Blog: ECHO’s new cash policy – what’s good and what’s missing?

By Paul Harvey, Valentina Barca, Louisa Seferis, Calum McLean
March 2022

A new ECHO Thematic Policy on humanitarian cash was published this week. It updates and replaces the Funding Guidelines on Cash and Vouchers from 2013. It’s a really valuable new resource which presents clear guidance for ECHO’s partners and there is a lot to like about it. This blog makes some early observations about the policy. It’s written by Paul Harvey, Valentina Barca, Louisa Seferis and Calum McLean who have all been working on humanitarian cash and social protection issues as researchers, consultants and practitioners. Calum helped to draft the policy.

What’s working.

There’s a much stronger focus on linking humanitarian cash with social protection than in the previous iteration. This is really welcome. It reflects how far debates and policies have moved over the last 10 years, with shifts in approach among donor governments and aid agencies, plus more widespread social protection systems in crisis affected countries for humanitarian cash to link to. As Ugo Gentilini noted,

‘One of the biggest difference between 2022 vs 2013 guidance?  In the latter, social protection wasn't mentioned once; now, it appears 88 times, and perhaps not accidentally it's featured prominently in section 1.’So this isn’t just lip service: linkages between humanitarian cash and social protection are front and centre of the new guidance with the opening chapter focused on linkages and operationalizing the humanitarian-development-peace ‘nexus’.  ECHO states that 'DG ECHO-funded humanitarian cash should link, preferably at the outset, to a systems approach that strengthens local capacity and links to durable solutions' ... 'This may involve linking with social protection systems'.

It’s also good to see openness to going beyond ‘usual suspects’ (social assistance and especially cash transfer programmes), to enable consideration to supporting social insurance or health insurance, where feasible and appropriate.  This will be critical to the medium-term protection of the ‘Missing Middle’ – including informal workers and other categories who are just one-shock away from destitution:  not poor enough for social assistance but not formally employed nor rich enough to be covered by social insurance.

The importance of "weighing up the trade-offs of linking cash to Social Protection systems rather than linking by default" is highlighted. For more on how to do this in practice, it’s worth looking at this SPACE analysis which identifies key questions to be asked when weighing options, and endorses an overall focus on routine systems building over time. The ECHO focus on working collaboratively at all levels of the social protection system – and strategically starting where entry points are clearest (e.g. specific points in the delivery chain, or in the policy and design process) -  draws on years of collective and cross-sectoral thinking and action from colleagues worldwide, including further SPACE resources on linkages in the COVID response and overcoming coordination barriers to linkages.

We find four specific areas of the guidance particularly important for strengthening humanitarian cash responses: cash over vouchers; separation of functions; metrics on value for money; and harmonising approaches:

  • From the perspective of beneficiary choice and dignity, ECHO takes a strong policy stance on cash (that people can spend on whatever they choose) over vouchers (which have greater restrictions on what people can buy). That’s welcome given evidence on the effectiveness of cash over vouchers  in Lebanon, and topical, given WFP’s plans for a large voucher programme in Ukraine.

  • ECHO has led the way in calling for large-scale cash programmes to have a separation between assessment, implementation, and monitoring functions. This, at times, controversial position is still in the guidance -  'For large-scale cash programmes ... partners are encouraged to segregate the functions related to the fundamental elements of a cash transfer programme cycle (assessments, design and monitoring)'. For smaller scale programmes this is less prominent with the exception of an independent MEAL, which “should become the norm in any context”  Regardless of views on the pros and cons of separating functions, there is scope to think through the potential for more locally-led models that draw on the complementarities between UN, INGO and LNGO key strengths.

  • ECHO also continues to lead the way in demanding clear metrics on cost efficiency and value for money. The policy states that, 'Partners should use the total cost to transfer ratio (TCTR) as a standard way of measuring cost-efficiency, defined as the proportion of the value of net transfers received by beneficiaries to the total programme cost' and that partners are expected to reach a ratio of at least 85:15 in large-scale programmes. More systematic collection and transparency around data would be great – at the moment there is still a lot of missing data from humanitarian and social protection sides to be able to truly assess, compare and contrast full cost streams. If you want to know more about how this might be done,  Emily Wylde discusses some of the challenges with systematizing better value for money analysis, and reflections on which collective outcomes agencies should measure themselves against to determine effectiveness can be found here.

  • ECHO emphasises the need for partners to harmonise approaches across cash programming, reflecting experience in the field especially from the Syria crisis (Greece, Turkey, Lebanon etc.). This includes a strong section on digitalisation, interoperability and data protection as a well thought out part of the policy, reflecting the needs of partners to improve programming while doing ‘no digital harm’.

What’s missing, or unclear?

  • As is common with nexus related guidance, there’s less about how agencies might tackle the peace dimension of the nexus and oddly there’s no mention of climate change.

  • On targeting, ECHO states that 'targeting criteria for DG ECHO-funded cash assistance should include socioeconomic vulnerability and the protection concerns of individuals and groups'. This left us wondering if ECHO could support categorical social protection benefits such as social pensions or child grants, if that was the best way of reaching vulnerable people transparently and effectively, while supporting existing social protection systems. More explicitly making clear if that is an option would be helpful. The Guidance nevertheless has an important focus on those who are most vulnerable, as well as on gender and social inclusion considerations.

  • On transfer values the policy picks up on the challenge that payments made by humanitarian agencies often far exceed those received by social protection recipients.  ECHO states that "Where appropriate, the transfer value should be set to facilitate linkages between humanitarian cash responses and SP systems" but has less to say on how this can be done. There’s more on the HOW and WHY this is so complex here. Examples of country-specific 'solutions' stress the need for different actors to put themselves in each other’s shoes – in order to set transfer values at levels that are both effective and sustainable.

  • There’s little to disagree with in a section on accountability and important considerations, but it would be good to get beyond "beneficiary participation and decision-making" and integrate aspects of accountability that do not only consider those who end up benefiting and include an equal focus on people who might be excluded. And there could be more emphasis on considerations and challenges in linking state and aid agency, and developing shared development and humanitarian language when it comes to approaches to accountability.

Finally, there’s a great checklist towards the end of the ECHO Policy document for use by partners developing proposals. Overall, congratulations are due to ECHO for a strong piece of policy development. There’s nothing startlingly new or unexpected but it’s a really useful summary, compilation of resources and clear statement of ECHO's position.