GiveDirectly

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The Humane League
Mercy and Leonard, two GiveDirectly recipients in Malawi, in front of their home
Atika Umar, ISP, vaccinates Fatima Nura's child, Ahmad at Walama Primary Health Center Ringim in Jigawa, Nigeria, on Wednesday, 7 December 2022. Photo by KC Nwakalor for New Incentives. New Incentives 'All Babies Are Equal' program provides cash incentives for caregivers who vaccinate their babies at their local health clinics in northern Nigeria. These cash incentives cover the cost of food and transportation to the clinic. They have provided enough "nudge" to double the percentage of fully vaccinated infants in the region.

Direct cash transfers for extremely poor people

GiveDirectly transfers money by cell phone to people living in extreme poverty. There are no strings attached to these money transfers and the recipients do not have to pay the money back.

Families can use it to buy much-needed food and medicine, pay school fees, or start small businesses. A large body of research shows that unconditional cash transfers reliably and sustainably help people overcome extreme poverty, unlike most conventional aid interventions.

The problem

COVID-19 marked the end of a period of global progress in the fight against poverty. In the previous three decades, more than 1 billion people had escaped extreme poverty. In fact, the trend has reversed. According to the World Bank the number of people living below the extreme poverty line will increase by more than seventy million to more than 700 million in 2020 alone,[1]  meaning that nearly one in ten people worldwide will live in extreme poverty, defined as living on less than $2.15 a day.[2] 

However, many traditional approaches to development cooperation (formerly development aid) are not sufficiently focused on the real needs of these people. Development programs are often driven more by political considerations (in both donor and recipient countries) than by the question of how to most effectively help people with the resources available. Traditional development cooperation is also often costly because it employs a large number of staff from donor countries who are paid relatively high salaries.

The solution

So why not just cut out the big aid apparatus and give money directly to people in extreme poverty? No one knows the needs of poor people better than they do.

Thanks to unconditional cash transfers, people can decide for themselves what is best for their lives. GiveDirectly transfers the equivalent of an annual income to people living in extreme poverty. In Kenya, this corresponds to around $1,000 for a five-person household. 

These money transfers are extremely efficient: of the donations made to GiveDirectly the organization uses only 15% for all administrative purposes, including the salaries of all employees - an exceptionally low figure. 85% of a donation therefore goes directly to people living in poverty.[3] Because the money is transferred to people's cell phones via mobile banking, it is virtually free from corruption. In addition, this approach is highly scalable and could theoretically be transferred to many other countries with little effort.

GiveDirectly community meeting ("Baraza") in Kilifi, Kenya
GiveDirectly community meeting ("Baraza") in Kilifi, Kenya
GiveDirectly-basic-income-per-mobile-phone-effective-donations
GiveDirectly: Basic income by cell phone

The effect

Cash transfers have been used in many countries for about two decades and are now considered one of the best-evaluated approaches in development cooperation. A review of 165 studies shows that cash transfers are surprisingly reliable and lead to sustainable improvements in a variety of areas (including education, health, savings rates)[4] In humanitarian aid, cash transfers can increase food security and are more cost-effective than in-kind contributions.[5]

However, it was often feared that the recipients would spend the money on alcohol, drugs and the like. However, studies have repeatedly shown that this is not the case.[6] The World Bank sees targeted cash transfers as an effective means of combating poverty and inequality.[7]

The positive results are also reflected in the evaluation of GiveDirectly's work. The gold standard of scientific research, a randomized controlled trial, proved that GiveDirectly's program in Kenya has a positive effect on the physical and psychological well-being of the payment recipients.[8]

The organization

In search of the most effective way to combat poverty, students from Harvard University and the Massachusetts Institute of Technology founded GiveDirectly. Right from the start, great importance was attached to ensuring that the projects are scientifically monitored and carefully evaluated . The organization is characterized by high cost-effectiveness and outstanding transparency: In GDLive Newsfeed recipients report voluntarily and unfiltered on their experiences.

