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Madagascar: Cash & COVID

Categories : Cash and Crises, Cash is the first step of financial inclusion
February 17, 2021
Tags : Cash Transfers, Coronavirus, Demand, Humanitarian
Cash Transfers are supporting Madagascar’s poorest and most vulnerable citizens during the Pandemic, but there are unintended consequences.
James Shepherd-Barron

Disaster Risk Management Consultant, Author, and Founder of The Aid Workers Union

This post is also available in: Spanish

This year one in every 33 people across the world will need humanitarian assistance as a direct result of the Coronavirus (CoVid-19) pandemic. That’s a rise of 40% from last year, according to the UN. More than half of the countries requiring aid to help deal with the pandemic are already in protracted crises, coping with conflict or natural disasters.

Even before CoVid-19 threw decades of progress on extreme poverty, healthcare and education into reverse, aid budgets were heading in the wrong direction. In 2020, the UN had just 48% of its $38.5bn (£28bn) in funding appeals met, compared with 63% of $29bn sought in 2019.

Demand is outstripping supply, with the pandemic increasing the volume of funding requests made to governments and institutions while simultaneously eroding their capacity to respond to people in crisis. As a result, “We’re seeing a perfect storm gathering,” says Angus Urquhart of the research group, Development Initiatives.

Meanwhile, the virus’s knack for exposing inequities in society has also highlighted some inequalities when making cash transfers over mobile money platforms.

Take the control programme enacted last year to stop the spread of the disease in Madagascar where a social protection programme was set up by the Malagasy government to help vulnerable citizens in the four main cities of Antananarivo, Toamasina, Moramanga and Fianarantsoa who were economically affected by strict containment measures.

Before the ‘lockdown’ was lifted, more than 244,000 households from 769 neighborhoods in these four major cities benefited from monthly cash transfers of about 100,000 Ariary (the equivalent of $27) from the government through an unconditional cash transfer program funded for the most part by soft loans from the World Bank … loans that Madagascar can ill-afford. These poor and vulnerable households were identified as being the most exposed to the risk of food insecurity and those whose income was interrupted due to the requirement to self-isolate.

“During the period of restriction where the incomes of these vulnerable households are affected, social safety nets are a way to help families meet their basic food needs, avoid selling their assets or sacrificing their livelihood to survive, protect their human capital, while respecting the rules of confinement,” explained Julia Rachel Ravelosoa, the World Bank’s Senior Social Protection Economist for Madagascar.

One of the main objectives was to preserve human lives and livelihoods, especially for the most vulnerable. “In this context,” she said, “social protection is the most appropriate tool,” adding that, “This response to CoVid-19 has also made it possible to strengthen use of technology, in partnership with mobile payment companies, to speed up the implementation of the programme. This has laid the foundation for greater financial inclusion for these beneficiary populations.”

Unfortunately, the much-touted benefits of financial inclusion may have been true for some, but not for all. That’s because such rhetoric from the World Bank and other members of the UN-led Better Than Cash Alliance downplays the unintended consequences of making social protection payments using mobile money platforms. These include the rapid acceleration of household-level indebtedness brought on by unscrupulous pay-day lending apps and consequent over-borrowing; higher prices of goods in shops as increased transaction costs are passed on to consumers; and reduced value-for-money for institutional donors due to the reduction in economic multiplier effects caused by the lack of cash recirculating in local markets. Such a mechanism is also discriminatory in that it excludes those for whom the cost of owning a 3G-enabled smartphone and paying the recurrent costs of data is prohibitive.

This post is also available in: Spanish