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.”
The Earthbound Report 
If you give something to someone in abject poverty, they will almost certainly end up being forced to hand it over to a landlord (in higher rent) or other extortionist. The systemic extortion needs to be stopped first.
Even street beggars have to hand over a cut of their takings to protectionists. That is how the best pitches are allocated – they are controlled by racketeers. The only way to stop it would be for the local authority to charge for the street pitches and police the use of the sites.
One might think so, but from their history, you get the impression that if it didn’t work, they wouldn’t do it. There’s a lot of independently verifiable data on their website to show that it does.
Why it doesn’t fall down the way you suggest is probably down to their eligibility criteria, and where they target their interventions. One of the groups they aim to help is families living in mud huts in rural areas. With a one off payment you can upgrade to a wood and tin house, saving time and money every year on patching and replacing the thatch and thus giving the household an ongoing benefit.
Mud huts are generally not rented, and wouldn’t necessarily come with formal land rights either. If this were done in urban areas and more formalised settlements, it may well come unstuck in the way you describe. That’s one of the reasons why this is a useful tool, but not a magic solution to poverty.
If you do not own the land you live and work on, you are effectively a slave of your landlord or employer. To most intents and purposes we still have slavery in a disguised form.
Sure, land reform is important, and has played a role in some of the most successful development stories of the past 50 years. But it’s not as if nothing useful can be done without it, and Give Directly have plenty of evidence to support what they do.
I envision a phone book of those making less than 20 a month. I envision a Sears type catalog they can order from. I envision one love letter and one check from us a year. I imagine we could sell blankets, flashlights, bug nets, runners, shower filers, buckets, real practicle, non-breakable and stealable stuff. Mad really. You can’t automate love and relationships.
It is a nice idea but no more than a gesture. Poverty is a systemic problem.
Love this post. I was facing a similar dilemma recently in South Sudan when entrusted with $600 from a Polio Points school I work with in Thailand. I usually like to find local community based organisations (CBOs) or community service organisations (CSOs) but in South Sudan there are few and the few that exist are often are linked to the pockets of already corrupt politicians. So I decided to give cash. I gave $200 to a polio survivor I had met previously and I know she will use that to stock her very small shop of tea, soap, oil, etc. and will give her the opportunity to get ahead of the game and see what happens. I also gave $500 to an entrusted community leader from the Protection of Civilians (PoC) camp in northern South Sudan who said he would use the money to activate the youth in his camp to produce drama performances for the community talking about immunisation, family planning, gender-based violence etc…
I felt it was absolutely the best use of money ahead of giving it to UN agencies (who I work for), big INGOs and in the case of South Sudan local CBOs and CSOs. If people don’t have direct access to communities in the developing world then giving to the UN and INGOs is still a good option but those of us who do have access to impoverished people and families I can absolutely guarantee it will make a positive impact with the majority of people more than the big NGOs can do on a personal level (not large infrastructure level).
I think we should look at cash as a better source of aid and less of the west knowing best and painting schools, or giving their old socks, etc. Keen to know if there is more research going into this…
Great brain-opener of a blog, thanks Jeremy.
Great post! I have a friend who lives in Nepal at the moment, but he’s spent the last nine years travelling between there and india. He raises money himself and receives donations to help poor families, mainly to fund there children top school. In the way you are says by giving the families a little extra cash the can then afford to pay for the schooling.
I recently wrote a pos about his current work helping the earthquake victims, he ventures further into the mountain than most of the aid agencies please take a look https://ideasofmassdestruction.wordpress.com/2015/05/14/urgent-ugent-nepal-appeal-they-need-our-help/
how can i get your help?
Are we safe with this money? or there is negative effect coz other people are telling us not to accept
Hard to say, since I don’t know your local circumstances. The charity itself is genuine, and you would need to get in touch with them if there are questions about negative effects where you are.