The organization has grown considerably since it was founded. In the past 12 months GiveDirectly paid out around $160 million directly to extremely poor people. (As of December 2022) Nevertheless, the growth potential remains enormous. Theoretically, GiveDirectly could use several hundred million US dollars in the coming years to lift people out of extreme poverty.

In addition to this direct contribution to combating poverty GiveDirectlyexerts structural influence on the "aid industry" and thus increases the effectiveness and efficiency of development cooperation as a whole. GiveDirectly co-founder Jeremy Shapiro advocates using them as a benchmark for other poverty reduction projects in a guest article for the World Bank.[9]

From 2012 to 2022, GiveDirectly was recommended by GiveWell as a "top charity". Due to an adjustment of the evaluation criteria, GiveWell no longer recommends GiveDirectly , but the assessment as an outstandingly good charity continues unabated. [10] In addition, GiveDirectly's cash transfers continue to serve as a benchmark for calculating the cost-effectiveness of programs that GiveWell evaluated.[11]

Also due to its indirect effect on development cooperation as a whole, we continue to consider GiveDirectly to be an outstandingly good aid organization and continue to recommend donations to it. The donations sent via us to GiveDirectly are used exclusively for programs in developing countries. Nevertheless, we would also like to point out that GiveWell considers its four "Top Charity" as 8-10 times more effective than the cash transfers from GiveDirectly .[12]


Blog articles

FAQs

How does GiveDirectlydecide who receives money?

The goal of GiveDirectly is to reach the poorest of the poor. To achieve this, particularly poor regions are first identified using official data. Then local employees introduce the organization and its approach to the communities. Individual households are then visited to explain details, verify the identities of the people and counteract possible fraud. As a rule, the process then ends with all people living in the region receiving money from GiveDirectly .

How exactly does the money transfer work?

GiveDirectly uses electronic payment service providers for transfers: In Kenya, this is M-Pesa, the mobile money transfer service of Kenya's largest mobile phone operator. In Uganda, the mobile money system of the country's leading telecommunications company is used. Local GiveDirectly employees help people in the program to register with their payment service provider. GiveDirectly then sends the money to the recipient's mobile account. The recipient receives a text message as soon as the amount has been received. The recipient can then exchange their "mobile money" for cash at exchange points. Exchange points are often local retailers and kiosks, but can also be petrol stations, supermarkets, internet cafés or banks.

Do the recipients receive the amount as a lump sum or divided into smaller amounts?

The amount is paid out in several installments. This is the approach favored by the majority of recipients. During the registration process, recipients are informed exactly how much money they will receive and when.

How do the recipients use the money?

Cash transfers allow people to spend money on the things they need most. A 2013 evaluation of GiveDirectly 's work from 2013 shows that people used the money to buy livestock, medicine or school books, invested it in rainproof roofs or saved for larger investments.[13] In the GDLive Newsfeed allows you to track what recipients are doing with their money in real time and without filtering.

How sustainable are cash transfers?

Cash transfers are the clearest expression of the principle of helping people to help themselves. A study of unconditional cash transfers in Mexico found that the incomes of the households studied increased by 1.5 to 2.6 times the amount of the transfer, a clear indication of the long-term impact of cash transfers.[14] What people in extreme poverty lack in order to escape poverty is not specific skills, but money.

What do state representatives think of GiveDirectly?

The prerequisite for the work of GiveDirectly is that the relevant state representatives in the regions (mayors, village elders, members of parliament, etc.) have to support the program of GiveDirectly . GiveDirectly always works in close coordination with all relevant state institutions.

Is the money paid out to women or men?

GiveDirectly transfers the money to both men and women. A study showed that it hardly made a difference who received the money; both genders handle the money responsibly. GiveDirectly therefore allows households to decide for themselves which adults enrol in the program. So far, just over half of the recipients are women.

Which programs from GiveDirectly are supported by effektiv-spenden.org donations?

