Send Money Directly to the Extreme Poor with GiveDirectly
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Since October 2016, GiveDirectly has been sending monthly cash transfers to 95 adult residents in a remote village in Kenya. This village is the pilot site for our broader universal basic income initiative. “Remote” is often a code word for “poor.” But other vulnerabilities in age, gender and marital status contribute as much, if not more, to poverty. This village is unique because it has a higher proportion of widowed women than average (44% vs. 21%) and an even higher proportion of elderly widows (81% vs. 57%).
My colleague Salome and I sat down for a focus group discussion with 21 elderly women. I share below how they - in their own words - described their experience receiving a basic income.
This village wasn’t always poor. These widows fondly remember a past of abundant food, generous neighbours and an economy where little or no cash was needed to thrive.
“We could till land using our hands and get bumper harvest. We were doing a lot of sorghum. Fish was available, such that 50 cents could afford a whole week’s supply of fish.” -Patricia, 79
“We used to do very little farming but produce so much [that] the grain store could be filled with produce from a very small piece of land. You needed to have people to help harvest.” -Margaret, 85
That story has changed. The same village today is dry, bare and ravaged by poverty. The modern cash economy means old livelihoods are less viable. These widows report needing between $1 and $3 daily to provide their basic needs, yet most have never been formally employed. In our focus group discussions, the widows shared the everyday strains of life before they started receiving cash transfers.
“Before GiveDirectly’s transfers, I was a casual labourer. I was left behind with orphans that I had to work hard for. It was a really difficult job but I had to do it. To me it was like committing suicide, I used to overwork myself being that I had many children to take care of, buy food and other things. I would do this continuously.” -Mary, 61
“I was majorly burning charcoal. I did that, and one day, I cut a huge tree that fell on me, I was only rescued by people who heard me screaming. I have burnt charcoal for long. God did not bless me with a child so I was burning charcoal and doing casual work to earn a living.” -Alice, 75
Having grown up in rural villages, I was reminded when talking to these women, about the toils my own mother endured to ensure we had food. With 14 children in our home, she was under immense pressure to meet all of our needs.
Since the start of their basic income (18 months in, and 11 years to go), some of the women, like Magdalene, say they have been able to give up hard labor:
“I no longer work in people’s farms. I cannot do that job any more. I am sick. I use my transfers to purchase food and pay school fee for my orphaned grandchildren. My life is better because even when I run out of money, I can approach someone to borrow me so that I pay later.” -Magdalene, 76
Others still engage in casual labour, but with more flexibility:
“I go once in a while when I feel like. It is not a must. I now concentrate on my farm. At times when I am through with work at my farm, I rest and take some time to burn charcoal, just a little, not as before.” -Joyce, 60
And though the rigidity of needing to work (or work under tough conditions) has lessened for some, 58% of the widows say they’re actually more likely to work now. Notably, there’s more interest in work among these old women. In 2016, 30% felt they were too old to work; in 2017 only 20% felt the same way. “I now feel like I need to work harder and sustain a good life,” is how 64-year-old Karen put it.
The assurance of 12 years of transfers has boosted the confidence for some women, making them more open to both risks and opportunities:
“Believing that payments will continue for that long has influenced my confidence of making decision of investing in a large scale farming that l could not have managed to do.” -Jane, 79
“I used to think that salaries are only meant for people who live in the urban places. I am glad that today, I am earning a salary. I have hopes that I will be earning my salary for twelve years given life by God.” -Magdalene, 76
It has also helped them feel independent rather than a burden on their children.
“Because we don’t want to be always dependent on our children, calling them all the time. We would love for our children to know that we can also take care of ourselves, our children also have responsibilities; at times they go hungry. At least for us we don’t go hungry.” Jane, 79
Some honestly acknowledge that their goal is not necessarily to learn a lot of new things. One woman pointed to an organization that came to teach women agricultural skills. She described getting very little out of the training and said she does not intend to apply the curriculum.
