Cash Transfers - Lump Sums

Lump Sums

One method of managing a cash transfer is to provide all the money at once in a lump sum, rather than in small regular amounts. Researchers at the Overseas Development Institute carried out a study on the effectiveness of the Swiss Agency for Development Cooperation's experiments with lump sum cash transfers and came out with the following six findings:

1. Lump sum transfers work better in post-emergency than developmental contexts as their potential to be rapidly transferred to the recipients suits the urgency of post-emergency requirements.
2. Success of lump sum transfers greatly depends on the local market and whether there are long-term income generating investments to be made. Areas affected by illness (e.g. HIV/Aids) or other such problems are likely to benefit more from regular small payments.
3. Economic conditions other than limited markets or limited investment opportunities are also important, for instance, if the scale of the transfer greatly exceeds several years of local incomes recipients are unlikely to be able to know how to prudently invest the cash. Where there is a clear investment potential, care should be made to support the recipient while lump sum investment matures, e.g. someone who buys a cow still needs to eat while waiting for the long term benefits (calf, milk) and so must be helped in order to ensure s/he doesn't sell the cow.
4. While business planning, skills enhancement and training support is useful, if a clear investment opportunity (fishing boat, cow, etc.) is available, that is normally enough.
5. Context must be considered, e.g. people cannot build a house if they have no access to land.
6. Large cash transfers risk creating corruption or being used as a tool to gain political support for the government.