Are cash transfers the 'new normal' in the Philippines? Challenges and opportunities from Typhoon Haiyan

As Typhoon Haiyan made landfall on 8 November 2013, aid agencies and donors alike realised that, if ever there were an environment where cash transfers would be appropriate, it was the Philippines. Some 16 million people were affected; 1.1m houses were damaged or destroyed, 4.1m people were displaced and around 6,200 lost their lives. In response, at least 45 international humanitarian agencies implemented cash transfer programmes in one of the most sophisticated humanitarian cash interventions to date. This article reflects on the author’s experience of delivering cash in the Philippines and draws out some key observations, challenges and opportunities for moving forward.

The cash response

At an estimated $338m, equivalent to roughly 40% of the response, the cash transfers following Haiyan constitute one of the world’s largest humanitarian cash-based interventions. This figure does not include the substantial cash contribution made by remittances, the private sector and government and civil society organisations.  According to the Office for the Coordination of Humanitarian Affairs (OCHA) Financial Tracking System, three-quarters of transfers were conditional, restricting expenditure to a set range of items or asking recipients to participate in training or some other specified activity (e.g. cash for work). The remainder was given as unconditional transfers, without requirements. About 60% of the conditional cash transfers were to support livelihood rehabilitation, primarily through cash for work. Table 1 describes some of the cash transfer modalities deployed in the Philippines.

Targeting

As in most emergencies, targeting was an issue in the absence of more in-depth assessments and better baseline data. Although efforts were made to standardise targeting criteria, agencies often used different conditions – e.g. female-headed households, having partially or fully damaged houses and being registered with the government 4P’s social safety net. The Pantawid Pamilya Pilipino conditional cash transfer programme.

While publishing inclusion/exclusion criteria on public billboards helped to improve transparency, some communities argued that using standardised indicators failed to reflect the nuances of debt and vulnerability. For example, one community member noted that she was not selected because she had used credit to buy fish cages before the emergency, and as such was seen as less ‘vulnerable’ than her neighbour who did not have the same assets. During the emergency she lost her boat, could no longer fish and was incurring increasing debts, raising questions about how to include debt in targeting frameworks. To overcome this, some agencies implemented blanket cash for work programmes, offering everyone the opportunity to participate. While this helped in overcoming targeting errors, some businesses complained that they lost employees and were no longer able to source labour due to the impact of the programme on a small island economy.

Payment

The Philippines probably has one of the most developed and efficient mobile cash transfer systems in the world. Yet hand-to-hand payments, either directly by aid agencies or through remittance companies, were often the first choice, with organisations such as the World Food Programme (WFP) and the UN Development Programme (UNDP) piloting more sophisticated e-payment systems some four to 12 months into the response. UNDP provided beneficiaries with a mobile phone, a SIM card with PhP30 airtime load and a Landbank ATM cash card, the idea being that people could cash out using both the mobile phone and pre-paid ATM card.  While remittance companies were fast, had good coverage and were flexible in terms of ‘know your customer’ ID requirements to verify the identity of their clients, their ability to scale up was restricted by each office’s processing capacity and cash-out liquidity (the ability of customers to access physical cash or buy goods using an electronic payment) – both of which were put under pressure as multiple agencies used the same provider. Similarly, although electronic payments (e.g. mobile payments) offered real-time reporting and reconciliation, a lack of understanding about available services, patchy cellular coverage and questions over cash-out liquidity slowed uptake. As such, cash in hand, either directly or through a third party, was often the most popular mechanism, with more sophisticated electronic systems introduced as the infrastructure became more reliable and better understood.

Cash for work policies

Filipino legislation requires any public work programme, including cash for work, to follow laws on labour rights and conditions of employment, namely accident and health insurance, tetanus vaccinations and a contribution to the Social Security Service (SSS). Although on paper these carried logical benefits, some questioned whether households would pay their SSS contributions given that they only receive SSS benefits after one year’s payments have been made. Similarly, when added up, the cost of insurance, vaccinations and SSS contributions could account for between 20% and 40% of the value of the transfer, depending on the wage rate and number of days employed. As a result, the Inter-Cluster Coordination Group worked with the government to update policies, dividing optional and mandatory requirements by work type (see Table 2). While this helped to install minimum conditions of employment in terms of protection and insurance, further research is needed to understand the costs and benefits of transferring money directly versus through the government social security service.

