1. MIFIRA Framework Lecture 2 Response analysis and MIFIRA Chris Barrett and Erin Lentz February 2012

2. Lecture Overview: Response analysis and food insecurity Changing political economy of aid distributions What is response analysis / when is it needed? What are the benefits and costs of different transfers? Key defintions MIFIRA is one such approach to response analysis: Two framing questions and associated subquestions. Scales of analysis 2

3. Changing political economy of aid distributions Shifting from donor driven to respondent driven Increasing donor flexibility Growing interest in local and regional procurement Creates choice when responding to food insecurity: –Cash and vouchers; –Food procured locally and regionally (LRP); –Transoceanic food aid. The increasing availability of choices means that agencies need better assistance in understanding response analysis. 3

4. 4 How do Managers / Programmers Make Decisions: Situating Response Analysis within the Programming Cycle* Needs Assessment Response Analysis Response Planning Program Implementation Monitoring and Evaluation *Resource appropriateness requires ongoing market analyses

5. Objective of Response Analysis Response Analysis links identified need with appropriate response –Evidence-based to support decision-makers –Analyze the likely impact of alternative responses 5

6. The Programming Cycle: Information Gathering, Planning and Analysis, and Implementation 6 Source: Barrett et al. 2009

7. Role of programming cycle 7 Prior to commencing MIFIRA, undertake a needs assessment. Need to know (provisional) answers to: 1)The subpopulation of interest: who is food insecure? How many people fall into that subpopulation and where are they? 2)What does this subpopulation most need and how much of it do they need?

8. Why the Form of Transfer Matters Getting the form of transfer right helps livelihoods… –Households sell food aid - often at a deep discount - to purchase what they need –Yet, when markets are not functioning, cash is of limited value. … and minimizes harm to markets –Impact on markets depends on: Total amount distributed Meets needs of households - demand Seasonality Type of transfer Functioning of local market 8

9. Comparing Cash and in-Kind Food Transfers Food transfers generally recommended when: Cash transfers generally recommended when: 1.Food intake is prioritized for nutritional purposes (including targeted feeding and micronutrient objectives) 2.Markets do not function well 3.Markets are distant, or during the lean season 4.Inflationary risks are a significant concern 5.Security conditions permit (i.e., food commodities are highly visible) 6.Cash transfer systems do not exist 7.Cost savings is sought through individual / household targeting 1.Overall humanitarian need, as well as choice and flexibility are prioritized 2.Markets function well 3.Markets are nearby, or during the peak, post-harvest season 4.Production disincentives due to food aid delivery are a significant concern 5.Security conditions permit (i.e., cash is less visible but offers greater incentive for theft) 6.Cash transfer systems exist 7.Cost saving is sought through lower logistical and management overhead 9 Source: Barrett et al. 2009

10. 10 Comparing Local or Regional Purchases and Transoceanic Sourced Food Aid Transoceanic food aid generally recommended when: Concern that procuring food will cause inflationary pressure in source markets Concern that traders will default on tenders or will drive up prices in anticipation of agency purchases Concern that quality and safety standards cannot be met with LRP food LRP procured food generally recommended when: Time is of the essence. LRP tends to arrive faster than transoceanic food aid. May be able to time deliveries to coincide with the lean season, minimizing production disincentives. Potential for cost savings, especially for bulkier products, such as grains and pulses Source: Barrett et al. 2009

11. Food Insecurity: Identifying responses How to choose the most appropriate transfer? –Tradeoffs across each transfer –Many of the costs and benefits of the various transfer options are contingent upon markets. –Understanding markets’ roles in addressing food security can lead to designing better social transfer schemes in programs –Important non-market factors 11

12. 12 What is a “market”? Markets are composed of: –Buyers –Sellers –Institutions and infrastructure –Others behind the scenes: importers, processors, storage owners, wholesalers, credit suppliers, government officials and policies Relative functioning of a market depends on: –Number, size, independence of buyers and sellers –Formation of prices –Availability of information on prices and costs –Ease of entry and exit Relative functioning of a market system depends on: –Reliability of contract enforcement –Integration across markets –Institutional framework (infrastructure, government policies, etc.)

13. Market Vocabulary 13 Source: FEWs (2008) Market Analysis and Assessment. Lesson 1, p. 12.

14. Commodity Channels Vocabulary 14 Source: FEWs (2008) Market Analysis and Assessment. Lesson 1, p. 5.

15. 15

16. 1a. Are food insecure households well connected to local markets? 1b. How will local demand respond to transfers? 1c. How much additional food can traders supply at or near current costs? 1d. Do local food traders behave competitively? 1e. Do food insecure households have a preference over the form/mix of aid they receive? Q1. Are local markets functioning well? 16

17. First MIFIRA question, “Are local markets functioning well?” 17 Source: Barrett et al. 2009.

18. Tracing out Different Supply Patterns Source: Barrett et al. 2009.

19. 2a. Where are Viable Prospective Source Markets? 2b. Will Agency Purchases Drive up Food Prices Excessively in Source Markets? 2c. Will Local or Regional Purchases Affect Producer Prices Differently than Transoceanic Shipments? Q2. Is There Sufficient Food Available Nearby To Fill The Gap? 19

20. Second MIFIRA question,“Is there sufficient food available nearby to fill the gap? 20 Source: Barrett et al. 2009.

21. Scales of Analysis and Complementary Agency Analysis Capacities 21 Source: Barrett et al. 2009.

22. Resource Transfer Choices or Combinations Will Make a Difference Cash transfers and vouchers to support purchasing power and local markets, quickly Local procurement to energize local markets and use local food products Cash and local purchases to strengthen local food chains and support smallholders Food aid to support people during combined availability and market failures 22