Earlier this month, while leaving a recipient’s home after a chat about his purchases and experience with GiveDirectly, I noticed a new structure beside his house that I hadn’t seen on my way in. “What’s that? Did you buy that with the transfer as well?” I asked, and my colleague Erick, Senior Field Officer, translated. The recipient explained that no, this structure was actually a pig pen built for him by an NGO that was offering residents of that village the option to go into either pig or chicken rearing. I followed up, “Now that you’ve been the beneficiary of two NGO programs, how would you compare the experiences with the two?”
His response: “If I had wanted a pig pen, I would have just bought one.”
More and more donors and policymakers are seeing the benefits of cash as a way to alleviate poverty—it’s efficient, transparent, and proven to have impact across many outcomes. But the perspective that matters most to me is the recipient’s own.
In a randomized sample of recipients from our two most recent campaigns in Kenya, 95% said they would prefer to receive cash instead of goods or services (n=428). We also asked them to explain their stated preference; the unedited responses, which were transcribed by our staff as accurately as possible from phone conversations, are here.
Many of the themes in these responses explaining why cash is better than goods or services are ones that we would expect—that people have different needs and priorities, and cash enables them to do exactly what is needed. In the words of one recipient, “Its [sic] the wearer of the shoe who knows where it pinches, so he prefers to spend himself.” Other reasons they gave are a bit more surprising:
- A greater sense of responsibility about the goods or outcomes — “People will treasure what they buy as there is some great value attached to what one buys on their own” and “He will feel more responsible when he spend it by himself”
- Ability to do multiple things rather than one big project — “People would wish to do several small things with the money” and “He is also able to use the surplus on other miscellaneous expenditures”
- Ability to respond to shocks — “Cash transfer helps you with time whenever a problem comes up” and “It will help me solve other new other issues that will arise later on with time”
- Dignity from being able to set your own standards — “Some people might complain when things are bought for them which might not fit their standards” and “He will have the opportunity to buy the things he thinks are of the best quality and are of his taste unlike when GD does the shopping for him”
- The simple pleasure of having money in hand — “It's a source of pride and happiness having money and marching, in the company of his wife, to the Mpesa agent to withdraw money” and “Money its self comes with satisfaction and joy”
- Empowerment — “Because she wants to feel a boss of her own” and “I am mature enough to make my own decisions”
One theme in particular struck me deeply. Some recipients said that even if it were just a matter of asking GD for what they needed, they would be embarrassed to ask for the things they most want. One recipient said “There are needs that are between a couple like under pants that they would be ashamed to ask GD to buy for them.” Another said “there are things which she wouldn’t be free to tell GD to buy for her such as blanket.” If I were running a different program, where recipients had to come and ask me for what they needed, I would want nothing more than to help them buy underwear and a blanket—basic needs that provide both comfort and dignity. The fact that they would feel ashamed to ask breaks my heart, and indicates to me a problem in the system of development. The poor shouldn’t feel that their needs aren’t good enough for donors; donors should be serving the real needs of the poor. Reading these responses has bolstered my confidence that I’m in the right line of work—giving people the autonomy and dignity to do what matters, with pride and confidence rather than embarrassment and shame.
We have a lot to learn from recipients about what makes a great development program, but I feel humbled and honored to be on the right track.
We asked members of our team who are from or have spent a lot of time in the U.S. a simple question: Do you give cash to the homeless in the US?
We were inspired by a blog post in which Chris Blattman asks: “Why do I think it’s a good idea to give cash to the poorest in Uganda, but not to the homeless of NYC?”
The question resonated strongly with many of us, including those of us in our NYC office, so we thought it would be interesting to see how members of the team – whose job it is to send cash directly to the extreme poor in Kenya and Uganda – feel about giving cash directly to the poor in their own country.
Of the 11 of us, 2 give most of the time, 5 occasionally, and 4 never. Everyone was asked to explain their responses, all of which you can see here.
One theme that comes up repeatedly – as would be expected, among this group – is that of evidence. It’s a fact that we simply don’t know much about the impact of cash transfers on the homeless in the U.S. As Blattman writes in the New York Times, there are only a few examples of organizations or individuals giving out cash and monitoring the results. Although these have been promising, they have not focused specifically on the homeless, nor have they been conducted at a large-enough scale to glean conclusive answers.
Another theme that emerged from the responses was that of the cost-effectiveness of giving at home versus abroad. One respondent wrote:
“I think that giving money to poor people overseas is probably much more cost effective (in other words, it does more to lift people out of poverty per dollar).”
