Somalia

Micro-enterprise in humanitarian programming: Impact evaluation of business grants vs. unconditional cash transfer

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By Munshi Sulaiman

Abstract

How can unconditional cash transfers (UCT) be leveraged to boost household incomes beyond addressing short-term food insecurity in a prolonged humanitarian crisis setting? Using a randomised control trial in Somalia, we test additional benefits of changing UCT into business grants while also varying the size of the cash transfers. We found receiving the same amount of money as a one-off business grant (instead of two monthly UCT transfers) increased likelihood of the households engaging in non-farm businesses by 15 percentage points in the short-term (3-4 months after the transfers). These effects did not last in the long-term (3.5 years after the transfers). We, however, found medium ($500) and large ($1,000) business grants sustain investment in non-farm businesses into the long-term. In the long-term, both medium and large business grants realised similar profit margins, averaging $20 per month. Examining the social returns in terms of impact on income, we found recipients of medium-sized business grants had equalised intervention cost by the third year while large-size grantees needed extra two more months to break-even. Therefore, in terms of returns to investment, $500 grant is more cost-effective than $1,000 grant in the long-term.