INSTITUTE OF SOCIAL ECONOMIC AND SOCIAL RESEARCH

POLICY ANALYSIS ISDS 606

TERM PAPER

EX-ANTE ANALYSIS OF

POLICY TO USE CASH AND VOUCHERS TRANFERS TO HOUSHOLDS IN

RESPONSE TO EMERGENCIES

MARCH 31,2011

ADARKWA EBENEZER 10359072

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Table of Content

Contents
Table of Content ................................................................................................................................ 2
1.0 BACKGROUND ............................................................................................................................. 3
1.1 Policy context .............................................................................................................................. 3
1.2 Goals and Objectives.................................................................................................................... 3
1.3 Political, Economic and Stakeholder Analysis ............................................................................... 3
2.0 PROBLEM DEFINITION ................................................................................................................. 4
2.1 Policy Problem ............................................................................................................................ 4
2.2 Analyst Problem........................................................................................................................... 5
3.0 METHODOLOGY ........................................................................................................................... 5
3.1 Research Design .......................................................................................................................... 5
3.2 Sampling ..................................................................................................................................... 5
3.3 Analysis ....................................................................................................................................... 6
4.0 FINDINGS AND RECOMMENDATIONS .......................................................................................... 6
4.1 Findings ....................................................................................................................................... 6
4.2 Strategies for implementations ..................................................................................................... 6
4.3 Institutional capacity ................................................................................................................... 6
4.4 Cost factors ................................................................................................................................. 6
4.5 Risks and Threats ........................................................................................................................ 7
4.6 Delivery Mechanism .................................................................................................................... 7
4.7 Key Policy Positions .................................................................................................................... 7
5.8 Evaluation Criteria ...................................................................................................................... 7
4.9 Alternative Policy options ............................................................................................................ 8
References…………………………………………………………………………………………………………………………...8
1.0 BACKGROUND

1.1 Policy context

Overt the last few years there have been many instances around the world where levels of and
incidence of poverty have increased in conditions of economic growth. For instance between
2007- 2009 the number of people around the world who were classified as poor increased
from 750m to 820m (WDR, 2010). This increase in the number of people living in extreme
poverty was caused by some shock factors that dragged households that were relatively better
–off back into poverty.
One of the main pointers of extreme poverty is the level of vulnerability that are associated
with poor groups in times of extreme stress event such as drought , floods, crop failure and
loss of income. According to the Ghana Living Standard Survey round five (GLSS5), the
poverty index among Ghanaians is as high as 29% in 2006 (GSS, 2008). Out of this poverty
level the incidence of extreme poverty among Ghanaians is around 18% (GSS, 2006). Among
the extremely poor section of society vulnerability is a veritable threat to livelihoods and
living standards. There real risks associated with vulnerability among the poor are the danger
of a relatively stable household falling into extreme poverty groups where sustenance
becomes a problem.
To help alleviate and lessen the effect of vulnerability among the very poor in danger of
falling into extreme poverty, many policies have been implemented to prevent vulnerability
and slip back into poverty. Many social protection policies take the form of transfers of
materials and resources (the so called in-kind transfers) into households (Tabor, 2002). One
of the new forms of social protection programmes is the introduction of cash voucher
transfers into households that are vulnerable in situations of severe shocks. These shocks are
sudden unexpected events that directly affect the ability of households to access the goods
and services that will enable them to live above the poverty threshold. Cash transfers through
various measures are seen as a way of providing respite through hard times. This could be a
crucial tool to consolidate the gains made in poverty reduction (Shaik, 2005).

1.2 Goals and Objectives

To achieve this super goal some objectives are required to be achieved

 Maintain the level of consumption of households in emergency situation

 prevent families from falling further into poverty in the event of an adverse
shock
 Prevent vulnerable households from selling critical livelihood assets to fund
current consumption
 Prevent disinvestment in human resource by households such as withdrawal of
children from school during and the aftermath of emergencies or shocks.
 Provide a platform for vulnerable households to recover from the emergency.

1.3 Political, Economic and Stakeholder Analysis

A stated objective of state policy is to improve the livelihoods and living conditions of
Ghanaians as well as eradicate poverty. This desire to improve the living conditions of
Ghanaians is capture by the various development plans and policies implemented through
the Ghana poverty Reduction strategies (GPRS I &II) (GoG, 2003). For this reason there is
generally a positive political environment to implement policies to assist the most
vulnerable in the society. There is however no legalisation towards the institutionalisation of
cash transfers to households that are vulnerable in time of severe shocks or emergencies.

Economically there are many challenges that make the implementation of such a policy both
desirable and challenging at the same time. There are high levels of poverty among many
sections of the population while the risk factors that cause extreme poverty among
vulnerable household are frequent. The challenge is the amount resources that are required
to fund these programmes.