While it is certainly true that there’s more evidence for giving to the poor in developing countries, and that a dollar goes much farther elsewhere, it’s important to balance the focus on evidence and cost-effectiveness with the fact that there are thousands of individuals in our own communities who are poor and struggling. One respondent eloquently summarized that sentiment in this response:
“I don't feel confident giving directly to the poor in the US without more evidence akin to what we have in most of the developing world, given the huge differences in culture and poverty. But, I give from time to time to make sure that saying "no" too many times doesn't harden my basic compassion for people who are suffering, regardless of why, or of what impact my money will have.”
Asking this question was an interesting thought experiment for me as a recent addition to the team -- and as a native New Yorker who is no stranger to being asked for money on the street. It confirmed, unsurprisingly, that for us at GiveDirectly, ensuring that our money has as large an impact as possible is paramount. Unfortunately, without further experimentation, there’s no way to know whether the cash we give is having any effect, let alone a positive one. Hopefully this conversation marks the beginning of a real shift in how we think about homelessness in the US, and prompts further research into the impact of cash on this population. The homeless here shouldn't be cut off from a potentially effective intervention, simply for a lack of evidence.
Here in Kenya, our team is focused on transferring money to as many poor households as possible. So, in March of this year, we made a significant change to our field model that allows us to reach more households than ever before.
Our process of identifying recipients and transferring funds involves several distinct stages, each of which has its own team of field officers and which must be completed before the next can begin. In our old model, we only had one team in the field at any given time, which meant that one stage had to be completed in its entirety before the next team could begin. Although this worked for a period, it limited how many recipients we could enroll in, say, a month or year. Once we felt that we had learned enough about how to execute each step, and had more predictable funding, we wanted to build a model that was easily scalable and that would enable us to increase our throughput.
As soon as we had secured enough funding earlier this year, we developed what we now call the rolling model, the main component of which is having teams overlap in the field. We now have an average of 15 field officers – three teams – in the field on any given day. As such, the various stages run concurrently, ensuring steady initiation of new recipients into the program. As one team (e.g. census) completes its work in one village and moves to the next, the subsequent team (in this case, registration) can move in and begin its work. With this new model, we are currently bringing on an average of 1,000 new households each month.
Another important benefit of the new model is that we can retain the very best staff – our contracts now range from four months for field officers to a year for senior field officers. Up until relatively recently, we would recruit and deploy new teams for each pot of funding; now, we can keep the same teams for longer and maintain a relatively high throughput rate.
To do this, we had to address several challenges, including coordinating multiple teams in the field and making sure that there was just enough of a lag between them. We also had to prepare to handle a substantially larger volume of data, which would now be coming in from three different teams on any given day. My role, Project Associate, was created to ensure we could manage the field teams and maintain a consistent and efficient data flow.
Taking on this brand-new role has meant that I face unanticipated challenges every day. But with a team of exceptional field officers as colleagues, in May and June we successfully enrolled the first 2,000 households under the rolling system. We're on track to enroll another 5,000 by year-end; by then, we'll be a well-oiled machine.
Recently, three members of our board – Michael Faye, Chris Hughes, and Paul Niehaus – announced plans to start a separate, fee-for-service for-profit venture called Segovia to develop technology for managing field logistics, with a focus on programs that transfer cash to the poor.
This is potentially an exciting effort to reduce poverty: developing countries spend huge sums on their social programs, but these are often plagued by leakage and high administrative costs that could be reduced with better technology. At the same time, the overlap in directors that will result raises questions about how the two organizations will relate to each other. GiveDirectly’s board – and I in particular as an independent director – spent several months consulting with legal counsel, certified accountants, and other stakeholders to understand these questions as they pertained to our fiduciary responsibilities, and wanted to share the answers we reached.
How are the organizations’ roles related? GiveDirectly’s tax-exempt purpose is to reduce poverty by providing financial assistance to the extreme poor. Segovia’s current focus, on the other hand, is to create technology that enables institutional customers – including governments, multilaterals, and NGOs – to manage field logistics. Segovia will provide this technology to GiveDirectly freely for philanthropic work, while charging other customers. One analogy might be to a firm that uses spreadsheets to manage its operations (GiveDirectly) and another that creates spreadsheet software (Segovia).
How will the roles of current GiveDirectly staff change? Overall there will be little change: Faye and Hughes will continue to serve on GiveDirectly’s board as currently, and Niehaus will continue to serve as president of GiveDirectly while also joining Segovia’s board. One employee will split time between the organizations, providing administrative support to both boards. One GiveDirectly employee will serve as designated liaison in order to describe what GiveDirectly needs from the technology Segovia will donate.
