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Beyond Cash: Making Markets Work in Crisis

Mar 1, 2018 | by Mercy Corps

Markets are vital to our well-being, yet they falter when war, violence, and natural disaster rip through communities. Goods become less accessible, incomes fall, and uncertain futures limit willingness to invest.

Yet even during prolonged conflicts, markets rarely collapse entirely. People find new ways to produce, exchange, and consume. Not only do they find new economic outlets: they depend on their markets, social networks, and local support systems more than they depend on external aid.

Despite this, traditional aid often overlooks these market systems; it may bypass them through the direct delivery of in-kind assistance and can undermine them with supply-driven programs. This is a mistake the aid sector is recognizing it can no longer make. Conflict currently drives 80% of humanitarian needs. By 2030, half of the world’s extreme poor will live in conflict-affected settings.2 We must serve those affected better. That requires moving past traditional approaches and recognizing the capacity that sits within crisis-affected communities and networks, particularly their durable markets.

The growth of cash transfer programs is a critical first step in this shift. Compared to in-kind assistance, which can undercut local economies and their ability to supply key goods, cash transfers enable households to purchase what they need through local actors, invest in economic opportunities, and repay debts.3 But cash transfers still focus on directly providing resources (in this case, cash) to people, rather than strengthening people’s capacity to access those resources themselves through local systems.

The aid sector needs a new vision for crisis response—one that is market-driven, that leverages the capacities of non-aid actors in local and global economic systems, and that ultimately gives crisis-affected individuals the ability to drive their own decisions and secure their own lives and livelihoods. The approach in this paper, grounded in resilience thinking, recognizes that systems-led responses are central to helping individuals cope and recover. It requires aid actors to focus on core cross-cutting issues, including strengthening financial services systems and understanding the role of social and political power in markets. At a practical level, it involves targeted market support to essential business and local institutions that have more reach and sustainable impact than aid agencies. While this paper focuses on economic systems, these theories have broader implications—they also impact health, education, and other systems crucial to life and livelihoods.

Categories: Resilient Markets Resource Library 2018 Resources

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