic Africa Institute


Cash transfers in development aid – not a silver bullet

Standing woman receives a cash transfer payment at a table where two men are sitting

Freetown, Sierra Leone, June 2015. Demoh Contel receives a cash transfer payment from Patrick Lamboi. Photo: Dominic Chavez, World Bank.

Date • 31 Jan 2023

Authorities and donor countries should pay more attention to universal aid schemes, and less to targeted cash transfers, which only benefit a few people.

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By Marion Ouma, postdoctoral researcher, The Nordic Africa Institute

Over the past two decades governments in Africa have adopted cash transfers, assistance in the form of money, as an important instrument in their development plans, both for humanitarian emergencies and for longer-term social policy programmes. The trend is largely driven by international development aid which is increasingly favouring cash transfers over traditional forms of self-help support. Promoters of cash transfers argue that they provide the recipients with greater freedom of choice and the dignity to determine and get what they need. They enable households to buy food and other basic goods and services. According to the promoters, cash transfers improve human welfare and access to health, education, and better nutrition.

On the other hand, critics of cash transfers question the suitability of this model of social provision, particularly in poor nations where the basic services are not fully developed. Based on my own research, I have landed in three main arguments against cash transfers as a key instrument in development aid.

First, cash transfers count as a part of social protection, which in turn is a subset of the social policy area. Other aspects included in the social policy area are health, education, housing and even in the case of some developing countries land reforms. However, the current promotion of cash transfer fails to place the instrument within this wider discussion of social policy. Instead, cash transfers have been valorised sometimes even at the expense of other forms of social policy. Following the mantra ‘Just Give Money to the Poor”, cash transfers are promoted as the solution to most, if not all, social problems in the global south, including low school enrolment, maternal health, teenage pregnancy, climate change, unemployment – the list is endless. This promotion of cash transfers as a silver bullet often lacks context and is a misdiagnosis. Cash transfers cannot be the solution to all problems and, in my view, if not properly placed within the wider national social policy structure, is merely an attempt to offer quick-fixes to complex problems.

Second, most cash transfers are targeted, meaning that they in practice only reach small groups of the population. Only a small number receive the cash benefits due to the strict targeting measures. Targeting benefits to a few people in countries with high poverty rates is expensive and takes up finances that governments could use for other services. Equally, the amounts paid through cash transfers are too small and hardly cover the basic needs of the households. With most monthly provisions ranging from USD 5 to 15, poor households can barely meet their food requirements and still have to rely on other means to cater for their health and education needs. Due to these inadequacies of cash transfers, the benefits can barely ameliorate household difficulties.

Lastly, the targeting of cash transfers derives from neoliberal ideas which promote individual rather than collective provisioning. Prioritising targeted cash transfers over for instance universal health care investments, atomizes societies and erodes the solidarity necessary for building social contracts.

Whereas the use of cash transfers may be a better alternative in humanitarian and emergency settings, they remain unsuitable and inadequate as the key instrument in tackling the problems of poverty, unemployment and other long-term challenges that poor nations experience. Instead of investing in cash transfers, governments and international donors should pay greater attention to broader universal provisions in healthcare, education and land reforms.

marion ouma
postdoctoral researcher and social policy specialist, the Nordic Africa Institute


This text was also published in Norwegian translation; Kontanter er ingen kvikkfiks External link, opens in new window. in Bistandsaktuelt, a Norwegian journal on development aid and international development.