Why cash nourishes faster than food in Kathmandu

Financial Inclusion

Why cash nourishes faster than food in Kathmandu

The average Nepalese earns less than $1.30 a day and more than a quarter of the population survives below the poverty line. Electronic vouchers assist slum residents to buy basic food staples like lentils, rice, and oil from local markets, stimulating the local economy. Photo: Suraj Shakya for Mercy Corps

Aid groups that implement cash transfer programs without understanding the communities they serve are flirting with disaster.

Without careful research and preparation, programs can backfire in misuse and waste, leaving people worse off. Cash transfers also have great potential to catapult impoverished communities into independence and prosperity. Clearly, there’s a lot on the line.

In serving the needs of the people who receive them, cash transfers have a few demands of their own. A successful cash transfer program needs an overarching goal, a conducive environment, and careful implementation.

One of the essential factors for success is deeply understanding the community: What do people need? Why aren’t they getting it? How can they get it? Answering these questions identifies that overarching goal, from meeting basic needs during a crisis, to improving access to healthcare, or even boosting women’s status in society.

A common misconception is that a cash transfer program's goal is just to get cash into hands. But it's not about the cash - it's about jumpstarting an economy or helping people gain long-term access to something that improves their lives over time.

Earning on an average $1.30 a day, the residents of Nepal's urban Kathmandu slums lack the wherewithal to meet their most basic needs; illiteracy, innumeracy and chronic illness make the cycle of poverty insurmountable.

In search of a solution, Mercy Corps surveyed neighborhoods, interviewed residents and formed focus groups to identify the needs, barriers, and abilities of this community.

Asking the question, “why aren’t people getting what they need?” was the key to finding a viable solution. Without a market to purchase goods, cash transfers would be useless.

Around the world there are diverse barriers to markets: one community may lack physical access to a market, whereas another suffers extreme inflation. Both prevent the poorest from meeting their needs. One solution might be to boost the local market by giving community members vouchers to use with specific local vendors. That approach helps build up both supply and demand, and making these essential economic links is key to getting markets back up and running for the long-term.

What Mercy Corps found was that for people in Kathmandu’s slums, market prices were restricting; they could go to market, but couldn’t buy anything. Mercy Corps decided to launch a voucher program, called ELEVATE, that empowers participants go to their local market and purchase staples like lentils, rice and oil and other supplies.

The method of distribution--cash, paper vouchers or even mobile vouchers--also depends on community needs. The reach of mobile technology has created an opportune vehicle for cash transfers. In Mercy Corps' ELEVATE program, 94 percent of participants already owned cell phones. As an added benefit of using mobile phones, vendor reimbursement times are cut, and there are fewer errors and quicker disbursements, all invaluable in inflation- or disaster-prone areas like Kathmandu.

After deciding on mobile phones as the tool to get the vouchers to participants, local Mercy Corps staff held community training programs to teach beneficiaries and vendors about the program. Knowing the community's needs sparked a specialized training curriculum to teach participants--over two-thirds of whom were illiterate--how to use their cell phone keypads. Since directions couldn’t be written, local shops displayed “how-to” posters to guide customers through the process.

These extra considerations made the cash transfer program a practical solution, meeting the immediate needs of participants. Over half of all mobile transactions were completed in four minutes or less, and 100 percent of the mobile vouchers distributed to the participants were used.

A “one-size-fits-all” voucher system won't work in all of the diverse communities around the world. However, the spread of mobile technology presents a unique opportunity to coordinate between local NGOs and for-profit mobile and banking institutions to implement thoughtful, customized mobile voucher solutions for people who need it across the globe.

There’s no silver bullet, but success in Kathmandu proves that cash transfer programs--implemented with care for the host culture--can help rebuild in the wake of disaster, and even move communities toward resilience through improved access to healthcare, markets and economic infrastructure.


Read more about Mercy Corps' work in Nepal

Read about Mercy Corps' cash transfer program in the Philippines

Find resources at the Cash Learning Partnership

Secondary Department: 

Curated news and insights about innovative, market-driven solutions to poverty explored through news, commentary and discussion.

Learn more »

Global Envision newsletter