“But What Is It Doing To the Markets?” Developing Tools and Guidance to Understand and Influence the Effects of Humanitarian Assistance on Market Vendors

This blog was co-written by Laura Meissner, Emily Sloane, and Clare Clingain. 

In humanitarian response, agencies can provide needed resources in kind to affected families-- or, as is increasingly becoming the norm, through cash transfers or with vouchers. Proponents of cash and voucher assistance (CVA) generally agree that, in addition to being fast and efficient, cash and vouchers can channel humanitarian-assistance funds through local vendors and increase the funds circulating in the local economy. This should help critical local market systems recover, in a process known as the “multiplier effect” (see here, here or here for more). 

Some additionally claim that since cash can be spent anywhere, whereas vouchers must be spent only at participating vendors, cash should be even better at propagating benefits throughout local markets. However, the multiplier effect isn’t uniform in all contexts, and is often assumed rather than actually measured.

That’s what USAID’s Bureau for Humanitarian Assistance (BHA) and the International Rescue Committee (IRC) are trying to determine by partnering on the project “Generating Evidence on the Effect of Cash Relief on Local Markets.”  By the end of the project, we expect to have evidence on which factors influence local vendors' ability to participate in commercial activity in crisis-affected markets. This includes evidence on the effect of humanitarian assistance delivered through unrestricted cash and through vouchers. And that evidence, in turn, will help USAID, its partners, and the broader humanitarian community select the best mix of programming approaches - including direct support to vendors themselves - in different contexts to maximize benefit. 

Thus far, the project has focused on vendors in Chad’s Lake Region. With input from an external technical advisory committee and through desk research, we developed  quantitative and qualitative research instruments. The qualitative tool focused on understanding vendors’ challenges and support needs and the effect of cash and voucher assistance on the market. Meanwhile, the quantitative tool was intended to rapidly capture vendor “health,” defined as a vendor’s capacity to engage in commercial activity and profit from market opportunities. This was designed mainly to help us capture the effect of cash and voucher assistance on vendors of different “sizes,” but could potentially be used for other purposes as well. After the initial tool development, we collaborated with IRC’s Chad-based staff to contextualize and refine the tools. 

In November 2019 and again in March 2020, our team interviewed a total of 370 vendors across five markets in the Lake Region, using the quantitative tool once in the first round of data collection and the quantitative tool during both rounds. Throughout the subsequent analysis process, responses have been disaggregated by the sex and business size.

Fieldwork is currently on pause due to the ongoing COVID-19 pandemic, but preliminary results from Chad indicate: 

• Although few vendors in areas with cash programming noted any effect on their business or the marketplace in November, roughly half of the vendors reported positive effects in March. Vendors stated that these benefits, such as increased sales and employment opportunities, were more pronounced for the market as a whole as opposed to their own personal businesses. Although no vendors reported overtly negative effects, some stated that the cash programming had no effect at all. 
• All of the vendors participating in voucher programs reported that the voucher intervention had positive effects on their businesses, such as increased and timelier sales of products. Although no negative effects were reported, some vendors faced challenges due to delayed payments or other NGO delays. At least two vendors also noted negative effects of in-kind assistance on overall market activity.
• Overwhelmingly, voucher vendors, semi-wholesalers, and wholesalers were male. Of the vendors who were female, a higher proportion of them experienced business interruptions at both time points, and poor business health in March.
• Many vendors in crisis-affected markets commingle their business and personal finances. Personal events, such as the illness or death of a family member and marriage ceremonies and the associated financial obligations, seemed to negatively impact vendors’ businesses just as often as, or even more often than, macro-environmental factors such as border closures and insecurity. Women vendors were more likely than men to cite household-related factors as a challenge to their business’ success. Overall, the data suggest that economic interventions seeking to support market actors will likely meet with limited success until personal shocks are also factored into program design.
• Leveraging support networks, especially for informal credit, was the main strategy that vendors used to keep their businesses afloat during challenging times. Vendors frequently referred to their suppliers as their “friends”. This dynamic underscored the fact that strong and amicable relationships with suppliers and the continued business health of relatively well-off vendors were essential to vendors’ capacity to weather difficult financial periods. 
• Many vendors were not only dissatisfied with their markets’ commercial infrastructure, but also with a lack of sufficient WASH and community infrastructure. Poor infrastructure increased the time vendors had to spend away from their businesses. The vast majority of respondents felt that support to market infrastructure would offer the most widespread benefits to all types of vendors throughout the market place. Both men and women, as well as vendors of all sizes (retailers, semi-wholesalers, wholesalers) claimed such an intervention would have the most impact. Other vendors stressed that repairing and paving roads along popular trade routes would also benefit the market as a whole.
• Capital constraints are a nearly ubiquitous challenge to business survival and growth in the face of shocks and crises. Financial assistance was by far the leading type of business support requested across all types of vendors, regardless of sex or business size. Although the preference was definitely for cash grants, many vendors also expressed an openness to loans, though there was widespread recognition of the lack of financial services available. 

What’s next? Context permitting, we’re planning to replicate some of the research in another country over the coming months, which should help us to further refine our results and help us develop recommendations. Look for our learning products -- including a tool to measure vendor health; a market support guidance document; a research report on our fieldwork findings; webinars and other events --  coming in mid-late 2021 here on Marketlinks as well as on Markets in Crises and CaLP. 

Meanwhile, we invite you to continue the discussion. What are we missing? How can USAID and partners best promote market-sensitive, market-supporting effective humanitarian assistance?