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By Thomas Byrnes on 26/01/2022
This note was created to promote discussion on this topic and as such cannot consider all potential issues but aims to raise awareness of potential preparedness steps that different actors may wish to consider.
Since 2015 Humanitarian actors in Ukraine have been using Cash and Vouchers (CVA) as a response option to support populations impacted by the conflict to access their basic needs. Significant operational experience has been gained during this time, and tools developed. Building upon this previous work, it is possible to undertake a review of the current state of play related to using Cash as a response option in Ukraine and identify its potential feasibility for use as an element of a potential larger response and what preparedness activities could be undertaken to enable its use.
When considering the current news reports of potentially expanding conflict in Ukraine, a question arises of the potential to rapidly expand the use of cash assistance to work in new areas if the scope and intensity of the conflict were to change. And most importantly, what steps could be taken now to enable the potential of CVA to be reached in any future response. While it is never pleasant to imagine future negative events, experiences from past responses have shown how such crisis moments have played out in many other contexts and the painful lessons the humanitarian community has had to learn about the challenges caused by failing to prepare.
Current humanitarian context in Ukraine
In 2021 the Ukraine Humanitarian Response plan sought to address the needs of 1.9 million of the most vulnerable people by providing emergency lifesaving assistance and protection across six sectoral areas – education, food security and livelihoods, health, protection, shelter and non-food items as well as water and sanitation. The primary Strategic Objective for the response has been to provide emergency and time-critical assistance and ensure access to basic essential services for people affected by the conflict.[1]
The vast majority of the 1.9 million people targeted for humanitarian assistance live in the two conflict-affected oblasts of Luhansk and Donetsk. Over 770,000 of the people targeted live in areas outside of Government-control (NGCA), while 1.14 million live in Government-controlled areas (GCA). The GCA caseload includes 189,000 people who have been internally displaced and account for 17 per cent of the people targeted in GCA. There are fewer people targeted for assistance in NGCA than GCA despite the higher severity of humanitarian needs in NGCA because ongoing access constraints continue to limit operational access limiting the capacity of actors to respond.[2]
The current state of play for CVA programs in Ukraine.
The use of cash programming has been an integral part of humanitarian operations in Ukraine since the onset of the response in 2015. The focus of these operations has been in communities in Government-controlled areas (GCA) where markets remain open and have established supply chains, and where financial service providers, including postal and bank services, are accessible and offer a delivery mechanism that is safe, efficient and suitable for beneficiaries targeted through this response. The proportion of projects with a cash or voucher component in the Humanitarian Response Plan (HRP) for Ukraine has shown an upward trend for years: it was less than 40% in the 2017 HRP, and in 2021 it reached over 50% of response activities. Between 2018 and 2020, five hundred and twenty-four thousand people were successfully supported with cash assistance.[3]
Since the very beginning of humanitarian response in Ukraine, multipurpose cash (MPC) transfers have been considered one of the most appropriate and timely modalities to address the immediate multiple needs of the affected population. As a result of over seven years of experience undertaking humanitarian Cash in Ukraine, strong systems to undertake MPC program now exist, including;
A Minimum Expenditure Basket (MEB), which includes the minimum essential food basket, set of non-food items (NFI) and essential services which is updated monthly by the Ministry of Social Policy (MoSP).
A clear methodology for determining and updating a transfer value (currently 40 usd per person per month or 1150 Ukrainian hryvnia[4]
A joint market monitoring initiative with common market assessments and price monitoring tools.[5]
a Food Security and Livelihood Cluster which has been coordinating both the technical and operational elements of cash programing
Potential for expanding the use of CVA as a response option.
Currently, it is not possible to predict the severity of needs and the magnitude of people who may be facing humanitarian needs, especially as there have been no recent examples of conflict between two modern armed forces however considering that the population of Ukraine is over 43 million people (being the 34 most populous country) even minor fighting could lead to significant displacement of people, overwhelming the capacity of the local systems to support, and requiring international support. A key part in undertaking a response analysis is to identify the key risks that may exist and if they can be mitigated or if they would prevent the use of different response options.
Risk 1: Would the markets for food and other basic items continue operating, and would cash assistance result in rapid price inflation?
Ukraine is a diversified lower-middle-income free-market economy with a GDP the fortieth largest globally and with direct rail and road links to the EU. As such, its markets can expect to remain robust and well resupplied from international imports even if domestic production were significantly disrupted. Fighting could be expected to disrupt markets, but experience from the past seven years of programming is that markets in the conflict zone have remained operational up to a five-kilometre distance from the front line and have been used to undertake CVA programs successfully. Additionally, compared to the size of the economy, the size of any cash transfer is expected to be minimal, limiting concerns about the potential inflationary impact of cash programs. As such, households will likely be able to access the markets to purchase goods, except in areas directly connected to any conflict.
Risk 2: would the banking systems remain operating and could be used to provide assistance safely?
Based on recent analysis, the Ukrainian financial sector, including the banks used by humanitarian actors, are well capitalized and are unlikely to suffer a liquidity or deposit crisis. However, their systems could potentially be compromised temporarily by cyber-attacks, and resupply of new notes to ATM and bank branches could be compromised by transport system disruption and banks' risk appetite to transfer currency during a period of conflict. However, the shortage of notes could be mitigated by the current widespread use of point of sale (POS) devices, which have widely been rolled out after recent changes to tax evation laws that have promoted their use in even rural and small shops, enable the use of debit cards directly without a cash-out mechanism. Additionally, the use of mobile wallets and mobile payment systems are widespread in Ukraine and add additional resilience to the system as they make use of robust mobile networks.
