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Opinion: A New Kind of Charitable Giving

Facebook co-founder Chris Hughes says the best way to help people living in poverty is simple: Give them money—and the power to decide how to spend it.

May 19, 2014
Cash illustration by Patrick Leger
GiveDirectly is the first non-profit organization dedicated to allowing donors to transfer cash directly to impoverished households.
Illustration Patrick Leger

There is perhaps no harder problem than how to meet the very simple needs of the world’s poorest. Too often, aid strategies are proclaimed silver bullets but then come apart under scrutiny. Obstacles like gender inequality, government corruption and lack of infrastructure can seem insurmountable.

When I wanted to make a contribution and was researching the best way to do it, I didn’t have trouble finding a lot of organizations out there with the best of intentions. The challenge is knowing whether they are having a meaningfully positive impact. Even if there is some data—a rarity in a field where dollars are more often invested in marketing than in evaluation—many groups are not able to scale their work to make a sufficiently large difference.

In 2011, I found a rare exception, a non-profit organization that embraced all of the challenges aid groups face and pursued its own theory of how to help in an analytically rigorous and potentially scalable way. The more I saw of its operations in the United States and East Africa, the more hopeful I became. In late 2012, I joined the board of the group, GiveDirectly, and made it the focus of my philanthropic investments of time and money.

GiveDirectly provides a stunningly simple service. Using the latest technology, it identifies impoverished households in Kenya and Uganda, accepts tax-deductible money from donors, and then transfers that money via text message to the poorest of the poor. The most important part? Recipients can spend the money in any way they like. Rather than having “experts” determine what the poor need, GiveDirectly empowers the poor themselves.

GiveDirectly monitors the ways families use transfers and the efficacy of their choices, but it does not constrain those choices. These transfers are not microloans; they are permanent. This kind of giving—called “unconditional cash transfers” in development—is not a new or untested idea. Emerging market governments like Mexico and Brazil have used similar methods for years and have seen dramatic reductions in poverty and income inequality. GiveDirectly is the first non-profit solely dedicated to giving donors the ability to provide this intervention—simply, cash—directly to the poor.

What do the recipients spend the money on? In large part, they invest it in personal real assets to improve their lives for the long term. In America, this would mean something like paying off a mortgage; in Kenya, it often means going from a thatched roof to a metal one.

These investments open up more money and time to create a stable source of income. An independent evaluation of GiveDirectly’s work in Kenya by the research group Innovations for Poverty Action found that after a year, beneficiaries saw significant increases in business and agricultural income, with incomes up by 28 percent of the average grant size. They also found decreases in hunger, domestic violence and stress, and no change in spending on tobacco, alcohol or gambling. These findings are consistent with dozens of other studies that show that people living in poverty make good choices when given the chance to improve their lives.

Rigorous evidence like this is extremely important to making informed investment decisions. But numbers cannot replace listening to the poor. I travelled to western Kenya last year to meet with individual recipients. I saw people making money from high-yielding investments that I, as an outsider, could not have thought of—from welding machines to solar charging stations to paying for a child’s tuition so she could share future income with her family. I also heard how important it was for them to be given the trust and respect to make their own choices.

Because of the radical simplicity of the programme, GiveDirectly can scale quickly and effectively. There is very little overhead—90 percent of the dollars given to the organization have gone to the recipients themselves—and few barriers to growth.

One simple idea cannot untangle the web of challenges facing any developing country. But GiveDirectly is sparking a much-needed dialogue about how resources can be put to best use, by helping potential contributors to a charitable organization ask a simple question: “Could this non-profit do more good with the money than the poor could do themselves?”

Cash transfers are not a panacea; they don’t build roads, write constitutions or stabilize markets. But they do provide a critical boost to the poorest of the poor. I want to provide that boost to as many people as I can.


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