Still, the majority of these women have clear plans and goals. 71% have reported saving in a pool. When asked how they plan to use the money to improve their lives, 55% said they want to fix their homes, buy and keep domestic animals or start a business. Perhaps contrary to expectations, food and health were mentioned by only 10% of these recipients.
Leonida, age 82, knows that she may not have many years remaining. For her, 12 years of transfers mean that “I can now apply for National Hospital insurance fund card and pay for it on a monthly basis… I am now happy and look forward to have the money and eat well before I die.”
In 2009, our co-founder & President Michael landed in Nairobi, connected with a local M-Pesa staffer, and transferred money to a handful of families in an internal displacement camp (he might still have the handwritten ledger he used to keep records). It goes without saying that our maiden voyage setting up a country office involved more than a few rookie mistakes. We had to learn, sometimes the hard way, that, for example, finding a lawyer right away is very helpful, building local advice networks early pays off, the right messaging at community meetings really matters...and the list goes on.
Today, we’re excited to announce Take 4 - we are launching operations in Liberia! We’ll be able to reveal more details about the program and its objectives soon. In the meantime we’re sharing a short interview with our Country Director, Stephanie Palla, to shed some light on the hard & exciting process of building out a new office.
Stephanie may hold the record for the largest number of field posts of any GD staffer - born and raised in New Jersey, she has worked with GD in Kenya, Texas, and now Liberia. We are very excited for her to bring her hard-earned wisdom to this project, and here’s what she had to say:
What’s the current socio-economic situation in Liberia?
To say Liberia has faced meaningful challenges in the last few decades would be an understatement. The country endured two civil wars (until 2003) that crippled the economy and resulted in hundreds of thousands of lives lost. And then the ebola epidemic hit in 2014, killing nearly 5000 people. To put things into perspective, Liberia’s GDP fell by over 90% in less than two decades, one of the largest economic collapses since World War II. Last year, it was ranked the 4th poorest country in the world, making it by far the most impoverished place GiveDirectly has worked in to date.
What are your biggest operational hurdles?
The infrastructure challenges in Liberia are the toughest I’ve ever seen. To list two big ones: roads can be virtually impassable during the rainy season, with cars often getting stuck in the mud. And payments technology is far less developed than in our other countries of operation.
Right...so is mobile money going to be feasible?
Perhaps, but we’re still figuring it out. Mobile money providers are growing in number but the industry is still immature and mostly clustered in urban areas. Agent networks are very thin in many areas, and liquidity is still a big challenge outside metros. For context, even in the capital Monrovia, there are days when I've had to go to multiple ATMs to find one that is stocked. And, needless to say, I’m one of many waiting in line.
You’re now in the set-up stage. What’s top of mind right as you kick off your day?
Top of mind is establishing our legal presence. That means getting approval to register as an NGO so we can operate in country, lease an office, and hire staff. If you have an appetite for details, this means we need approval from the Ministry of Foreign Affairs and are seeking NGO accreditation from the Ministry of Finance and Development Planning. Historically, this process has taken from 4 to 12 months, but we’re hoping to hit the lower end of that range.
When do you start hiring people and where do you look first?
The goal is to start hiring people this month! Given the range of tasks that need to get done early days, it’s often useful to hire a generalist who can flex between many functions. Month 1 for employee #2 may look like: finding an office, introducing our program to local government, and benchmarking compensation for field officers. The good news is that we have a fairly developed playbook for recruiting staff. In simple terms: we’ve found that networks are key. This may mean talking to other NGOs, connecting directly with universities, or just asking friends who’ve lived in the area for a while. And then there’s always some old fashioned job posting.
And finally, to borrow from GDLive, what’s your favorite part of the day?
I’d say my ride to work where I get to travel by tuk tuks through central Monrovia. Also, music in Liberia is awesome. Need proof? Listen to this from CIC. For the R&B lovers among us, check out Kizzy W. Last but not least: Liberians add pepper sauce to everything. Enough said.
