4. Programme Design

Once preliminary assessments and analyses (Section II above) are complete, CARE staff should adhere to the following process in designing cash transfer programs:

  1. Determine appropriateness of CVA;
  2. Choose CVA modality;
  3. Set grant amounts and delivery frequency;
  4. Choose payment mechanism.

For CVA to be effective and successful, it must suit the context. The decision of using in-kind, cash programming, or a combination of modalities will be based on situational analysis outputs and a comparison of the relative risks and benefits of different transfer modalities (in-kind and cash based), cost-efficiency, and potential effectiveness. This includes timeliness, the skills and capacity necessary to implement cash programming, and their coherence with other aid programs.

To use CVA for emergency projects, the following conditions must be met:

  • Functional and accessible markets:
    • Markets are functioning and integrated;
    • Vendors, especially women traders, have safe physical access to the market with their products;
    • Communities are used to access markets to cover their basic needs;
    • Products are available at regional, local levels or within an acceptable distance;
    • Traders are willing and able to participate;
    • Target group, including women, has physical access to shops/markets and culturally it is acceptable for them to do so;
  • Social acceptance of cash (within the community and by the authorities);
  • An efficient payment mechanism is accessible by all community members and safe for both the community and CARE team members;
  • A team trained in CVA.

Potential advantages and disadvantages of CVA:

 

This decision tree can be used to determine whether CVA fits contextual circumstances:

Below is a table with the potential advantages and disadvantages of each CVA modality, those should be contextualized.

Potential advantages of CVA delivery Potential disadvantages of CVA delivery
Choice and dignity – cash allows recipients to decide what they should spend the money on. This enables people to choose what they most need, and allows for this to vary from person to person Less control from the women – women may be less able to keep control of cash than alternatives such as food. If this challenge is overcome by distributing the cash or the voucher to women, protection risks should be closely monitored.
Cost effectiveness – for CARE and the beneficiaries as logistics costs are lower. Lack of skills – in context where CVA has not been used before, the team may not be fully proficient hence creating delays in the set up of the project. Lack of knowledge can also lead to resistance from the team to use CVA to deliver the project.
Multiplier effects – distributing cash can have knock-on economic benefits for local markets and trade if the money is spent locally, and it may stimulate agricultural production and other areas of livelihoods Risk of inflation – if the market has not been properly assessed or if market monitoring is not done or does not lead to appropriate operational decisions, prices for key goods can rise, negatively impacting both beneficiaries and non beneficiaries.
Avoids disincentive effects – unlike in-kind distribution CVA is unlikely to discourage local trade or production. Security risks – Despite the lack of evidence of CVA being more risky than in-kind, the perception of risks may be higher for beneficiaries and CARE team members.
Enhanced accountability to beneficiaries due to higher scrutiny of CVA. Higher scrutiny of CVA – may increase costs and time spent to set up the project.

 

Limit opportunities for corruption – Grants or vouchers pass through fewer hands than in-kind aid, cutting out the number of intermediaries who have the opportunity to use the resources for private gain. Higher risk of political manipulation – because CVA are popular, they are more prone to be used for political manipulation, especially when the targeting mechanism is not strong or transparent enough.

 

As a general principle, the grant calculation should be based on:

  • Project objective
  • Available resources at household level
  • Cost of goods and services to be covered by the grant
  • Cost of transaction and of transport to access goods/services
  • Price variation and seasonality
  • Targeted population’s preferences for frequency
  • Coordination and coherence with other operations and CARE’s financial capacity

Adjusting grant amount by household size may be considered.

Resources and political feasibility determine the size, frequency, and duration of the scheme. Grants can be used to support existing social protection schemes, and amounts can be calculated collaboratively within cash working groups.