Is Segovia acquiring anything of value from GiveDirectly, and if so, what compensation is required? We retained Morrison, Brown, Argiz & Farra as auditors to assess this question. Their review found that Segovia should compensate GiveDirectly for the fair market costs of recruiting the one employee mentioned above who will split time. No other assets (code, contact lists, etc.) are being transferred. Segovia’s founders are also making GiveDirectly a minority owner of the firm to ensure that it participates in any financial upside subsequently created.
How will potential conflicts of interest between the organizations be managed? While we generally expect GiveDirectly to benefit tremendously from the creation of Segovia, we recognize that conflicts of interest between the two organizations may potentially arise at times. In such cases, the directors with dual roles (Faye, Hughes, and Niehaus) are required to recuse themselves from GiveDirectly board votes. In addition, we will shortly announce an expansion of GiveDirectly’s board which will increase the number of independent directors participating in such votes. Finally, on the recommendation of counsel, GiveDirectly’s board drafted and approved a Memorandum of Understanding codifying the relative roles of the organizations as described above as principals by which potential conflicts should be governed.
Culturally, we have always sought to break with mainstream practices while at the same communicating clearly about what we are doing and why. Our goal is that this development will be no different. If you have questions about anything related to GiveDirectly and Segovia, please don’t hesitate to contact us.
We like to give cash because it enables people to do many different things, some things that we have never heard about. Some you might think are good and some maybe you think are bad. Was there anyone that you knew who spent in a different or interesting way in your village?The results were fascinating. Recipients built fish ponds, bought livestock, wired their homes and started side businesses charging electronics for others, rented land to farm and hired neighbors in their village, or paid university tuition for their children. Which… brings me to power saws. One recipient told us about his own spending that he thought was unique (note these quotes are taken by our follow-up call team in Kisumu, Kenya):
I decided to buy a power saw so people call me./hire me,and I use it to cut down the trees/wood for building houses,making furniture and some use the wood (its burnt) to make charcoal,this is the work I do to earn a living(cutting down trees (using my power saw), meant for those purposes)Neighbors of his also commented on the purchase:
One neighbor: She says there was a person who bought power saw that he uses in business and this impressed her.Now, who knows what the economics are of starting a power saw business (well, this guy might). And in general we rely more on independent, randomized controlled trials to understand the impact of our cash-transfer program and others. But these anecdotes help illustrate a lot of the value of cash transfers: there’s no power saw charity. As far as we know, there’s no tin roof charity either, or a motorcycle charity for aspiring motorcycle taxi drivers, a fish pond charity for future fish farmers, or a dowry charity for people who just want to marry. There’s also definitely no combined power saw/motorcycle/fish pond/dowry charity. Cash is a compelling weapon against poverty precisely because people can use it how they see fit, responding to their own specific needs and dreams.
Another: its her who they added some amount and bought a power saw machine which earns them a lot of profit.
Note: you can see the full, unedited answers to this question for the subset of recipients we asked at the link below. After each transfer we send, we call every recipient to ask them a few questions, mostly to learn about how we can improve our process or identify any adverse cases we should follow-up on. Members of our Kisumu-based team then write down what recipients say as closely as possible. We added the question on interesting spending to a randomized 15% subset of the surveys we did over the last couple of months.
You’ll see some recipients thought others spent the money poorly. We know in aggregate study after study has shown that cash transfers are not associated with increases in spending on “bad” items, but it’s no surprise some people may choose to spend in ways others find “bad” (and, knowing humans, it’s certainly no surprise that cases of one person judging another’s spending would occur!).
For the past year, I served as the Field Director in Kenya and led our team to deliver more than $3 million to poor households. Since transitioning to a New York-based role recently, I’ve been reflecting on how far we’ve come in a year. When I arrived in Kenya, our office was aptly described as “a series of boxes under the stairs”; now, we have a real office that will be able to accomodate our team as we continue to grow. Lydia Tala was our sole full-time employee; now we are 30. Field officers who used to refer to GiveDirectly as “you” now include themselves, saying “we.” But by far the most interesting and surprising marker of our growth is how well-known we have become in Siaya district and even Siaya town, the urban center.
