Fighting
poverty

Poverty is on the rise again

In recent decades, nearly 1.5 billion people have been able to escape extreme poverty. Unfortunately, this trend is now beginning to reverse. The organization Our World in Data assumes that the number of people living in extreme poverty will rise from the current 832 million to 932 million by 2040.^[1] This development is further exacerbated by the fact that government development cooperation is currently being cut back at record speed. After a decline of 9% was already recorded in 2024, the OECD even expects cuts of up to 17% for this year.^[2]

Donating works

Donations can make an important contribution to supporting people living in extreme poverty. But the effectiveness of the charity that’s supported makes a big difference. While most people assume that there is little difference in effectiveness between charities, the best organizations are actually up to 100 times more effective than the average.^[3] There are two main reasons for this:

1. Every euro achieves more in developing countries.

Most of us would agree that every human life has equal value. So if we want to help people, it shouldn’t matter where they live - in our neighborhood or in the Global South. But prosperity is much lower there. For example, Kenya’s gross domestic product per capita is only 9% of Germany’s. In Malawi, it is less than 3%. Because of these differences in purchasing power, the same amount of money can “automatically” do more for people in a very poor country than in a wealthy country.

As a result of this enormous wealth gap and the strong purchasing power of the euro, it is possible to rid a schoolchild of harmful parasites for less than €1 in these countries, or to distribute a mosquito net that reliably protects against malaria for less than €4. Both are measures that often save the lives of those affected, but in any case improve them, and which are fortunately no longer necessary in industrialized countries.

2. Health is not everything, but without health everything is nothing.

For example, the J-PAL Poverty Action Lab, a research institute based at the Massachusetts Institute of Technology, has compared the cost-effectiveness of various measures to increase children’s participation in school.^[4] To this end, 58 randomized studies from 28 countries in Africa, Asia, and Latin America were examined. 

The study showed that health measures that reduce the frequency of illness among schoolchildren are among the most effective ways to increase school attendance. $100 for free school uniforms led to 0.09 additional years of school attendance in Kenya. $100 for scholarships increased school attendance by 0.15 years. 

However, if the $100 were invested in school-based deworming programs, children would gain 11.9 additional years of schooling. So the same amount of money could have an impact 80 or more than 100 times greater. After all, scholarships and uniforms are of no use to those who cannot attend school because of illness.

The effectiveness is scientifically proven

So we are dealing with two very powerful levers: firstly, the purchasing power advantage of our euros in very poor countries, and secondly, the knowledge gained through scientific studies. If we combine the two, we can increase the impact of our donation 100-fold.

This is made possible in particular by systematic research in the field of development economics. Three economists, Esther Duflo, Abhijit Banerjee and Michael Kremer, were even awarded the 2019 Nobel Memorial Prize in Economic Sciences for their work on the effectiveness of different approaches in development cooperation.^[5]

Based on their research and a variety of other studies, renowned research institutes such as GiveWell examine both aid measures and individual aid organizations in terms of their effectiveness and cost-effectiveness. We base our recommendations on these studies.