Some key stakeholders that are crucial to actualise the policy include the Ministry of
Finance, Parliament, Bank of Ghana, Ministry of Employment and Social Welfare, NGOs ,
Gender advocacy Groups and Development Partners

2.0 PROBLEM DEFINITION

2.1 Policy Problem

Vulnerability is an ex-ante measure of wellbeing reflecting not so much how well a
household is doing currently but what its future prospects are. Vulnerable households are
those that are at the risk of falling into extreme poverty as a result of multiple sources of
risks. Vulnerability is illustrated more clearly through the anticipation and projection of the
deterioration in the standard of living of a household in the event of an unexpected event
(World Bank, 2000). This is as opposed to poverty which is considered an ex-post measure of
low levels of means, choices, consumption and welfare. The distinguishing feature between
poverty and vulnerability is risk- mediating between current welfare and future uncertainty of
wellbeing. This state of affairs holds true for those living on the margins of the poverty line.
Some of the common causes of shocks that may lead to deterioration of wellbeing of
vulnerable households include but not limited to the following

 Natural Disasters (flood ,earthquakes, droughts etc)

 Crop failure
 Loss of income of income generating member of the household through ill health, loss
of employment etc
 Conflict
 Sudden spike in food prices
 Sudden deterioration in Macroeconomic conditions (Commodity price collapse,
hyperinflation, collapse of currency etc)
Identifying vulnerable households is necessary to for several reasons:
It is necessary to identify households that are likely to fall into poverty besides cataloguing
those who are currently poor. Policy interventions to eradicate poverty that are based on static
analysis of poverty run the risk ignoring those who are most likely to be poor in the future as
a result of temporal risks.
Focus on vulnerability focuses attention on both eradication of poverty and prevention of
poverty among those that most likely to be poor. This is absolutely crucial when a severe
sudden shock that deteriorates the livelihood of household occurs
Also because of the many risks households face, they often experience shocks leading to a
wide variability in their income. In the absence of sufficient assets or insurance to smooth
consumption, such shocks may lead to irreversible losses, such as distress sale of productive
assets, reduced nutrient intake, or interruption of education that permanently reduces human
capital, locking their victims in perpetual poverty. Aware of the potential of such irreversible
outcomes, Policies directed at reducing vulnerability–both at the micro and macro level–is
instrumental in reducing poverty.

2.2 Analyst Problem

It is necessary to provide buffer to vulnerable households in times of temporary severe shocks
and risks that is likely to caused hardship and affect the wellbeing of such households. Such
assistance programmes are usually implementation through in kind assistance and overall
poverty eradication programmes that do not involve direct transfers into households.
An often contentious debate is on-going regarding the merits and costs of in-kind household
transfers and risk factors. Interest is growing in the use of cash in response to both acute
emergencies and chronic vulnerability.
The main Analyst problem is the delivery of cash and voucher transfers to households that
are in potential danger of falling into extreme poverty as a result of emergencies.

3.0 METHODOLOGY

3.1 Research Design

To achieve the goals and objective outlined, it is necessary to have a cross-sectional and
geographically sensitive datasets on households and risk to livelihood profiles. These datasets
are necessary to identify the potentially vulnerable households and the risk factors that could
trigger vulnerability to poverty.
This will be done through a an empirical living standards survey over the entire areas the that
are at risk of emergencies and shocks or the sector of the economy that are most at risk from .
The data must be collected at the household level as a unit of analysis to enable the
identification and profiling of poverty levels of the households.
Sectoral and geographical risk profiling is needed to plan and target vulnerable households
that are at risk more accurately.
Al the studies will be done using qualitative and quantitative methodologies of data
collections including questionnaires focus group discussions and key informants.

3.2 Sampling
A nationally representative sample of households will be selected in order to achieve the
survey objectives. At least 500 household will be selected from each of the ten administrative
regions.

It is important that each sampling unit in the surveyed population has a known, non-zero
probability of selection. To achieve this, there has to be an appropriate list, or sampling
frame of the sampling units, comprising of populations living within private households in
Ghana.

3.3 Analysis
Data will be analysed to establish a poverty threshold, as well as vulnerability measures
using income and expenditures of households. Also the headcount of poor household and
household poverty profiles will be done through statistical tools and methods.

Using statistical and Geographic information analysis tools, risk profiles geographic areas
will be delimited to ensure the accurate targeting.

4.0 FINDINGS AND RECOMMENDATIONS

4.1 Findings
Based on the goals and objective of the policy it is expected that the these outcomes will be

 Establishment of a clear risk assessment tools and criteria for determining

households that are vulnerable to extreme shocks and emergencies
 Identify and profile segment of the population that can be classified as
vulnerable to poverty through a verifiable methodology
 Conduct a risk assessment study to identify areas with high risk factors
 Mobilise resources to fund the programmes
 Set up an institutional framework for implementation, monitoring and
evaluation

4.2 Strategies for implementations

The main strategic thrust of the policy is to move away from in-kind transfers to targeted cash
and voucher transfers to households. This strategy is intended to give choices to beneficiaries
as opposed to other kinds of transfers during emergencies.
Transfers are to be effected in an efficient manner keeping the interface between the
institutions implementing the program as simple as possible.