Enrollment field officers live in Siaya town and travel long distances by motorcycle to the villages where recipients live. When I first arrived, a field officer going into a village would have to introduce himself and sometimes even show his identification badge before being recognized as a GiveDirectly employee. Now, just walking down the street to buy groceries, field officers are frequently recognized by their backpacks, which are not particularly distinctive, but are all similar in style and marking. Almost daily, recpients or family members see the bags and stop our staff to express gratitude or ask questions.
GiveDirectly staff are not only recognizable – they’re thought of as part of the community. As the below interactions highlight, recipients regard field officers as family, don’t hesitate to come to their aid, and even name children after them! Recipients also clearly feel great pride in the accomplishments they’ve made as a result of the transfers, and are more than eager to share them. Below are some of the field officers’ favorite stories:
- Erick was in town before heading out for a day of fieldwork when two older women greeted him, saying, “Hello, our son!” He had previously led a village meeting and visited these women in their homes, and they had just received their second transfer. They were in town making purchases with the transfer money when they saw him.
- Joe and Lydia were leaving a village and flagged a motorbike driver on the road. The driver, who happened to be a recipient, recognized Lydia and explained that he had bought the motorbike with the transfer.
- Anne was at the bus station, negotiating her fare with a particularly stubborn bus conductor. A recipient, whom she didn’t remember, saw her arguing and stepped in to help. He told the conductor to give her a good rate because she had changed his life — he had used the transfer to buy a water pump that he then used to start a car washing business. The conductor was so impressed that he reduced her fare!
- Witness Ochieng Gumbo had just completed a meeting in a new village being brought into the program, when people from a neighboring village came to pressure him to register them as well (which, of course, he couldn’t do). The host village came to his assistance, and a community member who had a motorbike gave him a ride back to town.
- Witness also has a namesake in baby Ochieng Gumbo Loka! A follow-up staff member heard a rumor that a baby in a village where Witness had conducted registration had been named after him. Witness called around until he found the child.
The fond feelings towards GiveDirectly staff are likely a reflection of both the impact the transfers have had on the recipients’ lives, and the field officers’ role in facilitating the transfers. George, a field officer, recently conducted a follow-up survey with Mr. Owegi, a musician by trade, who spent some of his transfer on a guitar. Mr. Owegi now plays in several venues in Siaya town, and, according to George, sounds great. He wants to compose a song for GiveDirectly – so it looks like soon we’ll have a local musician literally singing our praises throughout the town.
When I first started interning at GiveDirectly earlier this year, I was new to the whole idea of cash transfers. As I’ve explored the topic more on social media, I’ve come to realize there is a growing and very eclectic community of people who are passionate about direct giving for different reasons.
Here are some of my favorite ideas about aid and giving that I came across over the past couple of months.1. Direct giving is making people consider the impact per dollar spent on foreign assistance and on charitable giving more generally. There are of course many worthy causes out there, but it’s helpful to remember that 93% of donated money could go directly to someone in extreme poverty.
An example is Matthew Yglesias’ shoutout to GiveDirectly in his Slate article “Please Stop Giving Donations to Rich Universities”:
“At any rate, in the scheme of misguided donations to Harvard this one seems not-so-awful. It's mostly for financial aid, which is nice. But really you would almost certainly do more good with this money by picking 1,500 people at random and mailing them each a check for $100,000. I will as usual tout GiveDirectly where your money goes to desperately poor rural Kenyans as a great use of your charitable dollar.”2. Direct giving is for everyone, regardless of how much you have to give. With even just the couple of bucks you spend on your daily latte, you could have a direct impact on someone’s life.
Check out this poem that talks about how small contributions can add up quickly:
There's a little something I've been doing
I'd like to rope you into.
When people talk of saving
they say it's the little things
like a Starbucks habit
that hold you back.
I'm a stress spender
eater and coffee drinker
And it's especially silly when we have unlimited beverages at the office
and non-professional reading to help unwind.
So I baited myself
promising savings below a set daily budget
to my favourite charity
[GiveDirectly, if you must know].
Nibbles seem way less appealing
against the utility of their price in rural Kenya.
$12.91 in the first five days?
I'll take it
Give it a shot?
A blog post by staff at The Mulago Foundation raised doubts about GiveDirectly’s impact. It inspired thoughtful responses by Chris Blattman, the GiveDirectly board, Holden Karnofsky of GiveWell, Jeremy Shapiro and Johannes Haushofer, who conducted the RCT on GiveDirectly and a second post by The Mulago Foundation. In addition, many people followed and participated in the discussion on social media. Here is one of the posts we got on Facebook:
Lastly, I’ve seen our donors not only adopt direct giving themselves, but become advocates for it. Our supporters are becoming our spokespeople and using social media to carry their message.