Johannes Haushofer and Jeremy Shapiro recently released a paper (HS18) estimating the three-year impacts of individually randomized cash transfers on GiveDirectly recipients. We wrote a short note on these results in February; recently there has been active discussion among researchers (e.g., e.g.), and we’ve since followed up with many of them.
Our failure in original post
These conversations have demonstrated that we did a bad job in our initial note in describing the data and the range of interpretations one might take from them, including more negative interpretations. We take responsibility for that. The post was criticized for lacking “nuance and detail,” and we agree with that assessment.
Results w/ confidence: (i) increase in assets (ii) inability to draw strong conclusions on spillover
To be clear, we agree with the authors’ summary as laid out in the most recent working paper (Jan 2018). Their abstract concludes: “thus, cash transfers result in sustained increases in assets. Long-term impacts on other dimensions, and potential spillover effects, remain to be substantiated by future work.”
- The first point refers to the fact that treated households’ (non-land) assets were higher by 40% (or 60% of the mean transfer size) and that this conclusion is robust to both estimation methodologies: within-village and between-village.
- The second clause refers to the inability to draw strong conclusions about the long-term impact on other outcomes and on non-recipients.
Interpretation of within-village estimates is less certain: two potential interpretations to debate
At the heart of the discussion is the interpretation of the following results:
“transfer recipients have higher levels of asset holdings, consumption, food security and psychological well-being relative to non-recipients in the same village. The effects are similar in magnitude to those observed in a previous study nine months after the beginning of the program”
These results allow us to confidently conclude that recipient households in treated villages are better off over the long-term than their eligible non-recipient neighbors (i.e., the households in treatment villages that lost the randomization lottery) across most indicators. But they do not on their own say whether this is because:
A. Positive interpretation: the treated households who won the randomization lottery benefited from treatment or because
B. Negative interpretation: their neighbors who did not win were hurt by it (i.e. there were negative “spillover” effects on them).
The study does not allow us to conclude confidently which of these is correct
To decide between these interpretations, one must look to the between-village or spillover estimates; unfortunately, such estimates are potentially biased in this paper because households in untreated villages (a) were sampled using a different process and (b) attritted differentially from the study (i.e., control villages were 6 percentage points more likely to not be found between endline 1 and 2 than either group in treatment villages).
The authors handle this in a responsible way by bounding the estimates, and conclude that:
“we find some evidence for spillover effects when using Lee bounds, although most of them are not significantly different from zero1 after bounding for differential attrition across treatment groups.”
This statistical insignificance and more broadly, the potential bias of the estimates, is what prevents us from forming confident conclusions about spillover (or between-village treatment) estimates.
These limitations are one reason (among several) why along with Johannes and other investigators we launched a larger study in 2014. This study (“GE”) is randomized at the village level and used a consistent process to sample both eligible and ineligible households in both treated and untreated villages.
Thus, we think that it's prudent to proceed with an abundance of caution...
The second, more negative interpretation would obviously be a source of concern and have important implications for the way we design and test programs. We had similar concerns two and half years ago that losing a within-village lottery could be a negative emotional experience for the untreated eligible households (see footnote 86 in GiveWell post). Based on that feedback we chose to:
- Stop allowing researchers to randomize treatment within communities in future studies except in exceptional cases, and
- Send transfers to the untreated, eligible households from those studies that did involve within-village randomization.2
In aggregate, approximately 5.4% of GiveDirectly recipients have been part of an individual-level randomization since September 2015, and in 79.5% (and hopefully 100%) of these cases, the initial lottery-losers will also receive a cash transfer. Recently we have gone further, shifting towards “saturating” treated villages by making essentially all households within them eligible so that there almost no non-recipients of any sort.
... although we don’t think the most negative interpretation (B) is the most plausible
While we can only confidently conclude that we can’t confidently conclude much on the spillovers, we’re skeptical of the negative interpretation.
