Cash transfers: not “whether,” but “how”
Many people think that simply giving money directly to the poor is a radical new idea. We're flattered, but the reality is: it isn't. Over the last decade, cash transfers have quietly become one of the most widely used poverty-fighting tools in the toolkits of aid agencies and emerging market governments. If the question about cash ten years ago was "whether," the question now is "how."

I saw this personally on a recent trip to Nairobi where I met with government officials and counterparts in a variety of donor institutions. I spoke with teams working to build Kenya’s National Safety Net Program (NSNP), the foundation for a broad social protection policy that aims to provide a cushion to the most vulnerable members of society (orphans, elderly, and disabled). The chosen instrument of assistance is not food, livestock, or subsidies, but cash -- cash that is delivered directly to the poor via bank or post office accounts, with no strings attached. (Note that Kenya is not alone in this respect: the governments of Uganda, Zambia, Botswana, South Africa and Mozambique, to name a few, have all implemented or made plans to implement national cash transfer programs.)

A striking feature of the discussions I had in Nairobi was the absence of a “Should we give cash?” debate. The majority of policy-makers I spoke with accepted the important role of cash transfers in social protection and humanitarian assistance. Senior technocrats in Ministries and Secretariats cited the value of direct transfers as a means of reducing corruption, a goal that features prominently on their agendas. In my discussions with the teams working to build NSNP, the debate focused almost entirely on questions of how to implement cash transfer programs effectively:
  • Access - How do we deliver electronic payments in the most remote parts of the country?
  • Sustainability - How do we use technology to cut program costs and ensure long-term financing?
  • Scale - How do we create systems that can rapidly achieve broad coverage in an emergency?
  • Design - Do community-based targeting strategies produce accurate and fair outcomes?
I found our colleagues at donor institutions like UNICEF, UK’s Department for International Development, and World Food Programme asking the same questions. How can cash transfers fit into broader strategies for delivering outcomes on food insecurity, child and maternal nutrition, and resilience-building? How can these strategies be operationalized at scale? WFP, as the largest distributor of food aid globally, turns out to be one of the leading innovators on cash transfers; roughly one third of WFP’s aid is now distributed in the form of cash, not food. In Kenya, for example, WFP is partnering with banks and credit card companies to deliver cash transfers to highly vulnerable, drought-affected populations. Other institutional donors like UNHCR are exploring ways to augment the impact and efficiency of cash transfer programs in challenging settings like refugee camps.

I am excited about the unique role GiveDirectly has to play in answering these “how” questions: through technology, research and our operating platform in East Africa, we have the ability to experiment with new ways to deliver cash transfers and rigorously assess outcomes. We look forward to keeping you updated on what we learn.
Why so few stories?
If you regularly check our website, blog, or Facebook page, you may have noticed something you don’t often see: stories and photos of our recipients. Given how closely we interact with recipients and how prominently stories feature in most nonprofits’ messaging, you may be wondering if we’ve completely missed the marketing boat.

We try to anchor everything we do in data and rigorous evidence, and our marketing reflects that. So imagine how different GiveDirectly would look if, instead, we marketed by picking the “best” stories: instead of a page on our website dedicated to evidence on the effectiveness of cash transfers, you would see a page titled “success stories,” filled with stories about our recipients who spent their transfers in the most innovative ways. You might read about the recipient who bought a solar energy system and charges neighbors to charge their phones, and about the man who bought a keyboard and gets paid to play gigs around town.

The problem with this strategy isn’t that the stories aren’t true, or relevant – of course they are – but they clearly aren’t representative of all of our recipients. We believe that stories and qualitative information can be informative and powerful, but their value depends on the manner in which they’re shared. When individual stories are shared without sufficient context into how they were chosen or how they compare to the average, they can create a misleading picture of how the organization uses donors’ dollars and the impact they ultimately have. This would be unfortunate for individual donors – and could be dangerous for policymakers and institutional funders, who fund and influence programs at massive scale. If we shared our favorite stories without any context, you might think, for example, that the woman who was able to afford eye surgery and see for the first time in two decades is representative of the average recipient.

