Friday, May 12, 2023
Friday, May 12, 2023
As the crisis in Sudan appears to be sliding inexorably towards civil war, the UN and its non-governmental partners are planning for a protracted humanitarian catastrophe.
As is usual at the beginning of such disasters, the situation is fluid and uncertain. Aid stockpiles have been looted while hundreds of thousands have sought sanctuary in neighbouring countries, most of which are already facing their own humanitarian crises. Hundreds of thousands more are displaced as they flee local violence. Widespread and potentially long-lasting food insecurity looms.
The UN-facilitated Cash Working Group for Sudan, temporarily based in Nairobi, Kenya, is considering its options. While there will be a short-term requirement for food-aid, the bulk of the response is likely to involve cash transfers. But in what form?
This is what we know at the moment:
There is a liquidity crisis. The Central Bank of Sudan is unable to distribute local currency by air or road from its cash centres in Port Sudan and Omdurman. ATMs are empty and bank branches closed.
Mobile money transfers from diaspora abroad, mostly through Zain, are partially functional across most of the country but are interrupted by power and internet outages.
Electronic payments at point-of-sale, increasingly popular before the crisis, especially in Khartoum, no longer function.
The people are demanding cash, not electronic transfers.
The informal ‘hawala’ network is only working in certain areas. Commissions of 17% are not unusual.
Evidence of cash transfers for social protection from Libya, Syria, Lebanon, Yemen and elsewhere in the region over the past decade have taught us the following:
1. Physical currency is always preferred. The last mile of digital transfers almost always ends with recipients cashing-out the full transfer value at the earliest opportunity.
2. ATMs are the preferred cash-out option as long as their charges are deemed ‘fair’. There are many reasons for this, mostly connected to perceptions of security, dignity, gender equity and conflict- resolution with host communities.
3. Access to local currency (in this case, the Sudanese pound) can itself be part of the peace-making process.
4. When international aid agencies are involved, recipients prefer $100 bills as a hedge against inflation.
5. Local markets bounce-back extremely quickly if lines of credit, insurance and supply-chain security can be guaranteed by the warring parties.
The aid community and its private sector counterparts have to be ready for a rapid and sustainable escalation in cash assistance. Already, fintechs like Aidonics and Zain are advertising the benefits of end- to-end electronic transfers. There will be a time to consider the costs and benefits of all options, but that time is not now.
Neither consumers nor merchants are willing to trust electronic payments systems in times of such political uncertainty. As in the Syria crisis, international aid organisations involved in planning for what happens next in Sudan should follow the example of Syria’s neighbouring countries by preparing to scale up cash distributions using pre-paid debit cards and ATMs. This will likely involve the establishment of an entirely new ‘ATM-based retail banking’ system across Sudan.
Waiver of cross-border fees, reductions in interchange, interoperability and the daily setting of exchange rates will also have to be high on the agenda.
In light of all this, the Cash Working Group for Sudan – like Cash Working Groups the world over – would benefit from independent advice from a former central banker who understands retail payments, cash management for societies in crisis, and the Africa/Middle East payments environment.
Volunteers should contact the author directly in the first instance, at firstname.lastname@example.org.
James Shepherd-Barron is a management consultant with over 30 years’ experience advising international aid organisations and governments on disaster risk management policy and practice. A former UN official and Global Director of Emergencies for CARE International, he also founded Disasterwise.org, an online information platform which explores the myths, maths and management of crisis and disaster.