When the glass is half empty: How the Aid sector can improve efficiency to get the most out of every drop

The sector-wide struggle to provide enough funding to meet humanitarian needs is well documented.  In 2014, only 62 per cent of UN humanitarian appeals were funded of leaving a gap of $7.5 billion USD (GHA, 2015). The widening gap between required and available funds is driven by increased needs and has been attributed to the growing scale of chronic conflict situations like Syria, South Sudan and CAR.

After a relatively quiet couple of years for slow onset climatic disasters, the impacts of El Nino this year are expected to be the worst they have been since the mid 1990s.

The bad news is that after a relatively quiet couple of years for slow onset climatic disasters, the impacts of El Nino this year are expected to be the worst they have been since the mid 1990s.  Already, World Vision’s national entities in places like Ethiopia, Indonesia and across Southern Africa are mobilising to help communities deal with the impact of El Nino.

As the sector braces itself for a new wave of droughts and other climatic disasters to hit an already overstretched system, it is really worrying to think about the urgent needs that will go unmet in 2016.  I’ve written before about ideas to access new funds, and to better define and quantify humanitarian need, but as a sector, I think it’s also more important than ever that we get the most out of every dollar that comes in to the humanitarian system.

Two ideas to make the most out of what we have

1) Identify the best routes for humanitarian funding

This needs to go beyond a conversation about which partners provide good value for money.  We need to look at transaction costs across the whole humanitarian system from the primary donor through the implementer.  

An aid donation from an institution, like DFID, can be given directly to implementing agencies, to pooled funds or to fund managers (UN agencies, NGOs or consortia like the Start network).  This means it may go from the donor government, through several UN agencies, consortia or NGOs and then on to an implementing partner.  Intermediaries can add value along the way, and for governments, this method of giving reduces headquarter costs.

Benefits of this system include improved coordination, national level decision making and strengthening national level quality checks on projects through the UN cluster system.  Many of benefits are valuable and the functioning of these mechanisms is a legitimate charge against donor funds.  In fact, it is hard to imagine the country level UN cluster system functioning without the use of pooled funds.  However, the surprising thing is that we have very little evidence about which funding routes are the most cost-effective. 

We need greater transparency and clarity around the costs and the value add of each intermediary.

There are many different types of crises and humanitarian contexts and each one may need to draw on different benefits from intermediaries. We need greater transparency and clarity around the costs and the value add of each intermediary, between the principal donor and the final implementer.  Armed with this knowledge, donors could compare different routes for funding and choose the most effective route for each donation. Unified reporting against a common standard like the IATI standard and its humanitarian extension could enable comparative analysis of different funding routes. World Vision’s UK office and other UK based NGOs have been doing this for a number of years. However, this needs to be done at each level of the system to enable a comparison between the different routes that funding takes from original donor, via intermediaries to the field. Ultimately this should result in cost-savings so that more money can reach those who need it the most – the children and communities impacted by disaster.

2) Speed up the use of cash transfers.

Arguably, receiving cash or vouchers directly treats recipients with more dignity as they retain the power to make their own purchasing decisions, and choose what is most needed for themselves and their families.  Cash transfers also have lower overheads than giving out food or buying items to distribute, as there are a whole series of logistics, procurement and distribution costs that are no longer necessary.  The High Level Panel for Cash Transfers (PDF) has considered most of the cash research and has made some bold recommendations. With findings that World Food Programme cash distributions can be as much as 25-30% more efficient than in kind food aid, they recommend making the distribution of cash the default primary form of assistance. The research also references a study that found that 18% more people could have been helped in Ecuador, Niger, Uganda and Yemen if they had been given cash instead of food.

Many organisations have adopted cash programming, and are using it in more and more contexts. This is a positive trend, however, we must also look at how the sector could enable cash distributions to be efficiently taken to scale.  This will involve new ways of working and new partnerships with actors in the private sector who have greater experience in managing payments.

We need to get better at joint market assessments to confirm that the items people need are available in the market and that cash distributions are not going to contribute to price spirals which undermine their effectiveness or push others who are not receiving cash into dire need.  

Better coordination and a single market analysis for responses that is robust, regularly updated and available to all would assist an efficient scale up of the use of cash and vouchers in disaster response in programming.  In each context a judgement needs to be made around how much cash people need.  For cash to work well this needs to be consistent and fair across all agencies.  Whether this coordination is done as a formal part of the UN cluster system or a body established to do this in emergencies, it would be a significant contribution.  

The Future Humanitarian Financing Report: Beyond the Crisis points out, “Substantial gains in cost efficiency could be realised with a second generation of cash-centred reforms that sees agencies consolidating programmes, streamlining multi sector in kind responses into coherent cash centred responses and working collaboratively to negotiate more cost effective deals at country and global levels”. 

Whatever the sector decides to do to prepare for 2016, we can’t afford to focus only on securing more funding. New ways of working and systemic change are needed to make sure that we can get the most out of every drop, particularly when the glass really may be less than half full and more people may need a drink than ever before.