GiveDirectly runs several programs to utilize cash transfers in different contexts. The goal is always to support recipients as effectively as possible while at the same time improving their operations and the use of cash transfers in development cooperation overall. In this context, GiveDirectly has also launched programs such as disaster relief for US citizens and support after the earthquake in Turkey and Syria. We have agreed with GiveDirectly that the funds donated through Effektiv Spenden will exclusively benefit programs in developing countries.

Why does GiveWell no longer list GiveDirectly as a "Top Charity"?

In August 2022 GiveWell has adjusted its criteria for selecting its "top aid organizations". GiveWell explicitly emphasizes that the adjustment does not reflect a changed assessment of GiveDirectly and they GiveDirectly as one of the strongest programs they have evaluated to date. ( Here is GiveWell 's detailed justification for this). Nevertheless GiveWell considers the work of the recommended "Top Charity" to be even more effective and has adjusted its recommendations accordingly.


GiveDirectly has responded to this change by GiveWell with this declaration .

GiveDirectly in the media

Sources

[1] ↑ Poverty and Shared Prosperity 2022, World Bank. http://www.worldbank.org/en/publication/poverty-and-shared-prosperity. October 2022.

[2] ↑ The World Bank adjusted the global poverty lines in September 2022. The new extreme poverty line of $2.15 per person per day replaces the poverty line of $1.90. The World Bank provides further information in its Fact Sheet: An Adjustment to Global Poverty Lines.

[3] ↑ Operating Model. GiveDirectly. https://givedirectly.org/operating-model.

[4] ↑ Francisca Bastagli et al. Cash transfers: what does the evidence say? A rigorous review of impacts and the role of design and implementation features. Overseas Development Institute. https://www.odi.org/publications/10505-cash-transfers-what-does-evidence-say-rigorous-review-impacts-and-role-design-and-implementation. July 2016.

[5] ↑ Shannon Doocy and Hannah Tappis. Cash-based approaches in humanitarian emergencies: a systematic review. Campbell Systematic Review. https://onlinelibrary.wiley.com/doi/10.4073/csr.2017.17. December 2017

[6] ↑ David Evans and Anna Popova. Cash Transfers and Temptation Goods. Economic Development and Cultural Change, Vol. 65, No. 2. https://doi.org/10.1086/689575. January 2017. 

[7] ↑ Poverty and Shared Prosperity 2022, World Bank. http://www.worldbank.org/en/publication/poverty-and-shared-prosperity. October 2022.

[8] ↑ Unconditional Cash Transfers: Investing Directly in Poor Families. Abdul Latif Jameel Poverty Action Lab (J-PAL). https://www.povertyactionlab.org/scale-ups/unconditional-cash-transfers. October 2018.

[9] ↑ Jeremy Shapiro. More than money: How cash transfers can transform international development. World Bank. http://blogs.worldbank.org/developmenttalk/more-money-how-cash-transfers-can-transform-international-development. 2014. 

[10] ↑ "GiveDirectly is one of the strongest programs that we've found in years of research and we continue to have a very high view of their work." GiveDirectly - November 2020 version. GiveWell. https://www.givewell.org/charities/give-directly/November-2020-version. August 2022. 

[11] ↑ Why does GiveWell compare programs to cash transfers? GiveWell. https://www.givewell.org/impact-estimates#Why_does_GiveWell_compare_programs_to_cash_transfers

[12] ↑ These are currently the Against Malaria FoundationHellen Keller Internationalthat Malaria Consortium and New Incentives.

[13] ↑ Johannes Haushofer and Jeremy Shapiro. Household Response to Income Changes: Evidence from an Unconditional Cash Transfer Program in Kenya. https://poverty-action.org/household-response-income-changes-evidence-unconditional-cash-transfer-program-kenya. 2013. 

[14] ↑ Elisabeth Sadoulet, Alain de Janvry and Benjamin Davis. Cash Transfer Programs with Income Multipliers: PROCAMPO in Mexico. World Development, 29 (6): 1043-1056. https://www.sciencedirect.com/science/article/abs/pii/S0305750X01000183. 2001.