By Brandon Keim
Even by the standards of East
Africa, Julius Radol Gwada is
poor. His yearly income hovers
around $175. Until recently, his
hut in the rural Kenyan village of Komonge
was roofed with thatch. When it rained, water
seeped through the roof. When it rained at
night, Gwada would gather his wife and children
in the driest corner of the hut, and they
would pass several miserable hours under a
sheet of wax paper. Late in 2012, two strangers
came to Komonge. They went from hut
to hut, collecting information on the people
who lived there. To the poorest members of
the community, including Gwada, they offered
money: a princely sum of $1,000—more
than he would otherwise make in five years.
What was the catch? There was none.
The strangers worked for GiveDirectly, a
US-based charity founded in 2011 on the
principle that the best way to alleviate extreme
poverty is to give people money and
let them do what they want with it. With
his unexpected windfall, Gwada installed
an iron roof on his hut. It cost $300, but
the investment will pay off quickly: The
old, leaky thatched roof needed repair twice
a year, and the repair cost $30 each time.
In short, it leaked not only water but cash
as well—a vicious circle that the gift from
GiveDirectly has allowed Gwada to escape.
Quite a few people in Komonge installed
roofs with their GiveDirectly money. Others
bought cows, paid off debts, sent their
children to school, or held weddings. From
GiveDirectly, they received no instruction
at all—that is, beyond information on how
to collect their money. This might sound
strange: After all, whatever happened to
the proverb about “teaching a man to fish”? “The data we have so far,” says Paul Niehaus,
a cofounder of GiveDirectly who is also a
development economist at the University
of California, San Diego, “show that our
fishing lessons aren’t very good, and that
poor people use money to buy fishing poles.”
Transfer Technology
GiveDirectly didn’t invent the give-money-away
model. Over the past decade or so, conditional
cash transfers—gifts of money with
stipulations attached, such as the requirement
that recipients spend some of the money on
education or health care—have become a tool
commonly used by governments in Africa,
Asia, and Latin America. Many economists
consider this approach to be less vulnerable to
waste and corruption than traditional forms
of aid and philanthropy. Unconditional cash
transfers are a variant of that model.
By 2008, when Niehaus was a doctoral
student in economics at Harvard University,
cash transfers had become an established
poverty-fighting tool in the government sector. But that model hadn’t yet reached the
philanthropic world. Niehaus and three fellow
graduate students—Michael Faye, Rohit
Wanchoo, and Jeremy Shapiro—decided
that they wanted to use this approach to
help poor people in Africa. Unable to find
a charitable organization that offered such
a service, they took the matter into their
own hands. They formed a private giving
circle, collected money from friends and
colleagues, and then traveled to rural Kenya
and searched for potential recipients.
Niehaus and his friends didn’t actually
carry cash with them. Instead, they used
M-Pesa, a financial service that lets people
send and receive money via mobile phones.
The service has more than 17 million registered
users in Kenya alone, and it’s especially
popular among poor people who have no access
to traditional banking services. “There
are leaps and bounds being made in the technology
that poor people have access to,” says
Niehaus. “M-Pesa is a really remarkable system.
Sitting here on my floor, I can upload
a spreadsheet with a list of phone numbers
and hit a button, and the money shows up
with people in Africa.”
Three years after that initial venture,
Niehaus and his friends opened their giving
circle to the world by launching a nonprofit
organization—the first of its kind—that does just what its name says: give cash directly to
people in need. Since then, GiveDirectly has
distributed more than $6 million to 30,000
people in Kenya and Uganda. It has raised
that money from individual donors, and
it has received considerable support from
tech-world philanthropists in particular.
In 2012, Google bestowed a $2.4 million
Global Impact
Award on GiveDirectly, and
in February
of this year Good Ventures—a philanthropic group started by Facebook
cofounder Dustin Moskovitz—gave the organization
a $5 million matching grant after
GiveDirectly raised that sum from individual
donors and companies.
The tech-industry orientation seems appropriate,
given how central technology is to
GiveDirectly’s operations. Early on, people
from GiveDirectly would ask village elders
help them identify needy local families, but
elders sometimes used that opportunity to
direct cash to friends and relatives. To avoid
that problem, GiveDirectly leaders have adopted
an on-the-ground, in-the-sky approach:
They crunch census data to identify target
communities, equip field teams with handheld
devices and send them door-to-door to
collect information, and use satellite imagery
to verify whether potential recipients live in
thatch-roofed huts. (That data point, GiveDirectly has found, serves as a fairly good
indicator of whether a family is very poor.)