If any Ukraine FSP were disrupted significantly then global FSP solutions such as MasterCard or visa could be used to access the wider ATM and POS network if required. As such, it can be reasonably expected that the markets and financial systems would remain robust enough for cash assistance to be a realistic response option.
Risk 3: When a household is displaced, could they lose access to the documents required to open new accounts or access accounts due to Know Your Customer regulations (KYC)?
This risk can have a high impact on the ability to use Cash and, based on past displacements, has a high risk of taking place. However, this can be mitigated by identifying clearly with banks and central banks what documents can be accepted (beyond those normally used) and in an emergency setting which government bodies could issue temporary identity documents. Cash delivery mechanisms that do not require KYC checks, such as prepaid cards, could be prepositioned for use, or preparedness measures such as opening mobile wallets could be undertaken.
Potential for expanding the use of In-kind Food and NFIs as a response option.
Cash as a response option should never be considered in isolation, and because of the above risks, preparedness activities of in-kind programs as part of a rapid response mechanism is always recommended. While Cash would likely be a more cost-effective and rapid delivery mechanism (if systems are preposition and prepared), they may not always a viable option, especially as noted above in hard to reach and isolated areas close to the contact line or where active combat is ongoing. However, the key risk for in-kind that can be identified would be potential access constraints restricting the movement of goods and people around the country and into areas of need. However, the use of cash assistance can be used to mitigate this risk to a degree by providing assistance where it makes sense to do so and enabling in-kind supplies to be prioritized to areas of greatest need, reducing the total volume required. If any geographical area falls out of government control, cash will likely not be a viable response option due to existing sanctions and the lack of central bank regulation. In these areas, e-voucher and inkind programs would likely be the default response option.
Potential steps that could be taken to enable the use of CVA as a wider response modality.
From after-action reviews of past emergencies, several key steps that can be taken now can be identified that would enable humanitarian actors to be prepared to respond at scale in the case of a larger conflict. These are;
Pre-agreement on targeting approaches to be undertaken.
Identification with donors likely funding and scale of a potential response and agreement around common targeting approaches (blanked assistance for those displaced, targeted based on vulnerability criteria to prioritize assistance etc.)
Standardization of tools including;
Update past work undertaken at CWG level of registration forms standardiation to enable data interoperability.
Reaching agreement on how data collected will be stored and shared if referrals or coordination is required - In light of the sophistication of attacks in other contexts and recent ICRC experience. Data security in the Ukraine context will be critical
Reviewing of market assessment tools used in the east to identify any changes required for their use in other parts of the country. Including the need to undertake more rapid analysis and the training of teams in other areas of the country so that they have the potential capacity to respond.
Reaching agreement on a common emergency MPCA transfer amount to be used.
Ensuring financial systems are in place, including;
Review existing contracts by humanitarian actors with financial service providers to ensure that systems currently used in the east can be extended to other parts of the country as required. This can include ensuring the mapping of FSPs in Ukraine is up to date
Ensuring that procurement processes and procedures are reviewed to enable the rapid signing of new contracts by humanitarian actors with financial service providers to ensure redundancy in case of stress in the system.
Reviewing global framework agreements for CVA to enable their rapid deployment if required.
Engaging with the banking sector to identify any potential challenges, either liquidity or system disruption, that may prevent them from operating and document the banks' business continuity planning for those situations.
Discussion and agreement on an emergency preparedness plan for the response coordination
National state and non-state actors would likely play a central role in any response, so taking steps now to build connections between the humanitarian Cash Working Group and relevant actors would enable a more rapid and efficient response.
Agreement on how cash programs would be coordinated either ongoing or as part of a rapid response mechanism could be reached.
Agreement on how assistance would be coordinated or undertaken in areas that may potentially fall outside of Government-control.
Conclusion.
Experience from humanitarian contexts in Yemen, Iraq and other contexts has shown that CVA programs can be deployed rapidly at scale if required. Compared to most humanitarian contexts, Ukraine has a well-established market system and financial actors and both governments and local actors have significant experience undertaking or coordinating advanced cash transfer programming. However, the lessons and systems currently used in one part of the country would need adaptation and significant expansion into any areas not previously involved in the ongoing conflict.
Additionally, it is likely that cash assistance would be one tool along with in-kind and service provision and may not be suitable in all elements of a response. As such, it could be advised that preparedness activities, including developing an emergency preparedness plan that can be operationalized within 48hrs are developed. These could be undertaken both internally by agencies looking at their systems and contracts and between agencies, government, and local actors to enable them to respond at short notice and at scale if required.
[1] 2021 Humanitarian needs overview.
[2] 2021 Humanitarian response plan.
[3] 2018-2021 Cash Transfer Program Dashboard, https://www.humanitarianresponse.info/en/operations/ukraine/2018-2019-cash-transfer-program-dashboard
[4] Ukraine Cash Working Group Multipurpose Cash Guidance on Transfer Value June 2020
[5] https://www.humanitarianresponse.info/sites/www.humanitarianresponse.info/files/documents/files/joint_market_monitoring_findings_august_2021.pdf
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