First, the magnitude of the effect is puzzling. The results would imply that the transfers, which were a relatively small change to villages as a whole, representing at most 3.4% of annual expenditure (with 9% of those in treatment villages receiving a transfer) lowered expenditure of their non-recipient neighbors by 20% and their (non-land) assets by 14%. This is surprising on its own, but even more so since (i) the authors did not find negative spillovers at 9 months, implying that the negative spillovers only appear with time (ii) the most common mechanism for negative spillovers, an increase in prices, was not observed by JS after 9 months. (tables 149-157 of the online appendix).
This combination of factors is what leads us to think that the program more likely than not had positive results across the main indicators, as opposed to just non-land assets. We recognize, however, that this is not the only interpretation and we should have made that clearer. We look forward to future research that will help clarify which of the interpretations is accurate.
1 Exception is expenditure which is negative and significant across the various specifications in Table 8.
2 The untreated HS households received theirs in 2016, shortly after the 3-yr survey was conducted.
We have some good news to share: OmiseGO, with an additional generous contribution from Ethereum founder Vitalik Buterin, is donating the equivalent of $1 million USD in OMG tokens directly to refugees living in extreme poverty, and GiveDirectly will deliver those funds.
The crypto economy has grown immensely over the last year, bringing a great deal of wealth to many people and organizations within the ecosystem. In part we simply see an exciting opportunity to share that wealth. We hope the fortunes made in the crypto space will lead not to extravagant lifestyles but to extravagant generosity.
We’re also looking forward to collaborating on a project that embodies our shared vision of a freer, more decentralized world. For the OmiseGO team this means delivering financial self-sovereignty through disintermediation. Blockchain technology offers the means to deliver this on a scale that has never been possible before, and OMG believes it can use those means to change the world for the better by decentralizing personal finance. Specifically, the OMG team is working to decentralize the means to own and wield purchasing power by creating a disintermediated system for storing, transferring and exchanging assets. These financial tools do not require users to go through centralized networks, which often put up barriers and impose unnecessary costs.
Banks, institutions and card networks will be able to use these tools to improve on the services they provide to their users, or users can “opt out” of centralized banking altogether. The aim is not a wholesale dismissal of intermediaries — it is to create a system that selects for intermediaries who add value rather than simply extracting rent.
In some ways this effort parallels the ongoing movement towards direct cash transfers which GiveDirectly has helped lead. The foreign aid sector has historically been dominated by intermediaries — organizations that collect money on behalf of the poor and then spend it on their behalf as well. In some cases these intermediaries play a valuable role, but in others it’s hard to see what argument remains for funding them rather than funding the poor directly — especially given the overwhelming evidence that poor people generally use money responsibly, improve their lives, and in some cases achieve quite impressive financial returns. Direct cash transfers put (purchasing) power in the hands of individual people and make them the judges of what to prioritize.
We also share the view that providing alternatives to legacy systems can enhance accountability. Even a limited alternative that is not widely used can have an impact simply by providing an exit route from previously unchallenged establishments and creating incentives for improvement. In finance, for example, cryptocurrencies can provide a hedge against extreme cases such as the recent financial collapse in Zimbabwe. In foreign aid, direct cash transfers can be used as benchmark or hurdle rate that actively managed investments need to clear before they get the green light (e.g.).
Refugees are a perfect population to serve through this effort. The world is in the midst of a refugee crisis, with more than 65 million displaced from their homes. Many refugees arrive in host countries with their skills intact but with no capital to start rebuilding their lives. Many also find it difficult to re-enter the formal financial system as they lack appropriate local documentation. They are precisely the people we wish to see benefiting from the “unbanking” effect that OMG is designed to create. We’re excited to plug them back in, transfer funds, and let them get to work.
If you share these values we encourage you to join us. This is an open effort, and anyone is welcome to support it by sending contributions of ETH or ERC20 tokens to GiveDirectly’s Ethereum address: 0xc7464dbcA260A8faF033460622B23467Df5AEA42.