Those extra layers of tech-enabled
auditing
ensure that money reaches the right
people. According to GiveDirectly, roughly
90 percent of its revenue from donors goes
straight to recipients.
Big Gifts, Big Impact?
GiveDirectly has distinguished itself from
government-based cash-transfer programs
in another way: It provides exceptionally
large gifts. Most government transfers involve
relatively small sums disbursed regularly
over long periods of time. In Kenya,
for example, the government operates the
Cash Transfer Programme for Orphans and
Vulnerable Children, which provides about
$21 per month to more than 130,000 households.
GiveDirectly’s transfers typically run to about $1,000, and the organization pays
out that sum in a handful of installments
over the course of a year.
Why not provide smaller sums, which
have been proven to help? GiveDirectly leaders
believe that large transfers have a previously
untapped potential to transform people’s
lives. Carolina Toth, the organization’s
field director in Kenya, cites the example of a
46-year-old HIV-positive widow and mother
of three who used her gift to build a house,
send her children to school, and purchase a
cow. “Houses traditionally have to be built
by a husband, or another man who ‘inherits’
a widowed woman,” Toth explains. “No one
wants to inherit an HIV-positive woman, so
she was both socially and financially unable
to build.” With a smaller gift, the woman
would not have been able to make changes
to her life of that magnitude.
Sudhanshu Handa, a development economist
at the University of North Carolina,
notes that small, regular cash transfers have
real value as well. At this point, in fact, the
impact of that model has been more thoroughly
studied than the large-transfer
model. Handa, who has helped East African
governments to study their cash transfer
programs, does see potential in the GiveDirectly
approach. It “could allow recipients
to do something big—to structurally change
their situation,” he says. GiveDirectly, he
adds, serves as a kind of incubator: It can
test the large-gift model in ways that governments,
with their focus on immediate
poverty mitigation, are unable to do.
GiveDirectly has received praise for its
rigorous approach to impact evaluation. Most
notably, it was the subject of a randomized
controlled trial conducted by two researchers
at MIT’s Abdul Latif Jameel Poverty Action
Lab. (One of the researchers is GiveDirectly
cofounder Jeremy Shapiro.) The results of
that trial aren’t conclusive. They’re necessarily
short-term, and they encompass several
different gift sizes and payment schedules,
thereby decreasing their statistical significance.
But they accord with the findings of
earlier studies: One year after receiving their
gifts, recipients typically had more assets and larger incomes. They generally felt less
stress than before, and their homes were
more peaceful places. An influx of money
didn’t appear to cause local inflation. And
recipients, by and large, didn’t squander their
gifts. Contrary to what some might expect,
Niehaus notes, most people don’t drink or
gamble away windfall sums of this kind.
In a review of GiveDirectly’s work, the
charity evaluation organization GiveWell
observed that “there is still limited evidence
on the humanitarian impact of the
type of transfers” that GiveDirectly provides.
Despite that caveat, the group ranked
GiveDirectly as one of its top charities, in
part because of its commitment to self-examination.
“Most charities don’t have
that kind of rigorous, publicly available critique
of their own programs,” says Eliza
Scheffler, a research associate at GiveWell.
GiveDirectly continues to collect data,
and it’s also experimenting with its model
to compare the effectiveness of different
giving strategies. The data might eventually
show that it makes more sense to give
money to everyone in a community, not only
to people who meet certain poverty criteria,
or that it’s better to give $500 apiece to two
households than $1,000 to one household.
“Software companies are constantly testing,
improving, and releasing new versions,” says
Michael Faye, a cofounder who now sits on
the GiveDirectly board. “We are doing the
same, just in the field.”
Faye emphasizes that he and his colleagues
don’t envision a time when large
cash transfers will replace all forms of international
development aid. If there are no hospitals
or schools, for example, money alone
won’t help children get vaccines or learn
math. “Cash is not a silver bullet,” he says.
It certainly helps, though. GiveDirectly
aims to hand out $14 million in 2014 and
$26 million in 2015. Scaling up at that pace
will require adding new staff and building
the organization’s operational capacity. “But
longer-term,” Niehaus says, “the big question
is: How much do Americans want to give? I
don’t think the availability of poor people is
ever going to be a constraint.”