The Key Risks Addressed Here Are Related To;

The Key Risks Addressed Here Are Related To;

This guidance note is part of a series of nine modules that seeks to provide support to humanitarian actors working on Cash Based Programming in Somalia. These guidance notes are meant to provide an overview of the topics while pointing to materials with more in-depth explanations.This module aims at providing some key questions and possible answers to consider throughout the project life cycle.

The key risks addressed here are related to;



-Conflict sensitivity

-Timing of distribution

-Impact on the market

-Gender considerations

-Use of cash/inputs provided

-Financial limits



«Diversion is a widely used term, meaning any resources (cash or in kind assistance) that do not reach the intended recipient, because of ‘an abuse of entrusted power for private gain»[1].

Diversion can occur through entities being able to influence the targeting process (inclusion and exclusion factors) and controlling the distribution (taxation, fake distribution). Therefore, it is important for the implementing organization to set up proper mechanisms during the project design and project implementation. High levels of diversion would result in not reaching the objectives of the project.

As an underlining principle, your organization should have prepared a risk management framework, or risk analysis of some type. This exercise should be documented and repeated periodically. There is much less likelihood of a lack of mitigation measures if you have done a proper risk analysis. It can take many hours, if not days, but once done it provides consistent guidance and protection from unwanted diversions.

1.1Selection of beneficiaries

Mitigation strategy / Means of verification
⎕ List all the key groups, especially minorities, present in the targeted area with a focus on the groups at risk of being excluded for any reason (gender, clan, geographic, livelihood,disability) / ⧠ Report on context analysis.
⧠ List of profiles of beneficiaries and their representation compared to the target group.
⎕ Define the process of selection of beneficiaries.
⧠Agreement on the selection criteria per targeted group and the proportion of each group.
Specific group / Selection criteria / Mode of cash transfer / % targeted
xx / -xx
-xx / xx / xx
xx / -xx
-xx / xx / xx
⧠Define who will do the beneficiaries’ registration.
⧠Define who and how list of beneficiaries registered will be verified.
⧠Define how beneficiaries’ list will be updated and by who. / ⧠ Selection criteria per group of targeted beneficiaries signed by local stakeholders and IO staff.
⧠ List of beneficiaries signed respectively by registering and verifying entities.
⧠ List of beneficiaries should be structured with information on each beneficiary status compared to each selection criteria.
Bio data (name, phone, age, gender) / Vulnerability criteria
⎕ Inform the community on the selection criteria through radio or public notice. / ⧠ Information shared with the community on the selection criteria. This can be public notice, sensitization report (date, location, attendance).
NB: The message should also link the community to use the complaint mechanism by making public the phone numbers and other processes to be used.

1.2Distributing to the right beneficiaries

Mitigation strategy / Means of verification
⎕ Define the rules of verification of the identity of the beneficiaries by the suppliers / Hawala.
⎕ Use of ID card with photo when possible.
⎕ Ask questions related to the profile of beneficiaries.
⎕ Use the phone number as a mean of identification.
⎕ In case of voucher distribution related project, vouchers with serial numbers should be used. / ⧠ Rules of the verification of identity of beneficiaries by the suppliers / Hawala stated in the contract between IO and the supplier / Hawala.
⧠ In case of voucher distribution project, the voucher serial number should be reported on the distribution list by Hawala/supplier and verified by IO.

1.3“Ghost” beneficiaries and lower than expectedlevel of inputs received by beneficiaries

Remark on Cash: The main risk related to cash distribution is that of“ghost” beneficiaries[2] and taxation (before / during/ after distribution) of beneficiaries.Hawalas have set up their own internal systems to develop some assurance over the amounts transferred between branches and to the clients. IOs approach should avoid developing a parallel system and should consider the following points to decrease the risk of diversion.
Mitigation strategy / Means of verification
⎕ Understand what the Hawala warranty mechanism in place is and build on it. / Will the cash to be distributed be entered on the Hawala electronic system? / ⧠ YesNo ⧠
Where is the cash entered into the Hawala electronic system? / ⧠Head office
⧠Capital office
⧠Regional office
⧠District office
⧠ Village branch
Is the amount to be distributed in each branch below the authorization/warranty allocated to this branch by the Hawala head office? / ⧠ YesNo ⧠
Will beneficiaries be aware of their entitlement before the distribution takes place? / ⧠ YesNo ⧠
Who will inform beneficiaries of their entitlement? / ⧠IO
⧠ Local authority
⧠ Others
Will the cash be distributed through the Hawala be entered on the electronic system? / ⧠ YesNo ⧠
From where will the cash enter into the Hawala electronic system? / ⧠Head office
⧠Capital office
⧠Regional office
⧠District office
⧠Village branch
⎕ Emphasize information to beneficiaries on their entitlement, in advance, and by IO staff. / Will beneficiaries be aware of their entitlement before the date of distribution?
List of items specifying the quality, and quantity of items. List should be displayed at the supplier’s shop. / ⧠ YesNo ⧠
Who will inform beneficiaries on their entitlement? / ⧠IO
⧠ Local authority
⧠ Others
Will the IO deploy regularly and in an ad hoc manner IO staff at the supplier’s shop to verify quantity distributed and respect of the process of reporting / accountability. / ⧠ YesNo ⧠
If yes, at which frequency
⧠ Daily,⧠ Weekly,⧠ Monthly

2.Conflict sensitivity

Conflict sensitivity is about avoiding possible influence of the conflict dynamics or local tension on theproject design.
Remark: While the selection criteria cannot be perfect and conflict sensitivity could influence the selection process, the implementing organization should be clear about it, not only at proposal level but also at implementation level.
Mitigation strategy / Means of verification
⎕Be transparent and inclusive during the design of the project and especially during the selection process (beneficiaries, suppliers, sites selected for cash for work). Be aware that clan bias in the selection of sites, suppliers, beneficiaries will be measured during external review of the project. / ⧠ Justify / explain how the actors of the conflict do / do not benefit from the project.
⧠ Feedback mechanism report.
⧠ Analysis of the representativeness of the various layers (clan, gender, and livelihood) of the beneficiaries of the project compared to the profile of the targeted group as a whole.

