The Impact of Cash Transfers on Local Economies in Iraq: Lessons from Baiji and Rawa

Executive Summary

This report provides the findings of a two-part research undertaken by Proximity International for the Cash Consortium for Iraq (CCI) on the impact of Multi-Purpose Cash Assistance (MPCA) on local markets. The study focuses on two locations targeted for assistance by the CCI: the southern neighborhoods in Rawa (Anbar governorate), and three neighborhoods in Baiji (Salah al Din governorate). These two locations were selected because they had not received cash assistance for a year or more prior to their selection for CCI assistance, making it possible to control for previous cash assistance received.

During the research period, CCI partners Oxfam and IRC distributed $770,800 into the local economies studied here. The majority - $674,800 - was transferred in Baiji, with $96,000 being transferred to households in Rawa.

Our research suggests that there is evidence that the cash assistance distributed between December 2018 and February 2019 impacted the economies of Baiji and Rawa. However, this impact must be framed within the larger context of certain patterns within the nonurban Iraqi economy including a trust-based credit and debit system. It must also take into consideration the fact that these communities and economies are just beginning to recover from a conflict that nearly destroyed them as displaced persons increasingly return to these locations.

Vulnerability of businesses & traders in Baiji & Rawa

Businesses in Rawa and Baiji are functioning within the pre-existing framework of a largely informal economy and are still suffering from the consequences of the conflict, namely rebuilding destroyed businesses and regaining their stock. This is the case in both locations, but overall houses and businesses in Baiji were more badly affected due to the intensity of battles between the Islamic State of Iraq and Syria (ISIS) and the ISF and allies over the nearby oil refinery. All businesses assessed in both locations reported having suffered damages to storefronts or losing stock.
For communities in recovery from such significant destruction, it is important to remember that owning a business does not preclude socioeconomic vulnerability. In fact, 30% of traders in Baiji were also MPCA recipients. Most spent this cash on paying debts, healthcare and purchasing essential food and non-food items, but a few noted they used some of the assistance money to support their businesses by purchasing additional stock. No traders surveyed in Rawa were MPCA beneficiaries.

Impact of MPCA on Formality & Size of Businesses

The majority of businesses assessed were small, informal, family-run ventures where one or two people, usually working-age males who are related, assume most of the responsibility and various family members support on an asneeded basis.
Of the 82 traders originally assessed:

• 15 were women

• Female business owners were typically running businesses selling small clothes, candy, and basic groceries out of their homes and selling to other women.

• Only 16% of businesses were formally registered.

There is no evidence that the injection of cash assistance into these markets impacted the formality or size of businesses in the respective locations.