Cutting the strings: Why some aid orgs want to give money away

Poor people are poor because they don’t have money. A new charity sees a simple solution: give money to those who need it most. Despite some controversy, the program has started to turn heads, largely because it might just work.

“This puts the choice in the hands of the poor, and not me,” Michael Faye, one of GiveDirectly’s co-founders told The New York Times Magazine. “And the truth is, I don’t think I have a very good sense of what the poor need.”

The idea behind GiveDirectly, a charity founded in 2011, is that poor people know what they need. They just don’t have the cash to get it. The charity gives money to the poor with no strings attached.

GiveDirectly’s founders decided to test the idea in Kenya, where there are areas of debilitating poverty–and an advanced mobile banking system necessary for the cash donations to reach the recipients.

GiveDirectly’s idea isn’t new, but it is controversial. When Michael Faye, a GiveDirectly co-founder, started giving away money in Kenya, he didn’t find it as easy as he thought he would. He met resistance not only from other charities, but also from the very people he wanted to help. Faye, interviewed by This American Life, explained how some Kenyans couldn’t believe that someone would want to give them money without expecting something in return.

“They said, ‘I just don’t believe it,’“ Faye explained. “’I think you will come back in six months or a year and ask me for something. And I don’t know what that is, but I don’t trust you.’”

Experts working with other charities scoffed at Faye’s plan to simply hand out cash. The recipients would just spend the money on cigarettes and beer, or gamble it away, the critics charged. Even if the recipients did buy food for their families, the money was just a temporary fix, the pessimists said, and not a long-term solution.

But as GiveDirectly’s program took shape, the aid community started paying attention to the results.

Many people who received money upgraded their houses with tin roofs or started businesses. One man bought a motorcycle and started a taxi service. These successes started to point to cash transfers as potentially providing lasting improvements.

Earlier aid projects show that traditional cash transfer programs can work. Some cash transfer programs raised living standards by up to 30 percent after two years, according to a 2011 study by the UK Department for International Development. The study also points out that recipients overwhelmingly use the funds to invest in their future.

However, many of the programs included in the study require conditions for people receiving the grants–that’s where the strings come into play. The Bolsa Família program in Brazil requires parents to send their children to school and get vaccinations to receive the funds. But the program is credited with keeping kids in schools and helping parents hold a job.

GiveDirectly’s approach raised some controversial issues. Donations can cause tension between those who get money and those who don’t. And the money doesn’t address larger problems like poor schools, the lack of jobs or infrastructure. In spite of these problems, direct giving looks promising.

GiveDirectly defends its model as having the greatest impact for the least cost, and urges other charities to either find more efficient solutions — or adopt money transfers.

“Every organization that asks for money on behalf of the poor should make a clear and compelling case that they can do more good with it than the poor could do for themselves,” GiveDirectly challenged in its 2012 annual report.

Poor people in Kenya often live under thatch roofs that leak and cost a lot to upkeep. A DFID study shows people who get cash transfers upgrade to metal roofs. Photo: Michaela Ledesma/Mercy Corps.

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