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Small Cash Donations Can Pay Dividends for the Rural Poor

Words by Gina-Marie Cheeseman
New Activism
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Imagine an organization that gives money to people in poor countries, unconditionally. As in, they can do with it as they wish. And imagine that money actually makes a difference in the lives of the recipients. One organization making this dream a reality is GiveDirectly. The nonprofit gives small cash transfers, around $1,000, to people in poverty.

GiveDirectly is piloting its system in Kenya and Uganda. The New York-based nonprofit uses electronic payment systems to transfer the money to recipients. But first, the GiveDirectly team needs to decide who the recipients will be. To do so, they use publicly-available data and send field staff door-to-door to collect data on poverty before enrolling recipients. Recipients receive a text message alert and then can collect cash from a local mobile money agent.

In the Kenyan regions GiveDirectly serves, the average recipient lives on 65 cents a day. The nonprofit uses a “range of factors” to select recipients in Kenya, such as housing, assets and vulnerable recipient status, according to its website. The selection process is similar in Uganda, where the average recipient lives on 83 cents a day. 

And these relatively modest philanthropic investments have a big impact not only for recipients, but also for their entire villages. “After receiving the transfers, life has improved and people now own livestock,” Frederick, 30, who is not a recipient of the cash transfers told GiveDirectly

In another account, a recipient who received a cash transfer in 2014 said she used a "large portion of the transfer to cover her school fees so that she could complete her schooling, and then graduated and immediately sought employment." She also applied to work for GiveDirectly and got the job. “From living off of less than one dollar a day, to now being employed in one of the most competitive roles available, the cash transfer from GiveDirectly has completely altered the path of her life, and she will reach heights that only two years ago she would have thought to be completely unattainable for her,” Andrew McDermott recounted on NewCo's Shift blog.

Evidence shows cash transfers work

Studies show cash transfers like the ones GiveDirectly provides to people in Kenya and Uganda work. A 2013 study looked at a large cash transfer program in northern Uganda and followed thousands of mostly unemployed young people two and four years after they received grants worth twice their annual income. “Most invest the transfers in vocations and earnings rise by at least 40 percent, especially among the more credit-constrained, patient, and risk-averse,” researchers found.

A recent study looked at cash transfers from GiveDirectly in rural Kenya. What researchers found is that “unconditional cash transfers have significant impacts on economic outcomes and psychological wellbeing.” And they found that there are “large, positive and sustainable impacts” on assets, earnings, food security, mental health and domestic violence. The impacts were seen after four months, on average.

Similar cash transfer pilots are also planned in developed countries, including Finland, the Netherlands and Canada. If the pilots are as successful as GiveDirectly, cash transfers may become a more common way to help poor people better their lives.

Image credit: GiveDirectly

Gina-Marie Cheeseman

Gina-Marie is a freelance writer and journalist armed with a degree in journalism, and a passion for social justice, including the environment and sustainability. She writes for various websites, and has made the 75+ Environmentalists to Follow list by Mashable.com.

Read more stories by Gina-Marie Cheeseman