It's often thought that humanitarian aid is given as a response to a sudden drastic event: A natural disaster occurs, and altruists worldwide rush to send food and supplies to the needy. This line of thinking is incorrect, stated the Overseas Development Institute. According to one of its reports, most help (89 percent) goes to places that have been in distress for over three years. Sixty-six percent of relief efforts are given to areas that have needed help for eight or more years.
While in-kind relief efforts – sending food, materials and experts – play a large part in helping disaster-stricken communities, the ODI said the avenue of electronic payments is the best option through which donors can give, nonprofits can disburse and the destitute can receive.
Easy for donors, efficient for nonprofits
Direct debits are streamlining the giving process for benefactors and charities. Donors can specify the amount they'd like to give – sometimes to the exact dollar – and then set how frequently the money is sent from their bank account. The charity takes care of the rest. What's more, if the donors decide to no longer contribute, they can easily cancel their direct debit.
That freedom of cancelation might make some nonprofits nervous, but it doesn't seem many people go through with the process. When speaking to the European Fundraising Association, Scott Gray, managing director of Rapidata Services, said that direct debit is now the most popular donation channel in the United Kingdom. Direct debit transactions increased by 2 million in frequency from 2012 to 2013, and cancelation rates fell to a record low of 2.4 percent that same year. For organizations wanting to minimize cancelations, Gray suggested tracking them on a month-to-month and year-to-year basis to determine when cancelations typically happen and what preventative steps can be taken.
Direct debit aids charities by eliminating the fees and processing times associated with collecting other forms of payment, Gray added. The processing time is minimal, and the money is quickly sent where it needs to go.
Payment solutions for those in need
The ODI agreed that direct debit increases ease of use on the giving end, but it also extensively discussed how financial assistance better provides for those in need. Money, the organization said, costs less to send than provisions. Based on a study in Niger, Uganda, Yemen and Ecuador, if everyone who had received aid been given money instead of food, 18 percent more people could have been provided for without any additional cost.
Financial donations allow those in need to determine what best benefits them, not a foreign, unaffected party. For instance, in 2014, 70 percent of Syrian refugees sold the food that was donated to them instead of consuming it. For those refugees, money was a resource much more necessary than food. The ODI report referenced Nobel prize winner Amartya Sen who believed that famines weren't caused by a lack of food but by the lack of funds to pay for it.
People given monetary relief contribute to the local economy by spending that money within their communities. The report stated that cash denotations improve local markets, enable investments and are preferred by area citizens. What's more, those local markets do not suffer from inflation after the influx of money.
Monetary donations are also more transparent: There's quantifiable data on how much money is donated and where it goes. For example, those in Pakistan were given a total of 1.2 million prepaid cards after the flooding in 2010. It would be difficult to track the number of meals given if they had received food instead, and donors would have less of an idea as to how their donation was used.
Some may fear sending money would be nothing but wasted effort, expecting beneficiaries to spend it on vices or superfluous purchases. The ODI report disputed this claim, stating there is much evidence proving people spend humanitarian funding on what's needed and not on "anti-social purposes."
Still, electronic payments do not negate the need for or benefit of in-kind donations and human help. While it's more beneficial in some ways, money isn't effective at targeted solutions like providing clean water or increasing farm production, the ODI said. All humanitarian efforts need to be combined, with electronic payments at the forefront, to provide relief around the world.
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