The report outlines our findings on the relative effects of restricted versus unrestricted cash transfers to refugees in the Kalobeyei settlement, and offers policy recommendations to address the problem of indebtedness associated with these types of cash-based assistance.
The use of cash transfer programmes in humanitarian contexts is growing. In comparison to in-kind assistance, cash transfers are widely praised for enhancing autonomy, reducing costs, and boosting local markets. There are various modalities of cash transfer, from food vouchers to mobile money, and cash. Yet, evidence on the relative merits of these models is scarce. Using first-hand data from 896 refugee households living in the Kalobeyei settlement in Kenya, we make use of a ‘natural experiment’ to study the relative effects of restricted versus unrestricted cash transfers to refugees.
Our research shows that the switch to unrestricted cash transfers has positive impacts on asset holding and subjective well-being. Households receiving unrestricted cash transfers also appear to be less likely to engage in the costly practice of reselling food for non-food items. There is some evidence that unrestricted transfers may lead to higher expenditure on alcohol and tobacco, however this relates to only a limited proportion of households and a small proportion of their budget.
Both modalities of cash-based assistance are associated with indebtedness. A staggering 89% of sampled households are indebted towards their retailers, and cash transfers are used as a form of collateral by retailers to guarantee debt repayment. Indebted households have low negotiating power, face high prices, and are prevented from selecting between competing retailers. Facing both the uncertainty of food insecurity and the social pressures exerted by their creditors, many indebted refugees are left with feelings of anxiety, helplessness, and fear.
This report discusses the pros and cons of various policy options for addressing the addressing the problem of indebtedness, including debt repayment schemes or debt relief, social safety nets, more frequent transfers, training, and monitoring.