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GiveDirectly Gives Cash to Poor People, No Strings Attached

Sherrell Dorsey headshotWords by Sherrell Dorsey
Investment & Markets
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Growing evidence suggests that the best way to help poor people is to give them cold hard cash. GiveDirectly has been providing extremely poor households in Kenya and Uganda with about $1,000 in cash via mobile cash transfers since its launch in 2011. The nonprofit’s unorthodox giving model re-positions the impact of aid, eliminating the need for the traditional bureaucratic processes and regulations that charities and foundations abide by. Instead, cash is given without restriction. Most of all, it appears that GiveDirectly’s approach is working.

Launched by four graduate students at MIT and Harvard, GiveDirectly tapped into the growing trend of mobile banking technologies being tested in developing countries. To date, GiveDirectly has enrolled 25,000 households with an estimated reach of 125,000 individuals. Roughly 90 percent of each dollar is transferred to the recipient. The organization maintains $50 million in financial support with contributions from young Silicon Valley tech and finance executives.  

What powers the concept is much more than warm stories and donors with deep pockets; it's data-driven science that provides a measure of accountability. GiveDirectly collaborates with a team of independent researchers to measure impact, A/B test methodologies, and experiment against assumptions about poverty and long-term behavioral changes.

Model for accountability

After teaming up with researchers at Innovations for Poverty Action at Yale, GiveDirectly found large positive impacts on assets, earnings, nutrition, mental health and women's status, among others, as a result of direct cash donations provided to recipient households.
"There is this growing realization that being poor is really stressful, and that that can make it hard to organize your life and plan and make good decisions," Paul Niehaus, co-founder and president of GiveDirectly, told NPR. "If one of the things that giving people wealth is doing is enabling them to feel more sane and more in control of their life, that could ultimately be one of the more important things."
The GiveDirectly model, and its dogged commitment to results transparency and data collection, thwart donors' misconceptions about giving directly to individuals.

Despite popular opinion, beneficiaries aren’t mismanaging the free cash, nor are they spending it on alcohol or gambling. A 2013 investigative report on the impact of GiveDirectly’s cash transfer program in Kenya revealed that recipients increased their assets (livestock and housing upgrades) by 52 percent, and earnings by 34 percent.

Alternatively, they’re launching businesses, providing much-needed food for their children and even replacing thatch roofs with metal ones.

The future of aid

Local knowledge matters in the work to evaluate return on investment, Niehaus said. With a new roof, families can sleep better, collect clean drinking water, prevent malaria-carrying mosquitos from entering the home. In short, poor people know what they need. Providing them with the resources to make their lives a bit easier can produce long-term positive impacts and opportunities.

Globally, billions of dollars are donated through a myriad of organizations and foundations each year, with little to no evaluation of impact or transparency on how much of the aid is give directly to the individuals that are being helped.

Armed with data, research and a blog to communicate outcomes and experiments directly with donors, GiveDirectly’s model is both disruptive and threatening, calling on charitable organizations to create transparency in the way in which they measure impact, whilst also improving processes for other cash transfer businesses to replicate.

Image credit: GiveDirectly Facebook

Sherrell Dorsey headshotSherrell Dorsey

Sherrell Dorsey is a social impact storyteller, social entrepreneur and advocate for environmental, social and economic equity in underserved communities. Sherrell speaks and writes frequently on the topics of sustainability, technology, and digital inclusion.

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