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Cover image of the brief 'Cash transfer models and debt in the Kalobeyei settlement'

The latest research brief from the Refugee Economies Programme focuses on the use of cash transfers in the Kalobeyei settlement in Kenya. It summarises the findings of a report by the same name published this summer.

The use of cash transfer programmes in humanitarian contexts is growing. In comparison to in-kind assistance, cash transfers are widely praised for enhancing autonomy, reducing costs, and boosting local markets. There are various kinds of cash transfer, from food vouchers to mobile money, and cash. Yet, evidence on the relative merits of these different models is scarce.

Using first-hand data from 896 refugee households in the Kalobeyei settlement, the authors make use of a ‘natural experiment’ to study the relative effects of restricted versus unrestricted cash transfers to refugees. Their research shows that removing restrictions on cash transfers has positive impacts on household asset ownership and subjective well-being. Households receiving unrestricted cash transfers are also less likely to engage in the costly practice of reselling food in order to access non-food items.

There is some evidence that unrestricted transfers may lead to higher expenditure on alcohol and tobacco, though this related to only a limited proportion of households and a small proportion of their budget.

Both forms of cash transfers are associated with a massive problem of indebtedness, which undermines their effectiveness. A staggering 89% of sampled households are indebted towards their retailers. Cash transfers are used as a form of collateral by retailers to guarantee debt repayment.

The brief concludes with a discussion of the pros and cons of various policy options for addressing the problem of indebtedness, including debt repayment schemes or debt relief, social safety nets, more frequent transfers, training, and monitoring.

Read the brief Cash transfer models and debt in the Kalobeyei settlement here (pdf 1.5 MB)