Althea Allen, Ecosystem Growth, OmiseGO
Vitalik Buterin, Founder, Ethereum
Michael Faye, Co-founder, GiveDirectly
Jun Hasegawa, Founder, OmiseGO
Paul Niehaus, Co-founder, GiveDirectly
Images of refugees in boats make headlines and grip hearts, but we rarely think about what happens to them 1, 2, or even 10 years later. It turns out that refugees spend, on average, 10+ years in settlements or camps. The aid they receive helps them survive, but rarely do they get the chance to start building for the future.
Today, we’re launching a product to enable large cash transfers to refugees. We’re starting with Uganda, where despite very limited resources, more than 1.4 million refugees are being granted basic rights (like education, land, and the right to leave settlements or become a citizen). We kicked off a pilot in 2017 and are looking to scale significantly over the next year, with your help.
Here’s a quick run-down:
1. How much money will recipients receive? So far, households in our pilot received lump sum transfers of around US $650.
2. What will the cash be spent on?
As always, whatever recipients choose to spend it on. Because of Uganda’s progressive refugee policies, they can invest the money in education or small businesses. We expect some of the grant will also be used on shorter-term consumption spending, like food and healthcare.
Read more about the evidence on how cash transfers are effective.
3. What refugees are being targeted?
We're working with refugees who are in protracted exile, i.e. people who fled their homes 5 years ago or more. We’re also supporting local communities hosting these refugees, the majority of whom are themselves living in extreme poverty. The goal is not only to empower these families with cash, but also to strengthen social and economic bonds between the two groups.
4. How will refugees receive the cash?
We're testing two approaches: some recipients are receiving through mobile money, others through traditional banking. We will assess which option translates to greater efficiency, scalability, and a superior recipient experience.
5. Where are these refugees coming from and how long have they been in Uganda?
With an ongoing crisis in South Sudan and increasing conflict in the Democratic Republic of Congo (DRC), the refugee population in Uganda has grown to over 1.4m. The refugees we are working with are mostly from the DRC, but we may expand our work to reach refugees from other conflicts in the region.
6. How many people are you targeting?
We’ve reached 4,400 households, (21,500 individuals) with our pilot. With your support, we’re targeting 8,000 households in the project’s next phase.
7. What’s a day in the life of a refugee in Uganda? In many ways, it’s quite similar to life for poor families across East Africa. For many, farming is central to daily life: harvesting for subsistence, selling any surplus. Many seek work as manual laborers, to earn a small income. A few own livestock. Some, though not many, run a business. It’s estimated that just 1% have found salaried employment. Poverty is a fact of life. The majority of Uganda’s refugees live on less than 50c a day. Many are severely food insecure.
But being a refugee is unique. Refugees have fled their homes, often with only what they can carry on their backs. They have been exiled from their homelands, many will remain so for the rest of their lives. As increasing numbers of refugees arrive (almost a million have in the last two years), resources to support them are stretched. Achieving true self-reliance remains a distant dream. Though in a recent survey, 52% said that a lack of capital was their primary barrier to achieving it...
Send cash to refugees
Update (04/23/18): We’ve updated our take on the HS18 results, check out our latest here.
Back in 2011 we announced our first randomized controlled trial (RCT) in Rarieda, Kenya. A lot has changed over that time - we’ve moved to new areas, changed our transfer design ($1,000 lump-sum transfers are now GiveDirectly’s standard, whereas most Rarieda treatment households received $300, and a minority $1,000 spread over 9 payments), and changed eligibility rules, most recently to enrolling entire villages in some areas. We now have several other RCTs underway testing the impact of these designs.
We embark on these studies not because they’re easy (they’re not), produce results quickly (they don’t), or always tell a straightforward story (more on that later), but because changing the lives of those living in extreme poverty is too important an endeavour to leave to hunches. One important question is about the duration of impacts: while there is more evidence about the long-term impacts of cash than just about any other intervention, there is still a lot to learn about how long impacts persist, and for whom.