Of all the tweets and Facebook posts on GiveDirectly that I’ve seen, my personal favorite is Steve’s Youtube Video about his bike-across-America fundraising trip. I especially like how passionate he is about how cash transfers give real respect to the poor.
It’s been truly inspiring to see the community around GiveDirectly grow and, thanks to social media, find creative ways to express what direct giving means to them.
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“We target the poorest people in the region and try to get the cash to them as efficiently as possible.”
“Okay...” I responded. There was a five-second pause before Joy clarified:
“And that, in it its simplest form, is it.”
“Oh, ok…. You don’t give them advice on how to spend it?”
“No. We believe individuals know best what they need.”
That was my first introduction to the GiveDirectly model of unconditional cash transfers. I was speaking to Joy in May of last year, having heard about the organization through mutual friends. As you can probably guess from that conversation, I was skeptical at first.
Fast forward seven months from that initial conversation and I feel very privileged to have been appointed the new Field Director in Uganda. I spent the time after our initial conversation working in Ethiopia on the topic of climate change. While hugely important and one of the biggest global challenges today, I knew that I wanted an opportunity to deliver more immediate impact and make a material difference to those most in need. My instincts told me that I would get that chance at GiveDirectly.
I have now spent one week on the ground in Kenya, meeting the current team and visiting some of our initial recipients. Whilst watching and learning I observed a few aspects of GiveDirectly’s operations that surprised me and noted a couple of things to look forward to in the future.
Observations on our model
Firstly, the model features multiple checks and balances, with recipients having up to five touch-points with GiveDirectly staff before receiving their first transfer. This is to overcome any village-level data issues, ensuring that we are living up to our mission of identifying and reaching those that are most in need. It isn’t as simple as turning up at the home of someone with a thatched roof (one of our identified targeting criteria); all information - including names, house location, pictures and mobile numbers - must match before that first transfer is submitted.
Second, each step requires substantial staff effort on the ground. Currently, we have over 30 staff members in Kenya alone, all of whom work long, grueling hours walking through the rain, talking to our recipients and investigating suspicious cases. The quality of the individuals that I met was energizing – they are well-educated, communicate very eloquently (“we speak the Queen’s English”, as Andrew, one of our Senior Field Officers put it) and, above all are extremely passionate about GiveDirectly and the work we do.
Finally, communities’ support for our values I have found particularly striking. All members of a community in which we work are given a GiveDirectly hot-line number to call if they feel there is anything suspicious, or there are rumors relating to GiveDirectly in the local community. This has been an important avenue of information for us and illustrates the fantastic work our Field Officers are doing in transmitting our values to recipients and communities.
Looking to the future
After an inspiring week understanding the work that we are currently doing today, I look forward to tackling a big question as I begin my work on the ground in Uganda: what could we improve in the model?
Efficiency is obviously one - David Brailsford, head of Great Britain cycling (my British bias coming in), attributes the large success of his organization to the “sum of marginal improvements”. That is what we need to continue to strive for, trialing and scrutinizing anything that we implement. While we may not need to go to the extreme of teaching Field Officers how to wash their hands to reduce sick days (which they actually do!), we should frequently evaluate how much benefit we are seeing from each step of our approach and continue to trial new ideas to improve the model.
Another question I’m excited to pursue and that I think our work in Uganda can help answer is how we work in areas where financial inclusion and mobile connectivity are poor. Understanding what it takes to deliver under these circumstances will be important as we look towards the future.
by our Board
Staff at the Mulago Foundation recently commented on the results of IPA’s impact evaluation of GiveDirectly’s cash transfer program. Broadly speaking they see the results as “important” but think the media have overhyped them. As an organization, we are skeptical of nothing more than hype. Our intention from the start has been to search for well-documented, independently verified solutions to extreme poverty, not the trendy intervention of the day. Indeed, we encourage all donors to hold development organizations to a higher bar by asking three basic questions:
(1) What is the evidence base for the intervention’s long-term impact?
(2) Is there 3rd party experimental evidence of the specific program’s success?
(3) How exactly will a marginal dollar get spent?
The unfortunate reality is that too few organizations currently address these questions. We’re proud that we do and that as a result anyone can weigh in on the results.
Are cash transfers an experiment? The authors refer to GiveDirectly as an “experiment” and urge caution in pursuing untested interventions. We too urge caution in pursuing untested interventions; this is precisely the reason we founded GiveDirectly, which is anything but an experiment. We believe there is deeper, more conclusive evidence on the effectiveness of cash transfers than almost any other development intervention we can find.