4.3 Institutional capacity

Administrative machinery will be put in place to manage, administers, monitor, evaluate and
measure the outcomes of the programme. Administrative considerations are very critical to
the success of the programme as it directly affects its sustainability. There could be situations
where the wrong bureaucratic set up could lead to huge inefficiencies. Such inefficiency may
lead to a very slow system of disbursement and increases the cost. Based on these reasons, a
lean and highly decentralised administrative system will be the optimal institutions set up to
efficiently implement this policy.

4.4 Cost factors

Implementing a cash transfers programmes is a hugely costly exercise and governments could
find it difficult to fund and sustain over the long term. Admistrative cost may reduce the
direct benefits to the vulnerable populations. Cost of above 10% of total disbursement is
considered inefficient.

4.5 Risks and Threats

One of the main criticisms of cash transfers to households is its long tern adverse effect on
incentive to the labour market.

Implementing a cash transfers programmes is a hugely costly exercise and governments could
find it difficult to fund and sustain over the long term.
There are risk in allowing agents to keep and carry cash as it there could be diversion and
misuse.
The fact that cash transfers convey greater freedom of choice to the recipient also creates the
possibility that household members will use transfers to purchase goods and services that
many governments would prefer not to directly finance, such as liquor, cigarettes, and
gambling.
In times of fiscal volatility cash payments are among the first to be scaled back by
governments leaving beneficiary very vulnerable.

4.6 Delivery Mechanism

Cash and voucher transfers could be delivered to beneficiaries through various means that is
efficiently, safe and cost effective. A multi delivery mode will be adopted using a full
spectrum of existing community infrastructure. These could include Banks, post offices,
police posts etc. Also a the institution running the program could also innovate new means of
delivery using new technological platforms as well as direct payment to beneficiaries by its
own agents.

4.7 Key Policy Positions

Use cash and voucher transfer to smoothen consumption and maintain welfare of households
that are vulnerable and are affected by a sudden acute shock or emergency.
Link cash and voucher transfers to conditional qualifications to ensure proper reach. This is
to ensure that those in most need are reached and provide proper incentive for participation in
programmes that will bring positive poverty outcomes.

5.8 Evaluation Criteria

Some indicators are necessary to aide the benchmarking of performance to measure the
progress and outcomes of the programmes. This will give feedback on performance and
subsequent evaluation of the effectiveness and the impact of the programmes.
 Level of nutritional intake of households that are vulnerable and benefiting from the
program during emergencies
 Retention of critical productive assets by the affected vulnerable households during
emergencies
 Access to healthcare by the affected households during emergencies
 Level of disruption in human capital investments such as education by households
during emergencies.
4.9 Alternative Policy options
Conditional Cash transfers: this will be a voucher and cash transfer system based on
participation in certain programs deemed to be beneficial to the welfare of the household or
members of the household. For instance enrolment and attendance of schools by children in
the household and participation in ante and pre natal visits by pregnant members of the
household could be used as triggers for making cash and voucher transfers to households.

Work for Cash Transfers: This policy will implement cash transfers through public works.
This could be done in situations where livelihoods have be destroyed through emergencies
that have become chronic.

Table 1 Differentiating Policy and Alternate policies

Policy Strategy Strengths Weakness

Cash and Voucher transfers to
vulnerable households during
emergencies
Work for cash programs
Delivering assistance to -Efficient
vulnerable household -Reaches the household
during emergencies -Has clearly measurable
through cash transfer. outcomes
Target : Households -Easier to implement monitor
and evaluate
Assistance transfers -` Engages beneficiaries in
programmes based on productive activities
short employment - Easy to manage
Target : chronically - Has broad political support
unemployed - Has in- built exit strategy
-Could foster dependency
-Very expensive
-Difficult to mobilise
political support
-Has negative impact on
labour supply in the long
run
-Could spawn large
bureaucratic and inefficient
institutions
-Mostly engages
beneficiaries in
unproductive jobs
-Exclude many groups such
as old and disabled

Conditional Cash Transfer Transfers based on -Ensures positive human -Could result in dependency
participation of desirable development outcome like - Could spawn large
services. education and health bureaucratic and inefficient
Target: Households institutions

References

Ghana Statistical Service (2008), Ghana Living Standards Survey, Report of the Fifth Round5

Ghana Statistical Service (2006), Patterns and Trends of Poverty in Ghana

Government of Ghana (2003). Ghana Poverty Reduction Strategy (GPRS I) Paper.

Shaikh S. Ahmed (2005), Delivery Mechanisms of Cash Transfer Programs to the Poor in
Bangladesh
Steven R. Tabor (2002) Assisting the Poor with Cash: Design and Implementation of Social
Transfer Programs. World Bank, Washington DC.
World Development Report 2000-2001: Attacking Poverty. Washington D.C.