We’re excited that first draft results measuring impacts 3 years after transfers began have been released for the Rarieda study, providing new evidence about the longer-term impact of GD transfers, albeit for a different transfer design to what we use today.
Overall the findings are encouraging. The treatment effects on all the main outcomes (assets, earnings, expenditure, food security, and psychological wellbeing) were sustained after 3 years. Gains on an education index that were not significant at 9 months also becomes significant at 3 years, driven by increased spending on school fees, uniforms, books and supplies. The size of these impacts at 3 years are broadly similar to those at 9 months – in fact, the impact on assets increases significantly, even though the value of assets owned by control households doubled over that time.
The main caveat is that the study generally is not able to estimate “spillover” effects precisely. Spillovers refer to impacts on households that did not receive transfers themselves, but lived near other households that did. There are fewer such households today (particularly where we’ve switched to enrolling entire villages), but in the early days of the Rarieda study, the researchers randomized which eligible households received money initially try to measure spillovers and maximize statistical power to measure the impact of cash. (We later gave money to this control group as well on ethical grounds.)
To measure spillovers, the study compared control households in ‘cash villages’ to households in ‘pure control’ villages (where nobody received cash). There was no baseline survey for the pure control sample, and a range of analytical approaches were deployed to address other methodological challenges, including the late determination of ‘eligibility’ in pure control villages and higher study dropout rate in pure control villages. This means that multiple estimates are reported for every potential spillover effect, and most spillover impacts were not significant after these approaches to bounding the uncertainty were applied (the exception being a negative spillover for consumption).
The paper concludes that “a larger sample is needed to robustly assess treatment effects across villages and to validate spillover effects”. We couldn’t agree more, and that’s why we can’t wait for the results of the large study measuring the 18 month impacts of $1,000 lump sum cash transfers across 650 villages that’s in the works.
Michael Cooke is GiveDirectly’s Research Director.
Evidence about what works, for whom, and for how long is often lacking in international development. The impact of many interventions is simply unknown, while others continue to receive funding despite having been evaluated and found wanting. GiveDirectly was created because there is overwhelming evidence that cash transfers, in contrast, have a wide range of positive impacts.
Until recently, evidence of the long-term impacts of anti-poverty interventions has been particularly scant. Again, we have relatively good evidence for cash transfers; studies in Uganda and Sri Lanka find large impacts of lump-sum transfers on earnings 4-5 years later. But we think there is much more to be learned on two fronts.
First, we want to learn for whom one-time transfers have long-term effects. As several leading development economists (including two of our founders) discussed in a recent SSIR post, we would not expect one-time transfers to have long term impacts for all recipients. Yet we do not have enough data to predict for whom they do - whether farmers or factory workers, the young or the old, etc.
Second, we want to learn how long these effects last. To be clear, we would not expect them to last forever. A one-time grant can have a long-term impact if it lets the recipient make investments that she otherwise would not have been able to make. But even in places with weak financial systems, people without grants will likely find other ways to finance these same investments eventually, whether by saving their own money or borrowing someone else’s. Eventually we would expect their trajectories to converge, much as poorer but otherwise similar regions have tended to converge with richer ones over time. The question is how long convergence requires.
To answer questions like these, we need to be able to run big, long-term experiments. The math is simple: to learn about impacts on a group that’s only 1/5th of the population, for example, we need around 5 times the sample size we would otherwise need. We also need careful tracking, so that researchers can continue to find and survey study participants years down the road.
Some of the early studies at GiveDirectly may help a bit on these fronts, though they were largely optimized for other goals. The aspirations evaluation, for example, focused on the interplay between cash transfers and a video intervention and so allocated only 25% of villages to receive pure cash transfers. Our first study in Rarieda, Kenya focused on testing design variations (transfer sizes, timing, and recipients) and had a relatively small sample (the largest we could afford at the time); we expect to learn more when the results of a second endline are released, but less about subgroups or about the transfer design that we use today.
