GiveDirectly: The Future of Foreign Aid?
WHY YOU SHOULD CARE
Because there might be a simpler, more efficient way to use the billions of dollars we donate each year to international charities.
Just give money to the poor: That’s the essence of GiveDirectly’s strategy for global good. It sounds way too simple to work. What about trainings and empowerment and oversight?
But initial studies suggest it works very well indeed — and that GiveDirectly could jumpstart an entirely new way of easing global poverty.
In western Kenya, GiveDirectly grants recipient families about $1,000 over the six to nine months, more than doubling their annual incomes, on average. Recipients can spend the money however they want. So far, it seems, they’re making investments with long-term returns: sturdy tin roofs that, unlike thatched ones, don’t require constant repairs; school fees for their children; and livestock and land.
One internal study of the cash transfers found that families saw their personal assets increase an average of 58 percent over a year, while monthly incomes rose an average of 28 percent, thanks to returns on investments made with GiveDirectly cash. (The study was conducted by a researcher at MIT’s Poverty Action Lab and a co-founder of GiveDirectly.) Just across Kenya’s western border in Uganda, a three-year government cash-transfer program had similar success.
Could the GiveDirectly approach rescue development? For decades, foreign charities, especially in East Africa, have invested on overhead-heavy projects and high salaries for foreign staff. Many projects fall short of ambitions, some flat on their faces. Kenya and Uganda are strewn with wells whose pumps have stopped working and charity-built schools that remain empty because there’s no money for teachers and parents can’t afford the school fees.
“I think GiveDirectly might be ahead of all these (other) organizations,” said one recipient, a 39-year old corn and tomato farmer who plans to use his transfer to get into the chicken business. “Because now it is you who could fail, but GiveDirectly has done their work.”
Yet the program has challenges, especially when it comes to figuring out who shall receive. For now, the charity excludes people whose houses have tin roofs, as opposed to thatched ones; they’re perceived as better off. The demarcation sometimes leads to animosity between residents, but GiveDirectly’s higher-ups say its better to reserve the cash for the poorest of the poor.
GiveDirectly chose Kenya in part because of ’the robustness of M-Pesa as a mobile banking platform’…
Then there are the imposters. Some villagers try to install out-of-town relatives in abandoned houses to cash in, says Carolina Toth, Kenya Field Director for GiveDirectly. “We have a lot of people trying to cheat us in various capacities, and those people are usually not the extreme poor.”
Verifying identities requires home visits, but getting around in rural Kenya can be tricky. In April, I hired a motorcycle driver to navigate the dizzying web of dirt paths to visit cash-transfer recipients. First, the driver would call recipients for directions. They’d provide landmarks like “cypress tree” and “fence,” of which there were many. At one point, the driver picked up a toddler, said by onlookers to be the nephew of a cash-grant recipient, and plopped him on the front of the motorcycle. He pointed our way to his aunt’s house.
The idea of giving cash to the poor dates back several decades, when the Brazilian and Mexican governments began giving small, recurring grants to families, usually mothers. To qualify, mothers were required to attend nutritional and health seminars, bring their kids in for health checkups and ensure they attended school. These were widely considered successful, and Brazil and Mexico have now expanded them to as much as 30 percent of their populations. Similar programs have taken root across Latin America and the globe.
But not until the 2000s did governments and private charities begin experimenting with unconditional cash transfers — no-strings-attached grants. GiveDirectly, founded by MIT and Harvard graduate students in 2008, capitalized on the nascent movement. By August 2013, it had raised $6 million. Charity rater GiveWell estimates that GiveDirectly could efficiently disburse $10 million this year, if it could raise that much.
To be sure, individual cash grants can’t solve everything. They won’t build infrastructure like water and sewage systems, electricity, roads and bridges. Critics worry that cash transfers could lessen pressure on governments to provide public services. Cash transfers can enable the poor to access services, but they can’t “resolve supply-side problems with service delivery (e.g. teacher performance or the training of public health professionals),” warns British aid agency DFID.
And many poor, rural areas lack the infrastructure to make cash-transfer programs viable in the first place. In Kenya, mobile-banking services like M-Pesa make sending money easy. Indeed, GiveDirectly chose Kenya in part because of “the robustness of M-Pesa as a mobile banking platform” and the large number of poor people who have access to mobile technology. But mobile banking is less widespread in neighboring Uganda and other countries.
Still, GiveDirectly hopes its approach will appeal to donors who are fed up with NGOs starting projects that they never finish or that do little long-term good. Unlike traditional aid initiatives, GiveDirectly doesn’t fund community-wide initiatives or trainings.
“We want to focus on doing one thing well, and that’s delivering cash,” says Toth.
Jacob’s research in Western Kenya was funded by GiveWell, the non-profit research organization that evaluates the work of different charities and recommends “top charities,” among which is GiveDirectly.