Various tools can be used to determine transfer amounts, and they use similar logic:

  1. Quantify the needs: either through a Minimum Expenditure Basket (MEB), the use of Sphere indicators, the survival line, the poverty line, or the Cost of Diet methodology.
    • When quantifying the needs, it is important to factor in the cost of the item itself but also the cost for the beneficiaries to access this item (transportation fees, storage fees, etc.)
  2. Factor in the household capacity to cover the identified needs either through their own resources or with external aid.
  3. Define the grant amount: the need minus the household capacity.

Wage Amounts:

Employment opportunities created by the project must not entice people away from regular livelihood activities and must not distort the labour market. To ensure these do not happen:

  • Set wages 10-20% below market rates, varying between skilled and unskilled workers
  • Do not vary rate based on gender

Pros and cons of wage options:

  • Payment per unit is based on a clearly measurable output. This can include metrics including number of acres cleared, houses built, volume of debris removed, or kilometres of road rehabilitated.
    • Provides a clear pay unit
    • Wages are output-based, may require substantial oversight to ensure that each worker receives the correct compensation
  • Lump sum payment provides a fixed payment for a pre-determined timeframe. Based on an estimate of the amount of time required to complete a job. A bill of quantities is used to estimate labor/material requirements and the related costs for achieving an intended output.
    • Avoids the possibility that workers will deliberately prolong the work
    • Output-based and may require substantial oversight to ensure that work is completed on schedule
  • Daily wage payment provides flexibility and is often used when activity duration is uncertain.
    • Downside: can stretch out for longer than initially planned, do not necessarily lead to intended achievements

Payment Frequency:

Implementing teams should consider urgency of need, protection risks for beneficiaries when receiving large payment, capacity of payment agent(s), and project objectives. When beneficiaries need cash immediately, payments may be transmitted weekly or even daily at first, then transitioned to a less frequent basis (weekly, every other week, or monthly). When the project aims to support a community with livelihood assets replacement, payment can be made once an appropriate amount is determined.

The decision regarding grant amount and payment frequency is the responsibility of the CARE Project Manager and the Team Leader.

This decision is two-fold:

  • Choosing the payment mechanism or payment agent: bank, post office, mobile phone company, transfer company, cooperatives, traders, direct cash distribution by CARE or its implementing partner.
  • Choosing the payment instrument: direct cash, ATM card, check, wire, mobile phone or voucher. The choice of the instrument will be dictated by the choice of the payment mechanism but some payment agents can offer several instruments (e.g. a bank can offer direct cash, check, ATM card or wire).
Payment Agent Payment Instrument Potential Advantages Potential Disadvantages Appropriate Context
CARE or Implementing Partner Direct cash
  • Quick to initiate
  • Rapid beneficiary access to cash
  • Variable and flexible distribution points
  • No transaction fees
  • High risk to safety of staff and beneficiaries
  • Higher risk of fraud and corruption (or suspicion of either)
  • Labor intensive and time consuming in terms of planning for CARE or partner
  • Long waiting line for beneficiaries
  • Failing banking system and absence of other reliable payment agents.
  • Small scale pilots
  • One off payment
  • While CARE does not encourage this option, there are still cases where the CO has resorted to it
Bank Direct cash
  • Safer than direct payment by CARE or partner
  • Transfer risk of loss to a third party
  • Flexible time to redeem the cash for the beneficiaries
  • Quick, if existing relationship with the bank
  • Not labor intensive for CARE or its partner
  • Solid audit and reconciliation process
  • Access to branches in remote or rural areas may be minimal
  • Functioning banking system
  • Repeated payment

 

