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Cost efficiency: non-food item distribution

As the scale and complexity of humanitarian emergencies grow, an unprecedented number of crisis-affected people are in need of support to meet their basic needs. Common programs, such as distribution of food and non-food items (NFIs), are successful at meeting population needs, but are often criticized for being expensive and logistically complex to address increasing demand. In contexts with functional local markets, many humanitarian agencies are beginning to consider substituting cash transfer programs—where beneficiaries are directly provided with the means to purchase the goods they need and want—for traditional in-kind assistance. Some existing studies have explicitly compared the efficiency and effectiveness of cash transfer versus NFI programs, but few were conducted in emergency contexts. To better understand the trade-offs, the International Rescue Committee (IRC) conducted methodologically identical analyses of its cash and NFI programs to compare their cost efficiency.

This analysis considered seven NFI distribution programs from six countries, examining the “ingredients” necessary to implement the programs, the cost of each program per dollar of value transferred, and how cost efficiency is influenced by programmatic and contextual features. The results are compared to the cost efficiency estimates for eight IRC cash transfer programs, discussed in “Cost Efficiency Analysis: Unconditional Cash Transfers.”

  • Looking at IRC distributions from 2014–2015, the average cost per dollar of value transferred to clients was approximately 25 cents in the Middle East—not very different from the cost efficiency of unconditional cash transfers in that region. This may be, in part, due to the size of the NFI programs relative to the cash programs to which they were compared; as a result, ‘fixed’ costs like warehousing decreased per dollar of goods that moved through them.
  • However, comparing programs of the same scale in the same region reveals that cash transfer programs were more cost efficient than NFI programs. Comparing cash and NFI programs that served fewer than 1,000 households, NFI programs cost more per dollar of value delivered than cash programs of the same scale. No data was available at the time of this analysis for cash transfer programs serving more than 1,000 households; this will be incorporated into future analyses as financial data from recent large-scale cash distributions becomes available.
  • NFI programs demand additional staff and resources to manage the warehousing of physical goods, but these costs are small relative to the value of the goods distributed when NFI programs are large. Because NFIs have served as a cornerstone of humanitarian programming for decades, the procurement, warehousing, and transportation systems to deliver these goods are large and well established, allowing the IRC to take advantage of significant economies of scale.
  • The IRC is making a strategic shift towards cash transfers in contexts with functional markets due to these potential efficiency gains, as well as greater flexibility for clients and local markets stimulus that cash transfers encourage.

Available documents & links