A billion people still live on less than $1.25 a day. It’s a slowly decreasing number, and there are any number of programmes to accelerate that decline. One of the most straightforward is cash transfers – just giving poor people a sum of money. It’s an idea that gets all sorts of knee-jerk reactions, usually based on the idea that it won’t be used responsibly.
In reality, research shows that the poor are likely to be far better at managing their money than you and I. With so little to work with, every penny is accounted for. They save and plan and spend far more strategically precisely because they have so little. As the authors of Portfolios of the Poor write, “money management is, for the poor, a fundamental and well-understood part of everyday life.”
In short, if you give someone in abject poverty a sizeable sum of money, there’s a good chance they’ll know exactly what to do with it. They might get a tin roof or make a significant improvement to their home. They might buy livestock, or invest a portion for a future return. Whatever they do, it will be what they think they need, rather than an NGO’s vision for them. Since the family spend the money themselves, all of the donation gets to them – no funds lost to administration or corruption.
Unconditional cash transfers have been successful when trialled, and are slowly gaining acceptance. One charity that has specialised in the field is Give Directly. Founded by philanthropists interested in the maximum return for their donations, they cut out the middle men as much as possible and connect donors to poor households.
They do this by scouting areas and identifying target households, often focusing on those in the poorest quality housing. A few checks are made for eligibility, and then they wire the money straight to the family. They usually get a one-off donation of $1,000 – a year’s wages for some. That’s a big enough grant for a step-change in their lifestyle. The charity has a range of ways to ensure that money is reaching those that need it, and prioritises transparency throughout, so that donors can see the results.
Two things have made Give Directly possible. The first is the advent of randomized control trials, pioneered by groups like the Poverty Action Lab. These more scientific experiments demonstrate which aid interventions actually work. One of the surprises that is that just giving money to poor people is one of the useful things you can do. The simplicity of this is good news for poor households, and for philanthropists who’d rather give to the poor rather than to administration costs. It’s more awkward news for charities delivering goods or services, who will have to up their game and prove that their programmes are delivering value for money.
The second thing that makes Give Directly possible is technology. They mainly work in Kenya, where mobile banking is widely used. There’s no need for local offices, agents or bank branches. It can all be done online, and then through mobile phones. Uganda is next, and as mobile services reach further, the Give Directly model can spread.
As well as changing lives for some of Kenya’s poorest households, Give Directly aims to influence development charities more widely. By delivering the most direct form of aid, they can provide a baseline that potential donors can use to assess the effectiveness of what others are doing. There are plenty of charities promising to provide goats or cows, for example. They now need to demonstrate that their established programme for delivering a goat is better value than giving the family the money and letting them buy one themselves. If it isn’t, donors will want to know why they are worth supporting at all.
There are plenty of other things that charities and development agencies can do that can’t be done through cash transfers of course. It’s one tool in the box, and like micro-lending, it can’t address needs beyond the household level – infrastructure, public services, or larger businesses that create stable jobs. But it has proved a somewhat disruptive idea.
Give Directly is still fairly new, and not without its critics. It remains rather experimental, as we don’t have data on long term change yet – does it lift people from poverty completely, or offer them a holiday from it for a couple of years? Early signs are promising, and further research will follow. It will be interesting to see how the influence of Give Directly grows, and whether they are able to establish themselves as “the benchmark against which other, more expensive approaches are evaluated.”