Folks, even though this article was mentioned earlier on the blog, I’d like to showcase it because it shows how charities exist that can be supported after the Reval, rather than requiring us in all cases to reinvent the wheel.
Nico Pitney, “This Startup Gives Poor People A Year’s Income, No Strings Attached,” Huffington Post, June 4, 2015.
A person whom Teresa had never met showed up at her home one day with a remarkable offer. Teresa and her family would receive what amounted to a year’s income, in cash. Nothing was owed in return. She did not have to repay the money, and her family could spend it however they wished.
Teresa was at a loss. “We did not believe someone would give us that kind of money without having worked for it.” But then the money came.
This scenario has played out thousands of times. The organization behind the money, GiveDirectly, is not broadly known. They have spent very little to market their work; their Facebook page has just over 7,000 likes.
Yet, dollar-for-dollar, analysts say GiveDirectly is among the most effective organizations in the world trying to eliminate extreme poverty. Some of its strongest champions are two of Facebook’s co-founders. And in the spirit of Silicon Valley, GiveDirectly’s work is data-driven and transparent in ways that are virtually unheard of in the aid world. For donors who want their giving based on evidence-backed results, few organizations compare.
Since launching in 2011, the group has distributed about $15 million to communities in Kenya and Uganda. These are not the poorest countries in the region. Rather, they are at the center of Africa’s revolution in mobile banking, which is crucial to GiveDirectly’s strategy. A person in sub-Saharan Africa is 60 times more likely to have a mobile financial account than a European.
Once GiveDirectly has selected a village based on publicly-available poverty data, it uses an ingeniously simple method to identify who will receive money: it enrolls households who live in homes built with thatched roofs and mud floors (as opposed to corrugated metal roofs or concrete floors). The use of organic materials is a reliable indicator of severe poverty — easy for members of the community to understand, and for GiveDirectly’s staff to audit, the group states.
Distributing the money electronically slashes costs and eliminates several prime opportunities for corruption (i.e., fewer middlemen to siphon off funds or ask for bribes). It is at the core of GiveDirectly’s plans to scale its work to millions of poor people worldwide.
Does giving cash help? Cash transfer programs have an extensive research record, including dozens of peer-reviewed studies spanning at least 13 countries in four continents. The UK’s development agency calls cash transfers “one of the more thoroughly researched forms of development intervention”; a gold-standard charity evaluation group GiveWell (not affiliated with GiveDirectly) says transfers “have the strongest track record we’ve seen” for a non-health poverty program.
Longer-term research into anti-poverty interventions is rare, but it exists for cash transfers. A 2013 study in Uganda found that people who received cash enjoyed a 49 percent earnings boost after two years, and a 41 percent increase after four years, compared to people who hadn’t gotten a transfer. Another study in Sri Lanka found rates of return averaging 80 percent after five years. In Uganda, not only were the cash recipients better off, but their number of hours worked and labor productivity actually increased.
Do many people just end up wasting their money on alcohol or smokes? Last year, the World Bank reviewed 19 studies of cash transfer programs and said the answer is no. “Almost without exception, studies find either no significant impact or a significant negative impact of transfers on expenditures on alcohol and tobacco,” the report stated. “This result is consistent across the world.”
Cash transfers aren’t a silver bullet. One program gave $200 to at-risk Liberian men who were either homeless or who made their income from dealing drugs or stealing. The lead researcher, Chris Blattman, summarized the findings in an op-ed in The New York Times:
“Almost no men wasted [the money]. In the months after they got the cash, most dressed, ate and lived better. Unlike the Ugandans, however, whose new businesses kept growing, the Liberian men were back where they started a year later. Two hundred dollars was not enough to turn them into businessmen. But it brought them a better life for a while, which is the fundamental goal of any welfare program. We also tested a counseling program to reduce crime and violence. It worked a little on its own, but had the largest impact when combined with cash.”
There are at least a few health-focused poverty programs that have an even stronger record of cost-effective results, analysts say, including distributing bed nets to halt the spread of malaria and deworming.
Also, money alone cannot always overcome a lack of basic social services. Cash recipients spend more on education and health, but if there are no quality schools or healthcare in their area, then try as they might, they do not necessarily end up healthier or better educated.
But the positive impacts of cash transfers have been consistent and wide-ranging, from improved nutrition, healthier newborns and greater school participation to decreased HIV infection rates and psychological distress. As a result, according to a 2011 review by the UK’s development agency, global aid has undergone a “quiet revolution,” with developing countries launching transfer programs believed to reach between 750 million and one billion people.