Specifically, cash transfers have been called the “among the most thoroughly researched interventions” by the UK’s development agency (DFID), with dozens of academic publications across more than 13 countries documenting meaningful impact. Cash transfers are one of a handful of development interventions whose impact has been studied experimentally beyond three years, with recent studies finding annual rates of return of 40% after 4 years in Uganda (Blattman et al, QJE, 2013) and 80% after 5 years in Sri Lanka (de Mel et al, Science, 2012). And GiveDirectly is one of the few non-profits to have been evaluated in a randomized control trial by a third party – in our case, Innovations for Poverty Action. Even organizations that have been externally evaluated have, sadly, often kept that fact secret and released the results only if they proved favorable. We’re proud to have done differently, pre-announcing the evaluation and binding ourselves to an honest discussion of the results before we ever saw them.
Are the impacts meaningful? A second concern of the Mulago authors is about the magnitude of individual effects. In some cases this reflects misinterpretation of the results (details below). The bigger issue is what rigorously tested alternatives are available. For example, the authors are concerned about the 28% monetary rate of return that GiveDirectly beneficiaries see half a year after transfers ended. To be concrete, this rate implies that an average recipient who received $500 would more than double that initial transfer within three years, a strong result. The authors claim that other interventions can achieve even higher returns – up to 300%, a figure that exceeds even the largest estimates of returns to capital in Sub-Saharan Africa (e.g. Udry & Anagol, AER 2006). To our knowledge, however, none of these claims has been substantiated by a credible, independent, experimental evaluation. If and when they are we will of course be keen advocates.
What does “success” mean? Third, the Mulago post highlights important questions about the definition of success. In their post, for example, they explicitly put most emphasis on earnings impacts while putting none at all on reductions in violence against women. Other donors may feel differently. This is precisely why IPA’s study was designed to measure and publish a really large set of outcomes: any donor with any objective could get a complete picture and then decide for themselves whether to give. And the poor themselves may feel differently. Recipients in Western Kenya spent relatively little money on health or education, while recipients in other contexts have used unconditional cash transfers to sharply reduce HIV and HSV-2 infection rates and increase schooling (Baird, Garfein, McIntosh and Ozler 2012; Benhassine, Devoto, Duflo, Dupas and Pouliquen 2013). A broad lesson from this body of research is that poor people do things with money that vary depending on their needs and circumstances.
As we’ve said before and said publicly, cash transfers are not the single solution to poverty. In implementing them we have tried to adhere to high standards of transparency and evidence that are far too rarely met. We hope more organizations will do the same, so that we can all talk not just about GiveDirectly’s evidence, but instead, the relative merits of different interventions and organizations. It is this conversation that will move us beyond rhetoric and hype to credible, measurable, and long-lasting impact. We look forward to having it.
Some specific issues of interpretation:
Estimating the persistence of treatment effects. The Mulago post raises the sensible question of whether impacts might fade out over time after the initial transfer. It completely omits discussion, however, of the evidence presented in IPA’s evaluation on this point. Those data show that over the range of time lags studied effects were generally persistent and in some cases tended to increase, not decrease, with time.
Comparing magnitudes across different kinds of intervention. The Mulago post compares increases in income attributable to cash transfers to those claimed by other interventions designed to increase incomes. This is an extremely low bar to apply since, by design, cash transfers give poor people the flexibility to use money for purposes other than income generation. For example, recipients spent an average of 18% of their transfers on roofing investments which are cost-saving rather than income-generating. Including this spending in the denominator of a return on investment calculation effectively treats that 18% of spending as pure waste.
Distinguishing profit and cash flow. The Mulago post treats expenditure on self-employment activities as flow costs. In practice these expenditures include both flow costs and capital expenditures (e.g. inventory expansion), which is why IPAs study estimates effects on cash in and cash out separately. (The study’s use of the word “profit” is poorly chosen as the concept being estimated is in fact net cash flow.) The Mulago post similarly misinterprets the ratio of revenue to expenditure in various sub-categories as a measure of return on capital, which it is not.
Calculating returns on metal roofs. IPA’s full study estimates that the average cost of a metal roof among households who bought one was $564, and the average annual savings from repairing and replacing thatch was $107, for a simple rate of return of 19% (all figures PPP). The Mulago post appears to include only replacement costs, as cited in IPA’s shorter policy brief, and thus estimates a lower rate of return.