Whom do you help?
Every aid organization must determine how to allocate limited resources to people in need. GiveDirectly aims to find the poorest possible recipients while using criteria that are accurate, cost-effective, perceived as fair, and difficult to game. In Kenya and Uganda we choose regions to work in using poverty data from national surveys and then send field staff door-to-door in those communities to collect digital data on poverty and enroll eligible households.
In Kenya, we incorporate a range of factors into our eligibility criteria, including housing (e.g. house size), assets (e.g. presence of a latrine), vulnerable recipient status (e.g. homelessness), and other criteria.
In Uganda, we enroll families in homes that have thatched roofs and those who are homeless. People who live in homes with thatched roofs have been shown to be substantially poorer than their neighbors.
We have also experimented with alternative targeting criteria and methods. For example, this year we tested several different methods and eligibility criteria to evaluate their pros and cons, and the circumstances in which they would be most and least useful. We tested a variety of proxies, such as per-capita housing space and housing materials; community-based targeting, where members of a village nominate which they think are the poorest households; points-based systems such as the Progress out of Poverty Index (PPI) and the Multidimensional Poverty Index (MPI); subjective assessments like our field officers rating the poverty of a household or the quality of their house; and various blends of these approaches.
We give money to both men and women. IPA's evaluation of our work included an experimental comparison of transfers to men and women and found some modest differences, but that overall both genders used money responsibly. Given these data, we let households decide on a case-by-case basis which adult to enroll. Their decisions are usually driven by convenience – for example, one parent may already have the official IDs needed to open a mobile money account. Slightly more than half of our recipients to date are women.
No. Households need at least a SIM card to participate, and we give SIM cards to households that do not already have one. We also give recipients the option of purchasing a phone from us at bulk rates in order to make it easier to communicate with them. When recipients choose this option we deduct the value of the phone from their transfer. Historically the large majority of recipients in both Kenya and Uganda have chosen to buy a phone.
We chose these countries because both have large populations living in extreme poverty and yet are reachable through electronic payment systems. Kenya's top payment system, M-Pesa, is a global leader. Uganda's payments systems are still developing, letting us test our own ability to manage transfers under more challenging circumstances.
How does the process work?
We send transfers using electronic payments services. In Kenya, we use M-Pesa, a mobile money transfer service operated by Safaricom, which is a Kenyan mobile telephone operator managed by Vodafone Group Plc. In Uganda, we use MTN's Mobile Money system. MTN is the leading telecommunications company in Uganda.
In Kenya, once a recipient is identified as eligible, a field officer instructs him or her on how to register for an M-Pesa account. In Uganda, we facilitate procurement of IDs for recipients and work with MTN to organize village-level mobile money registration drives. Once the account is updated and verified in our records, we send transfers to it from our own account. The recipient receives text messages informing him or her of the transfer.
The recipient can then exchange his or her "mobile money" for physical cash anywhere in the payment provider's agent network. Agents are often local shopkeepers, but can be petrol stations, supermarkets, courier companies, cyber cafes, and even banks. Recipients simply transfer their electronic balance to the agent's account using SMS commands (which require PIN authentication) and receive cash in exchange. In Uganda, we organize monthly pay-days where recipients can cash-out more easily, in partnership with MTN. Recipients can also transact in mobile money with anyone who has an account on the same network.
The two main corruption risks that typically arise in transfer programs involve (a) manipulation of the list of eligible recipients and (b) diversion of transfers sent to eligible recipients. We address the first through a comprehensive audit process, using multiple independent checks to ensure that recipients are eligible and have not been charged bribes to get on the list. These checks include in-person visits by different staff members, in-person audits by senior management, remote audits of image and satellite image data, and phone calls with each recipient, all prioritized using modern analytics. We address the second through identity-matching between our records and those of our payment providers, through comprehensive follow-up calls to ensure money is reaching the intended recipients, and in some cases through direct staff monitoring of cash-out points.