An evidence-based approach to development. GiveDirectly is the first nonprofit to focus exclusively on cash transfers. It was founded by four graduate students at MIT and Harvard. Partly they were spurred by technological advances like mobile banking, which make distributing cash cheaper and more secure than ever. But in Cambridge, Massachusetts, they were also at the heart of a growing movement to put aid interventions to the test of actual science.
Esther Duflo is a key leader of this movement. The Financial Times called her “one of the world’s star economists — tenured at MIT at 29, MacArthur Foundation ‘genius’ fellow, winner of the 2010 John Bates Clark medal, the so-called ‘mini-Nobel.'” One of her mantras is that aid programs can and should be rigorously tested, because when they are, the results are often surprising and do not line up with people’s preconceptions. (Exhibit A: the realization that when poor people receive cash, they don’t rush out to spend it on alcohol.) In 2003, Duflo and colleague Abhijit Banerjee founded MIT’s Poverty Action Lab, which worked on many of the studies documenting the power of cash transfers.
After years of experimentation, Duflo and Banerjee published a celebrated book, “Poor Economics,” which combats the idea that poor people live simple financial lives. They found the poor are in some ways even more sophisticated with their finances than wealthier people, partly because it is so important that they get things right. The extreme poor personally manage loans to family and neighbors; they evaluate credit offers without the support of financial institutions; they manage their day-to-day cash flow in the context of very inconsistent income patterns. All of this helps explain why giving cash to the poor, rather than allocating capital on their behalf, has proven particularly effective.
Government-run cash programs typically require poor people to take some action before receiving money, such as getting a vaccine. The amounts transferred are usually small and handed out over longer periods of time; they’re essentially an income supplement. GiveDirectly takes a different approach. Bolstered by recent research, it distributes a large, one-time sum of cash over a shorter period of time. The goal is to transfer wealth that is more likely to be invested in long-term benefits. Also, GiveDirectly’s transfers are made unconditionally, with no strings attached. The group found that adding conditions (and verifying they were met) provided few benefits, despite substantial costs.
So how do people spend their $1,000? “We have seen it all,” GiveDirectly co-founder Paul Niehaus told The Huffington Post. “If there’s anything we’ve learned from doing this, it’s that everybody has very unique needs.” Often some of the money goes to food, better housing, healthcare or education. “Sometimes things don’t work out — the money goes to a failed investment, a business that doesn’t succeed.” And then there’s everything else. “We had one guy who bought musical instruments and started a band and released an album,” Niehaus said. “Anything you can imagine in this incredible richness and diversity of human life.”
Despite the work of Duflo and others, accountability is not yet a standard of the charity world. Few aid organizations attempt to verify whether their programs are actually effective. Even more rare are nonprofits that submit their own programs to randomized controlled trials (RCTs), the same rigorous types of studies that pharmaceutical companies use to test drugs. These trials are expensive, difficult and time-consuming.
GiveDirectly’s leaders not only encouraged such a study of their work, but went further. In 2013, they took the extraordinary step (in the charity world) of announcing an RCT publicly before the data were in, thus binding themselves to the findings whether positive or negative. If GiveDirectly’s approach didn’t work, if the results turned out terribly, there was nowhere to hide.
Trying to disrupt the aid world. GiveDirectly has proven especially popular in Silicon Valley, where sympathy is high for people trying to upend an industry using technology and data. Google’s philanthropic arm was an early GiveDirectly supporter; Facebook co-founder Chris Hughes sits on its board of directors, and another Facebook co-founder, Dustin Moskovitz, has donated over $12 million through his foundation.
“In a private sector company, cost is everything and customer satisfaction is everything,” said Michael Faye, another GiveDirectly co-founder. “I don’t think we see that in our sector.” And so he’s trying to change it.
In the traditional model, charities show they are conscious of costs by highlighting how much of their revenue is spent on “services.” But there are few standards or requirements (from the IRS or otherwise) about how charities should classify their spending. Nonprofits can claim all sorts of “service” costs that are indirectly related at best, including salaries, office space, or grants to other NGOs. There is no requirement that they itemize these costs, and most don’t.
GiveDirectly wants to establish a new standard: When a donor gives one dollar, how much ends up in the hands of a poor person? Their answer, which has been independently reviewed, is that about 90 cents of each dollar donated is transferred directly to recipients. This is in the realm of a few other best-in-class poverty interventions.
To force a focus on customer service, GiveDirectly surveys cash recipients about their experiences. Clients are asked a series of questions — were they able to pick up their payments quickly and easily? Were they asked for a bribe? — and their answers are posted publicly on the web, in real time, along with links to raw data tables.
(The article continues. For the remainder, please go here: http://www.huffingtonpost.com/2015/06/04/givedirectly-cash-transfers_n_7339040.html?utm_hp_ref=good-news&ir=Good%20News