We’ve intentionally designed our most recent study to get around these constraints. It delivered transfers to a very large sample - over 650 villages - and every household enrolled received the lump sum ~$1000 transfers that are our current default. The independent research group (IPA) conducting the measurement have also followed best practices to ensure they can carefully track participants in the future.
We expect to get 18 month results back in the next few months. We’ll find out how $1,000 cash transfers change a range of outcomes, including economic, health, education, food security, wellbeing and female empowerment indicators. Crucially, the scale of this study means we’ll learn how different kinds of recipients use money and for whom the impacts are greatest. In the future, funders could potentially use evidence like this to precision-target cash transfers maximize the impacts they are most interested in, if they so wish.
Michael Cooke is GiveDirectly’s Research Director.
‘Tis the season for charitable giving, and everyone, it seems, has a request: your kid’s school wants winter coats for its annual coat drive. Your mom asks you to donate to the Cockatiel Rehabilitation Society in honor of your beloved Aunt Carol (who has volunteered there for 20 years). GiveDirectly wants you to donate so they can give more cash to very poor people. Which cause should you prioritize?
One possible, and familiar, answer is: whichever moves you most. For example, John Hanc, writing recently in the New York Times, advised readers to “follow your passion, all the way to the next emergency.” The problem with this approach is not only that it overlooks bad situations that aren’t emergencies; it also treats charitable giving like personal consumption: you pick the cause about which you are passionate, just like you pick a bottle of wine or new sweater. It fails to recognize the moral value of charitable giving, which involves responding to needs that other people have or injustices that they face.
A second answer is that you should choose GiveDirectly, because it best addresses the most severe problem with the fewest negative effects. This is a better answer than the first in that it is responsive to what charitable giving is, but it also feels incomplete, because it doesn’t acknowledge or explain the pull of the other two causes.
A third answer— my favorite—is: don’t choose. I don’t mean give something to each cause (which is itself a kind of choice). Rather, I mean: don’t group these causes together as generic “charities” and make tradeoffs among them within your charity budget. Instead, consider how donating to each of these causes functions: whom does it benefit, and how? What values does it enact or promote? What relationships or connections does it strengthen? This line of thinking reveals that different types of charity are frequently more similar to other activities than they are to each other, and so ought to be traded off against those other activities instead.
Consider the coat drive and other forms of charitable giving that involve in-kind, local donations of items that you already had on hand, or short-term volunteering opportunities. These activities feel great, build community, and make someone else’s life a little better. They impose few if any financial costs on the donor. So while you might need to decide where to donate that extra coat, or where to volunteer locally, there is little justification for donating less money because you do these other activities.
What about donating to honor Aunt Carol versus donating to GiveDirectly? While they both involve contributing money, donating to honor Aunt Carol is more like buying her a gift or taking her out to dinner than it is like alleviating severe poverty. It therefore makes more sense, when doing one’s mental accounting, to take the cockatiel rescue donation out of one’s “gifts to friends and family” budget than a generic charity budget. (Even though a main purpose of the donation is to honor Aunt Carol, the donation still has other effects—on cockatiels— and so the donor still has a responsibility to do due diligence on the recipient organization, to ensure that it doesn’t cause harm.)
Correspondingly, I think of my own donations to GiveDirectly as coming out of my budget for effectively addressing serious suffering and injustice. While it can be tempting to “double dip,” and categorize donations that are motivated by personal relationships as also addressing serious suffering and injustice, I try to avoid doing this unless the recipient organization really is one that I would pick if addressing serious suffering and injustice were my only criterion.
When it comes to donating, there is no way to avoid difficult choices and tradeoffs. But making tradeoffs based on the purpose and function of donations, rather than whether they fit into a generic category of “charity,” is a good place to start.
