Cash and Crises

This webinar was the fifth in a series by CashEssentials exploring key trends shaping the future of cash. This was the first to focus specifically on ‘cash & crises’. Cash industry experts and international aid practitioners debates some of the advantages and disadvantages of digital cash assistance in the context of financial inclusion for societies in crisis.

The COVID-19 pandemic is the 1st truly global crisis. Beyond the loss of life, there are numerous far-reaching consequences such as human seclusion, suffering, economic distress and a sense of helplessness. The Global Cash Community has joined forces to develop an initiative called HUMANIA that aims to support the people in society who have been most affected by the Covid-19 pandemic in their efforts to recover and rebuild.

The review analyses the acceleration of the ‘cash paradox’ during the pandemic: declining cash transactions and increasing precautionary demand for banknotes. It also publishes the findings of laboratory testing on the risks of transmission of Covid-19 via banknotes.

Using data from a continuous household consumption survey, economists Renuka Sane and Ajay Shah analyse both the levels of household borrowing as well as the sources of lending. They conclude that fewer households borrow but more rely on family and friends as well as shops.

The dual role of currency both as a store of wealth and means of payment has never been more apparent, as the numbers that report cash on issue and cash use remain dramatically different.

This webinar is the fifth in a series by CashEssentials exploring key trends shaping the future of cash. This is the first to focus specifically on ‘cash & crises’. Over the course of sixty minutes, cash industry experts and international aid practitioners will debate some of the advantages and disadvantages of digital cash assistance in the context of financial inclusion for societies in crisis.

The benefits of humanitarian financial assistance – what the aid world calls ‘Cash & Voucher Assistance (CVA)’ – are pretty well known: Giving people cash instead of food or other forms of in-kind commodity empowers recipients to address their own priorities, reduces opportunities for corruption, and pumps money into local economies. It is, generally speaking, a much more dignified and cost-effective way of meeting beneficiary needs.

Since the beginning of the pandemic, a steady flow of disinformation has distorted the role cash may play in spreading Covid-19. Now, Australia’s national science agency has published a controversial study suggesting that the virus could survive up to 28 days on banknotes in strict laboratory conditions. However, the study’s lead author, confusingly, is minimizing the infection risk presented in his own work.

A new report by H.E. Reimers, F. Schneider and F. Seitz analyses the determinants of cash holdings of private households in the euro area between 2002 and 2019 and aims to shed light on the complex relationship between cash holdings on the one hand and transaction volumes, store of value motives, alternative payment instruments, the size of the shadow economy and crisis-related as well as precautionary demand on the other.

In 2012 an ATM selling cupcakes opened in New York City. Eight years later, Food ATMs are dispensing free rice and other essential staples to those affected by the Covid-19 pandemic in Jakarta, Indonesia and Ho Chi Minh city in Vietnam. The service is proving vital for thousands of people whose nutritional status has been compromised by losing their livelihoods as a result of the pandemic.

This year has been very dramatic for the global society. The full effects of the COVID-19 pandemic are still unknown and depend on the length of the exceptional period in various parts of the world.

Reductions in the ability of people to access cash and the increasing cost to business of using cash is likely to increase the risk of financial exclusion for sections of society dependent on cash if not managed. Maintaining access to cash should be part of any aid organisation’s fiduciary risk approach to cash assistance. Cash coordination groups currently active around the world should therefore work with their respective central and commercial bank partners to better understand the political economy of cash as used by their collective beneficiaries.