Check
  • Safer than direct payment by CARE or partner
  • Transfers risk of loss to a third party
  • Flexible time to redeem the cash for the beneficiaries
  • Strong audit and reconciliation process
  • Access to branches in remote or rural areas may be minimal
  • Long check writing time
  • Thorough check signature process
  • Beneficiaries may be unfamiliar with this mechanism
  • Functioning banking system
  • Repeated payment
  • Small-scale project
Bank account
  • Safer than direct payment by CARE or partner
  • Transfers risk of loss to a third party
  • Flexible time to redeem the cash for the beneficiaries
  • Quick if existing relationship with the bank
  • Increased financial inclusion of beneficiaries
  • Not labor intensive for CARE or its partner
  • Strong audit and reconciliation process
  • Possibility of saving in the bank account
  • Access to branches in remote or rural areas may be minimal
  • Fees associated with opening and operating bank account
  • Beneficiaries may not have the documentation/identification necessary to open a bank account
  • Functioning banking system
  • Repeated payments
  • When complemented with training on financial inclusion
ATM Card
  • Safer than direct payment by CARE or partner
  • Transfers risk of loss to a third party
  • Flexible time to redeem the cash for the beneficiaries
  • Quick if there is an existing relationship with the bank
  • Increased financial inclusion of beneficiaries and usually high acceptance from beneficiaries
  • Not labor intensive for CARE or its partner
  • Solid audit and reconciliation process
  • Possibility of saving on the card
  • Lack of ATMs in remote rural areas
  • Potentially long and expensive set up cost (ATM Card cost)
  • Loss/theft of the ATM Card
  • Urban area with pre-existing ATM system
  • When complemented with training on financial inclusion and use of ATM card
Mobile phone Mobile phone
  • Safe and usually discrete way of transferring cash
  • Transfer risk of loss to a third party
  • Not labor intensive for CARE or its partner
  • Flexible time to redeem the cash for the beneficiaries
  • Possibility of saving in e-wallet
  • Lack of beneficiary access to mobile phone – especially women (or extra costs of mobile phone distribution)
  • Unfamiliarity of the beneficiaries with the mobile money
  • Lack of stable mobile network
  • Potentially long and costly set up (SIM card cost, etc.)
  • Loss/theft of phone or change in mobile number
  • Possible error (sending to the wrong number)
  • No donor visibility
  • Repeated payments
  • Failing banking system or when bank services are more expensive
  • Area with reliable mobile coverage
  • Pre-existing mobile money system
  • When complemented with training on how to use mobile money
Transfer company Direct cash
  • Transfer risk of loss to a third party
  • Flexible time to redeem the cash for the beneficiaries
  • Not labor intensive for CARE or its partner
  • Can already be familiar to beneficiaries (e.g. remittance)
  • Lack of branches in remote rural areas
  • Expensive commissions
  • Rapid set up, but then low capacity to deliver cash to large groups of beneficiaries
  • Repeated payment
  • Failing banking system or when bank services are more expensive
  • Where transfer company are regularly used by beneficiaries
Post office Direct cash
  • Transfer risk of loss to a third party
  • Flexible time to redeem the cash for the beneficiaries
  • Not labor intensive for CARE or its partner
  • Often aligned with government policy
  • Often seen as a public sector service provider, rather than private sector provider
  • Lack of post office in remote rural areas
  • Lack of cash flow
  • Delays due to internal bureaucracy
  • Repeated payments
  • Areas with good post office coverage
Trader Direct cash
  • Transfers risk of loss to a third party
  • Flexible time to redeem the cash for the beneficiaries
  • Low set up and transaction costs
  • Higher multiplier effect on the local market
  • Poor record keeping:
    • Increased risk of fraud
    • Need for additional finance team member within CARE or implementing partner for prompt reconciliation
  • Initial lack of interest from the traders
  • No banking system, post office, transfer company or mobile coverage
Voucher
  • Transfers risk of loss to a third party
  • Flexible time to redeem the cash for the beneficiaries
  • Low set up and transaction costs
  • Higher multiplier effect on the local market
  • CARE or its partners can easily influence recipient choice and promote certain practices
  • Limits beneficiary choice on where to spend the money
  • Poor record keeping:
    • Increased risk of fraud
    • Need for additional finance team member within CARE or implementing partner for prompt reconciliation
  • Initial lack of interest
  • Cash grant not appropriate