As we scale our program, we’re accumulating more and more great stories – and, of course, the occasional not-so-great story – and color about recipients’ experiences with cash transfers. We want to share more of these to help you assess our work and – equally important for some donors – connect with the people whose lives we are affecting. To keep ourselves honest when doing so, we’ve decided to stick to three rules:
  • Share everything, as in this blog post on interesting spending choices;
  • Select recipients randomly so that every recipient’s story has an equal chance of being shared, as we do weekly on Facebook. Or, explicitly state if the recipient was not chosen randomly and why, as in this post on a recipient who experienced an adverse event; and/or
  • Provide contextualizing data so the reader can determine how representative of the average the story is. For example, if we relay a case of a woman who used her transfer to pay for a surgery, we’ll also share any data we have on average spending on medical expenses.
By bounding our use of stories in this way, we hope to give you a more balanced and transparent view into what happens as a result of your giving – not a view defined by what we happen to think is “good” or “interesting.” Our goal is to provide more insight into the richness of recipients’ lives and experiences, while honestly representing our work and impact.

We’re very much still experimenting with the best way to share stories, and would love your feedback on our approach so far. We hope that this gives you confidence in all types of information we share with you – and maybe even inspires you to hold other organizations to a higher bar. So, next time you visit another organization’s website, take note of whether there’s a tab called “success stories” or one called “evidence,” and ask yourself what message this is sending.
News round-up: Digitizing cash transfers
We’ve used mobile payments to deliver cash transfers since launching in Kenya in 2009. But many cash transfer programs around the world – including large-scale programs run by governments – still operate with physical cash, which is often costly, slow, and prone to error and corruption. Increasingly we’re seeing programs shift to mobile and other electronic payment solutions as they continue to spread rapidly. Here are a few recent developments that we think are particularly exciting:
  • Bank Indonesia launched an electronic payment system too support a flagship government conditional cash transfer program, Program Keluarga Harapan (PKH). Beneficiaries can text either of two state-run lenders to receive an identification number, which they can show to registered agents in their neighborhood to access their funds.
  • The Indian government is experimenting with electronic disbursement for various government schemes that involve cash payments. The National Rural Health Mission in Jharkhand state piloted the use of M-Pesa to disburse money directly to beneficiaries – in this case, women giving birth in a health facility.
  • The Rwandan government has joined the Better Than Cash Alliance in a move to advance its commitment to transition all forms of government payments to electronic forms.
Fighting fraud in Uganda
We recently dealt with our worst fraud case to date, with 2% of a round of transfers in Uganda diverted. This incident brought to light vulnerabilities which we have since addressed, and we don’t expect changes in performance going forward. We are making it a point to write openly about this case, however, because nonprofits typically do not discuss fraud risk and management and we want to set a precedent for greater transparency within the sector.

Funds were diverted by staff at a local mobile money agency, in collusion with members of our own team. This group took advantage of the fact that in Uganda (unlike Kenya), we disburse transfers on a scheduled day each month, on which the mobile money agent locates close to recipients. These “cash-out” days create an opportunity to quickly spread misinformation among a large group of recipients. In this case, the agent and our staff told recipients that their transfers would be reduced by 50,000 shillings (20 USD) to cover the costs of mobile phones that had been given to them (and for which they had already paid). Some recipients believed this and others did not, but those who did not had limited recourse, as traveling to a different agent would have been costly and time-consuming. Compounding this problem, our own call center operator was participating in the scam and told recipients who called with questions that the deductions were legitimate.

We learned about this incident in the course of routine back-checks with recipients. We then suspended the staff in question while conducting a systematic investigation, talking with each potentially affected recipient. The testimony we heard from recipients uniformly corroborated the account above. We then dismissed the staff members involved from our side and requested a police investigation, leaving it to recipients to decide on an individual basis whether to participate and seek to recover funds. Given the state of law enforcement in Uganda, we suspect this is, sadly, not a high-return strategy.