3.Timing of distribution

The timing of distribution will be a key element to consider during the selection of the design of the project. Modules on “justification” and “design” should be referred to.
Timing of emergency project is always a challenge considering the time allocated to each step of the project (selection, procurement, supply chain). Therefore, the timing should not be too ambitious and should acknowledge the complexity of the area of intervention.The most urgent cash interventions might have lower preparation and would be more exposed to more potential diversion. As a result, if the selection of the modality of cash intervention is prioritized due to timing, the timing of delivery should be respected to keep the comparative advantage of this modality.
Mitigation strategy / Means of verification
⎕Prepare in advance the most time consuming steps of the project cycle.
⧠Prepare the list of beneficiaries prior the signing of the contract with donor.
⧠Prepare the selection of suppliers.
⧠ Identify the goods foreseen to be needed/preferred by the beneficiaries.
⎕Anticipate the delay along the process / Anticipate the risk of shortage of goods through regular monitoring of good availability, local prices through regular discussion with suppliers.
Possible delays could occur due to:
⧠ Insufficient capacity (financial, logistical) of suppliers
⧠ Road status could deteriorate during the rainy season.
⧠ Conflict on the road.
⧠ Worldwide shortage
⧠ Low availability of local production.

4.Impact on the market

The key risk of the cash or voucher approaches is the capacity of the suppliers to absorb the demand (i.e. key items availability with no abnormal inflation). Lack of needed items would implythat the project would have no impact as the key items would not reach beneficiaries. Increase in thecost of items would reduce the quantity received by beneficiaries and would therefore reduce the impact of the project. Moreover, distortion of the market would have negative impact on the community as a whole.
Mitigation strategy / Points to consider
Measurement of the fluctuation and status of the market would be necessary to understand how markets are reacting to the increased demand generated from the cash intervention project. The evolution of the markets remains out of the IO’s control and therefore the impact of the market is mainly reviewedduring the design phase (selection of suppliers, appreciation of what would be the demand from the beneficiaries buying items, what would be the obstacle and constraints from the market). / ⧠ Isprice monitoring planned?
⧠ If yes, what would be the frequency of this monitoring?
⧠ If yes is there a list of items and their specific unit prepared to be monitored?
⧠ Are regular discussions with business community members planned to anticipate shortage, inflation … of specific items?
⧠ Is communication with FSNAU established to compare data collected on market?
⧠ Are there risks of artificial control of prices? If yes, why?
⧠ Is there a “pause” in distribution considered during the project cycle during harvest time notably to reduce negative impacts on the local producers.

5.Gender considerations

What is the role of women and are women empowered through this project?Prioritizing women does not necessarily imply women’s empowerment and could even be counter-productive. Therefore, the gender aspect should be considered based on local perception and indirect positive or negative social effects respectively for men and women. How men are considered in the project and how they are impacted by any strategy chosen should also be emphasized in the implementing strategy.
Mitigation strategy / Points to consider
⧠Regular monitoring / ⧠Measure ideally through focus group discussion (FGD) respectively with men and women, their perception of the use of the cash and understanding who decide how to use the cash.
⧠Measure / observe the implications for women to be beneficiaries of the project (contribution to cash for work vs. children management, going to the distribution site vs. security implications, …)

6.Use of cash/inputs provided

How the cash is received/ controlled and spent at household level? Is it really addressing the objective of the project?
Mitigation strategy / Points to consider
⧠Regular monitoring / ⧠Regular monitoring on the use of the cash/inputs at household level.
⧠Expenditure pattern, food consumption, evolution of livelihood activities and investment.
⧠ Measure the level of resale of items on the markets in the case of commodity distribution via voucher.
Ensure monitoring of the factors which will impact the objective of the project (i.e, what change is the cash transfer supposed to achieve?)

7.Financial limits

Mitigation strategy / Points to consider
The volume of cash transfer can be significant compared to the capacity of some Hawala/voucher supplier. The IO should understand the real financial capacity of the Hawala or voucher related suppliers to avoid cash flow limitation and / or bankruptcy. The maximal amount the Hawala / supplier is able to handle should be appreciated as part of the risk definition.Exceeding the financial capacity could have major impacts on the timing of the distribution. / Maximal financial capacity of the Hawala / voucher supplier
If possible, the IO could look for bank bond / insurance to be provided by Hawala / suppliers to IO ? / ⧠ Yes⧠ No
If yes, which warranty can be provided as a bank bond / insurance.This approach will enable low risk for IO If at all the Hawala company accepts these conditions.
Could the Hawala / suppliers pre-finance the payment and get paid after verification of the process? As above, the risk is then on the Hawala / voucher supplier and might not be acceptable for them. / ⧠ Yes⧠ No
Increasing the request on the Hawala/ voucher supplier to provide warranty would however increase the cost of the service and would not always be possible.


[1]Definition of diversion extracted from Cash consortium for South Central Somalia, Approach to risk mitigation. Updated April 2013.

[2]Ghost beneficiaries refer to a diversion method virtually increasing the number of beneficiaries by using fake names on the list of beneficiaries and diverting the level of inputs planned for these non-existing beneficiaries.