Jennifer Rubenstein is a GiveDirectly donor.
Over the years, we’ve had lots of conversations with folks about whether it’s a good idea to simply give money to people who don’t have much of it. It’s a great conversation: it gets to some pretty core issues about human nature, and (spoiler alert) there is good news to share!
To help you have that conversation with friends, we’re sharing notes on the main points we usually cover. Remember, there is no magic formula and it’s always important to begin by listening. Still, these may help add some structure and address a lot of the common questions we all hear. On our end, we’d love to keep learning alongside you as you have these discussions - let us know what questions you’re hearing, what insights you have.
Here’s the basic story:
- GiveDirectly is the first nonprofit that lets donors like you and me send money directly to the poorest people on the planet, with no strings attached. Crazy as it may seem, we weren’t able to find this back in 2011 when we were looking for a way to give away our own money, and that’s why we created GiveDirectly. And yes, a lot of people thought we were crazy at first - one of our first big funders initially told us we “must be smoking crack.”
- Like many people, we had grown up hearing this was a bad idea. We worried that recipients would waste the money, or even use it in ways that harmed themselves like spending on alcohol or tobacco. We worried that they wouldn’t work as hard to improve their own situation. We thought that you have to “teach a man to fish.” (An aside: in the data, we are actually quite bad at teaching people to fish.)
- But now for the first time we have evidence – a lot of evidence – from rigorous experimental evaluations. Experimental impact evaluation didn’t start in a big way in development until the early 2000s, but since then there have been 100s of high quality evaluations of the impacts of cash transfers, including many randomized controlled trials.
- The bad things we worried about haven’t happened. A systematic review by economists at Harvard and MIT found no evidence that people work less when they receive transfers; another one by economists at the World Bank found that not only did spending on alcohol and tobacco not increase, it actually went down on average.
- Instead there have been positive impacts on just about any measure of well-being you can think of, including health, education, nutrition, assets, earnings – we even saw a study recently that found evidence cash transfers reduced suicides. There is no one answer to the question “what happens when you give money to poor people,” which perhaps shouldn’t be surprising: the whole point is to give people the flexibility to pursue the goals and opportunities they think are most important.
- At the same time, advances in payments technology have made it cheap and safe to reach the very poorest people on the planet. We send most payments over mobile money, which let us reach people in East Africa living on just $0.65 / person / day and deliver around 90% of each donated dollar into their hands. We’ve proven this model at a large scale - currently around $50M / year, similar to the scale of many government cash transfers programs - and could easily be moving two or three times as much with current capacity.
- Given this, we think that giving directly should be the default way of helping people who don’t have much money. Globally, we are already spending more in foreign aid and private charitable giving than it would take to end extreme poverty, at least in a purely financial sense. There will be times when we can do better - by creating a public good like a vaccine, for example. But we think we should always start from a place of respect: treat donated money as if it belongs to the poor, and ask if there is a good reason to believe that we can create more value for them by spending it ourselves than by letting them decide.
If you’re a fan of efficiency ― as most GiveDirectly donors are ― here are three ways to make the absolute most of your year-end giving.
- Ask your employer to match you. Many employers will match from 10% up to 100% of what you give.
- Save money: give appreciated stock. All donations to the poor via GD are tax-deductible. But if you donate stock that is worth more now than what you paid, you can also save the long-term capital gains tax you would have paid.
- Have a merry crypto. Don’t want to deal with dollars? We take Bitcoin through Coinbase, or Ethereum through the following ETH address: 0x4CD5e2a46d040e3E66Ab16570C60E040a328f6C9.
Of course we also take old-fashioned PayPal, Venmo, and plastic.
Side note: It's best to give stocks and especially mutual funds by December 15, in order to lock in 2017 tax benefits. Brokerage transfers aren’t models of efficiency at year-end.
Got other efficient ideas? Tell us at email@example.com. We’re always looking for better ways to give.