GiveDirectly has a straightforward approach to helping the world’s poorest people: just give them cash, no strings attached.
The New York-based nonprofit has distributed about $1,000—roughly a year’s income—to thousands of ultra-poor households in Kenya and Uganda. Recipients don’t need to pay back the money, and they can spend it however they wish.
This might seem like a radical idea, but it’s not. Cash transfers have quietly become one of the most widely researched and consistently effective anti-poverty strategies in the developing world.
Now GiveDirectly’s work is receiving a major boost from Facebook co-founder Dustin Moskovitz and his wife Cari Tuna, who on Monday announced a $25 million donation through their foundation Good Ventures. The gift is greater than GiveDirectly’s entire 2014 budget.
“Governments and donors spend tens of billions of dollars a year on reducing poverty,” Tuna said in a statement, “but the people who are meant to benefit from that money rarely get a say in how it’s spent. GiveDirectly is changing that.”
Moskovitz and Tuna, both in their early 30s, are among the youngest billionaires to pledge the bulk of their fortune to charity. They’ve taken a unique approach to philanthropy. Their goal isn’t just to do good, but to do the most good possible. As they put it, “How can we help as many people as possible as much as possible with the resources we have?”
Launched in 2011, GiveDirectly is the only nonprofit focused exclusively on cash transfers. They use an innovative strategy to distribute money, leveraging mobile banking technology whose popularity has exploded in Africa. Distributing cash electronically to poor rural villages not only slashes costs but eliminates several prime opportunities for corruption (i.e., fewer middlemen to siphon off funds or ask for bribes).
GiveDirectly’s founders have also championed transparency and data-driven decision making to an extent rarely seen in the nonprofit world. The group’s key performance metrics are streamed in realtime on its website. And they’ve subjected their own programs to randomized controlled trials, the same rigorous types of studies that pharmaceutical companies use to evaluate drugs. This is an exceedingly rare practice for charities—the tests are expensive, difficult and time-consuming. But they produce the best evidence showing whether a program is actually working.
Investigators who studied GiveDirectly’s work found that, one year after the transfers, cash recipients had increased their earnings by 34 percent and their assets by 52 percent compared to people who didn’t receive transfers. Among cash recipients, the number of people who reported going to bed hungry dropped by 36 percent, and the number of days children went without food fell by 42 percent. People who got cash tended to invest in their homes, their livelihoods, and their savings. There was no increase in alcohol and tobacco spending.
From “Unorthodox Idea” To A New Anti-Poverty Standard
A decade ago, cash transfer programs were barely on the radar of major aid groups. Now, following dozens of successful trials, cash is driving what the UK’s development agency calls a “quiet revolution” in global anti-poverty work.
The United Nations’ World Food Program is among the largest humanitarian agencies, with annual funding of over $4 billion. As recently as 2009, only $10 million was spent on cash and voucher programs. That number has since soared and in 2014 was estimated to exceed $1.25 billion across 87 programs in 56 countries.
GiveDirectly doesn’t have that scale, but it offers other advantages. Its speed and advanced technology allow it to act as a test lab to improve how large institutional cash programs are designed.
For instance, GiveDirectly is running a trial that gives recipients more control over the timing of their transfers (some people want a lump sum upfront to pay for an expensive item; others want the payments spread out so their in-laws stop asking for loans). Another test will find out what happens when recipients receive information about possible useful ways to spend the money.
GiveDirectly is also advising aid leaders on how best to use cash after natural disasters and other humanitarian crises. In the wake of Nepal’s devastating earthquake in April, the Guardian reported on the benefits of cash relief:
Khamraj, 87, lost everything when his home collapsed in front of him during the earthquake in Nepal. He was given $75 from HelpAge International and can now afford the labour to build a temporary shelter. He is one of 10,000 people over the age of 60 who have received this support.
Cash relief, which complements in-kind humanitarian assistance as well as offering a potential alternative to it, is increasingly common. It is often preferable to relief items, allowing individuals and families to spend money on what they need, and to make these critical decisions for themselves in a dignified manner. Cash spent locally and on useful things has a positive impact on the economy, and can greatly assist the process of markets re-establishing themselves. Money in the hands of the most vulnerable disaster victims has been shown to support traders all the way down the supply chain.
Governments and large NGOs are “now trying to understand and stake out terrain in a future world where cash transfers are a much larger part of anti-poverty work,” said GiveDirectly’s co-founder Michael Faye. As a result, much of the $25 million donation will go to cash programs carried out in partnership with these big institutions.
“If GiveDirectly helps to shift even a small portion of institutional spending from less cost-effective programs to cash transfers,” Cari Tuna said, “it would be a major accomplishment.”