Moving forward, we’ve made a series of changes to address the vulnerabilities this episode uncovered. We’ve done so working on our usual assumption that the integrity of the process has to rest on a system of independent checks and balances, not on faith in the goodness of any particular person. We’ve adapted the Uganda model as follows. First, we are requiring more frequent and less predictable presence by senior staff at pay-days. This diverts management time from other important functions (e.g. planning, training) but increases accountability. Second, we now enlist community-nominated monitors to observe the entire payments process and call us to report any irregularities in real time. This gives us one extra set of eyes on the crucial cash-out process. Third, we have increased the separation of responsibilities between call center and field staff. This reduces our operational flexibility to move the most talented staff across functions, but limits the influence any one person has over communication to recipients. Fourth, we have tasked our call center to call recipients in real time during “cash-out” days to create an additional, real-time channel through which information reaches us from recipients. In the longer term, we may also consider moving the payments function in-house entirely in some settings to give us more control than we had in this case over the staff responsible for disbursing cash.

Fraud and corruption are big business in development work, particularly when we deliver resources (like cash) that are actually valuable to the poor. At GiveDirectly we aim to be both the best and the most honest in the anti-fraud business. We’ll continue to take credit for successes and responsibility for failures, and as always welcome your questions or comments.
Cold, hard cash
"The more cash we give to the poor, and the more evidence we have that it works, the more we have to reconsider everything else we give."

In a new TED talk, Joy Sun, COO-domestic of GiveDirectly, asks us to reconsider how we think about and deliver aid, and provides evidence on the power of unconditional cash transfers. Watch her talk here.
How would you explain what a PIN is?
M-Pesa is famously ubiquitous in Kenya, with more than half the adult population using it or some other form of mobile money. M-Pesa agents, who take users’ deposits and provide cash-outs, operate in most towns and even small villages. The breadth of the network has certainly made our work delivering cash transfers, even in rural, hard-to-reach areas without a banking infrastructure, easier.
But most of our recipients, who live in some of the poorest and most remote communities, are among the minority of adults who have never used M-Pesa before. In fact, many have never owned a mobile phone before purchasing one through our program. Our field officers are responsible for ensuring that recipients receive their transfers – and, importantly, are armed with the knowledge of how to access their money securely and protect themselves from fraud and theft.

Field officers deliver this education over the course of several interactions with each recipient. First, a registration team field officer meets with an eligible recipient in his or her home, provides a phone and SIM card (if he or she doesn’t have one already), and explains how to register with M-Pesa and what to expect when the transfer is sent. For those who are learning how to use a mobile phone for the first time, field officers often have to teach the basics, like how to charge the phone – for example, at a charging station run by a local entrepreneur – and receive and compose an SMS message.

Once those recipients have been enrolled, the backcheck team provides a more thorough tutorial that covers topics ranging from how to withdraw money from an agent to checking the account balance to PIN safety. For those of us who grew up with ATMs and online banking, PIN safety is second nature; for most recipients, it’s an entirely new concept. In these cases a field officer explains what a PIN is and how to keep it secure – often emphasizing things not to do, like using a birthday or other easy-to-guess number, giving it to the M-Pesa agent and keeping a written copy near the phone. They use didactic techniques like call-and-response to confirm that recipients have fully comprehended the information and are ready to receive the transfer safely and securely. They also instruct recipients on how to contact GiveDirectly via our hotline number – manned by four follow-up team members – to report any issues or questions.

Technology like M-Pesa provides the rails on which to send money directly to the poor, but without our field officers’ efforts to teach recipients how to interact with the technology securely, we wouldn’t be able to uphold our commitment to providing a great user experience and to delivering transfers securely.
Cash, goods, or services? The poor say cash
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.
Does the GiveDirectly team believe in giving cash to the homeless?
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.
Rolling model
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.
GiveDirectly and Segovia
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.