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In Rwanda, Research Finds Cash Assistance For Refugees Boosts Local Economy For Nearby Communities

A new study conducted in Rwanda has found that humanitarian assistance for refugees has a positive impact on the economies of surrounding host communities, and this impact is significantly greater when refugees receive cash transfers rather than food rations to meet their monthly food needs.

The study was conducted by a team of researchers from the United Nations World Food Programme (WFP) and the University of California, Davis. Their findings were just published [link] in the Proceedings of the National Academy of Sciences, one of the world’s leading scientific journals.

The study measured the local-community impact of food assistance provided by WFP to Congolese refugees living in three camps in Rwanda. Using hundreds of interviews with Rwandan community members, Congolese refugees and local businesses, researchers created a model of the economies within a 10-kilometre radius of each camp, and then compared the data between camps where refugees received monthly cash allocations, and a camp where refugees continued – at the time – to receive monthly distributions of food.

“Our research found that local communities see very real economic benefits from hosting refugee camps, regardless of the type of food assistance refugees received, but it was clear that cash-based food assistance for refugees translates into a larger boost for the people who live near the camps,” said the study’s lead author, J. Edward Taylor, Professor of Agricultural and Resource Economics at UC Davis.

“Each refugee generates real income for the surrounding community that is larger than the sum of the humanitarian assistance the refugee receives – and if the refugee is receiving cash, the impact of that assistance can nearly double,” he added.

In Kigeme, the camp where refugees were receiving food at the time of the study, researchers found that every dollar’s worth of food for refugees increased real income for the community around Kigeme by US$1.20. In two other camps – Gihembe and Nyabiheke – where refugees received cash transfers each month instead of food, each dollar they received translated into US$1.51 to US$1.95 in the local economy. The study also found a significant increase in the trade between that local 10-kilometre area and the rest of the country.

In the two cash camps, each adult refugee received an annual total of US$120 to US$126 respectively, and the research found that each additional adult refugee in those two camps increased the annual real income in the local area by US$204 and US$253 respectively – equivalent to 63 percent and 96 percent increases created by each refugee in the two camps for the average per capital income of Rwandan households neighbouring on the camps.

“When refugees receive a monthly ration of food supplies, they often sell part of it at below-market prices so they can have a little cash to buy other goods in the market, like fresh fruits or vegetables,” said Ernesto Gonzalez, a co-author of the study who works on cash-related assistance in WFP’s regional bureau in Nairobi. “When refugees receive cash instead, it not only gives them more control and choice over what they eat, but also increases their purchasing power, and therefore increases the strength of their contribution to the local economy.”

The agricultural and market conditions differ somewhat in the three camps studied, so the researchers found that assistance for refugees had a significantly different degree of impact in each area. In general, communities with a more developed agricultural sector benefitted more because farmers were more easily able to sell their produce to meet market demand. After the surveys were conducted last year, WFP switched to providing cash instead of food for refugees in Kigeme camp, and the researchers hope to conduct a follow-up study to measure the impact of that change.

“This research is vital because it is the first time we’ve been able to quantify the degree to which assistance for refugees also equals economic support and development for the communities and nations who host them,” said WFP Executive Director Ertharin Cousin. “Too often, people talk about refugees as a burden or a threat, but this study indicates that hosting refugees can economically benefit a community, and that assistance for refugees makes a concrete difference in peoples’ lives – including those who aren’t directly receiving that assistance.”

Rwanda currently hosts more than 150,000 refugees in five refugee camps. The research was conducted in three camps in southern Rwanda – Gihembe, Kigeme and Nyabiheke.

In Rwanda, and in many other countries, WFP provides more and more assistance in cash alongside the more traditional methods of delivering food supplies. These innovative cash-based transfers – which in different contexts can include physical cash, mobile money, SMS payments or food vouchers – enable WFP to respond faster to the needs of the people it serves.

They bring flexibility and agility to traditional assistance, using the latest technology available. However, providing in-kind food assistance continues to be needed in some contexts, when markets are not functioning or local food supplies are inadequate. WFP’s decision about which form of assistance to use – food, cash, or both -- relies very much on the local context and the presence of a well-functioning market.

The study accounts for the economic impact of the assistance that refugees receive. It does not, however, measure a unique feature of WFP’s assistance programmes in Rwanda, which is the extensive amount of food that WFP purchases locally. More than 80 percent of the maize and beans that WFP distributes in Rwanda – including the food provided to refugees in camps that are not yet receiving cash transfers – was grown by Rwandan farmers.

The study published this week in PNAS was based on detailed economic surveys of a random sample of refugee households and a number of formal businesses in each camp, as well as host-country households and businesses within a 10-kilometre radius of each camp to capture the main markets in which refugees transact.

It was carried out in the summer of 2015, and focused in particular on how refugee camp economies interact with surrounding host-country economies and what are the local economic impacts of alternative food aid delivery mechanisms, specifically in-kind versus cash aid distribution.

Distributed by APO (African Press Organization) on behalf of World Food Programme (WFP).