Wage distortion

From the outset, the government set cash for work rates at 100% of the minimum wage, rather than below it, in order to encourage self-targeting. As noted, some government and private sector employees participated in cash for work projects, rather than resuming their normal jobs, either because their employer paid below the minimum wage or the work was seen as easier than their current job. Similarly, skilled labourers such as carpenters undertaking boat repair complained that aid agencies were inflating costs for labour and goods, and unskilled cash for work employees were being paid the same or sometimes more than skilled labour. While some communities argued that the cash injection helped, others suggested that the increase in income was cancelled out by inflated prices for goods and services – especially for people not participating in the programme, who were asking how long it would take prices to settle back to their pre-emergency levels.

Conclusion

Cash is both a product and a driver of change, pushing the sector to envisage a system that is radically different. Rather than delivering physical goods, aid agencies are engaging with local economies, banks and mobile companies to deliver cash. They are trying to pay households the same amount, follow common targeting criteria and in some cases help link recipients to longer-term development projects – all in the midst of an emergency response. As such, the move to cash and market-based programming signifies a significant shift in the way aid works by uniting multiple actors to meet multiple objectives.

Recommendations

1. Implement a SWOT analysis to understand the strengths and weaknesses of using the 4Ps Social Safety Net to deliver and coordinate cash transfers in the next emergency. Covering 3.93m households, the safety net aims to provide a modest but stable source of income for the poorest families. Until now, there has been very little experience of or experimentation with using social protection programmes in the Philippines for emergency response. Further research is needed to understand the costs and benefits of delivering cash directly versus using the government’s protection system.

2. Identify opportunities to expand cash for work programmes to restore and improve pre-emergency employment. To date, the majority of cash for work programmes have focused on debris removal, managed by individual aid agencies. Where possible, cash for work programmes should be used to re-employ people in their previous employment, leveraging the capital injection to meet consumption needs and improve wage rates and job security for the target population.

3. Develop shared contingency plans with financial service providers. Digital delivery systems are one of the most transparent ways of making financial transfers and help root out leakage and corruption. Similarly, working in consortia offers opportunities to negotiate lower fees, develop common standards and streamline coordination through the use of common payment lists.

4. Pilot new payment models. Where appropriate, try out new models for transferring cash. For example, www.worldremit.com is what is known as a ‘Wholesale FSP’, which can deliver cash to multiple countries through its various partners. Such organisations often have more nuanced knowledge of issues such as regulation, compliance and coverage, and could help agencies to understand the risks and opportunities associated with different payment mechanisms. Similarly, working through one provider could reduce transfer costs and improve coordination by using common payment lists.

5. Develop an online marketplace (website) to compare and coordinate payments. Delivering cash can be complex because there are multiple types of modality, financing and channels of delivery. As a result, many aid workers commented on the usefulness of a report documenting the locations, services and requirements associated with different payment mechanisms in the Philippines. Such a model could be expanded by developing a website (online marketplace) where aid workers can compare different payment options. Such a platform could be extended into a shared payment and monitoring system using digital payments and shared service models to coordinate and reduce transfer costs.

6. Cash coordination. Fitting cash into the current UN coordination system is a complex task. Because cash can be given for one purpose but spent on something else project managers find it difficult to create indicators as they often do not know what the cash is spent on. Figure 1 Figure 1 has been developed from http://www.urd.org/Review-of-coordination-mechanisms. presents a modification to the current cluster model, the main difference being the creation of a shared needs and market assessment unit that works across clusters to calculate needs, and convert this into the local monetary equivalent. Distributions can then be tracked through a shared payment system/ database or through an online coordination system, allowing users to register the location, modalities and amounts of cash or assets being transferred, providing a composite picture of the distribution of resources.

Alesh Brown is a Cash, Markets and Technology Specialist at aptinfo.