We send each recipient household roughly $1,000 over the course of one year, or $200 per household member for the average household. In setting transfer size we took into account three factors:
- Fairness. We set transfer sizes by calculating how much the average recipient household would need to invest in order to raise its income to the level of its ineligible neighbors.
- Existing evidence. The total amount we transfer is similar to the total amounts delivered by other programs that have been studied extensively, with the main difference that these transfer that money over time longer periods.
- Transformative potential. One way to think about the potential impact of transfers is that if recipients invested them at a 25% annual rate of return, per capital income would increase by $0.14 per day – a meaningful 22% increase over baseline living standards. Another way to think about potential impacts is in terms of things that transfers could cover, such as:
- 5.5 years of secondary schooling
- 5.2 years of basic food requirements for one adult
- 1.2 acres of land
- Tin roofs for 4 houses
We provide a one-time transfer paid in multiple installments. We tell recipients exactly how much they should expect to receive and when during the enrollment process, before transfers are sent.
We also conduct experimental research comparing the impacts of different transfer timings. In a first study, we found some evidence that recipients are more likely to spend larger lump-sum transfers on physical assets, and more likely to spend streams of smaller payments on nutrition. Recipients themselves tend to prefer a small number of large payments; in ongoing work we are estimating the impact of giving them more control over transfer timing.
What are the impacts?
By design, cash transfers let recipients use money for whatever is most important to them. Innovations for Poverty Action's evaluation of our transfers in Kenya found increases in expenditure across all categories measured, including food, medical and education expenses, durables, home improvement, and social events. It also found large increases in income and in asset holdings, in particular livestock, furniture, and iron roofs. In addition to this research on GiveDirectly's transfers, there is a large body of research from around the world documenting the impacts of cash transfers on low-income households.
IPA's evaluation of our work in Kenya found no increase in expenditure on tobacco, alcohol, or gambling. This is consistent with a substantial body of research on the effects of cash transfers, which has found either no effect on the consumption of "temptation goods" like alcohol and tobacco or an increase proportional to the increase on other household expenditures (see the World Bank's review of the evidence for specific references).
We ask recipients about tension in the community in follow-up calls after they have received transfers. To date, recipients report relatively low levels of tension related to the transfers: 5% report arguments within their communities and 1% report violence or crime.
The available evidence on tension within households suggests that transfers actually reduce it substantially. Innovations for Poverty Action's evaluation of our work found "suggestive evidence that cash transfers reduce domestic violence and increase female empowerment in both recipient households and other households in the same village" [emphasis added]. This is consistent with what our recipients tell us in follow-up calls. It is also in line with earlier studies suggesting that conflict is driven by the hard choices that poverty forces: for example, which child should be allowed to starve. As one woman put it, "there is no peace in the family when there is no food to eat" (Slater & Mphale 2008).1
Usually when the word "sustainable" is applied to charity, it means that a gift "keeps on giving" and that donors need not continue to make gifts to the same recipient. Since many GiveDirectly grant recipients use some or all of the money to invest in small enterprises, many of GiveDirectly's grants are "sustainable." Indeed, one study of unconditional cash transfers in Mexico found that that household incomes increased by between 1.5 and 2.6 times the amount of the transfers due to the returns from increased investment,1 suggesting that cash transfers are more than sustainable. Beyond short run income changes, investments in adequate food, proper clothing, better health, or more education for children may be "sustainable" in the long run; even though it will require charity until that child is done with school, he or she will grow up much better off and needing much less assistance than his or her parents.
Not all recipients will invest the money, however, and it will be gone once it is spent. Donors who prefer to give a gift that is guaranteed to be sustainable in the sense that it will provide a steady income stream to the poor can do so simply; an easy option is for the donor to invest a gift themselves and donate the annual interest, effectively creating an endowment.
We choose to provide unconditional, rather than conditional, cash transfers for two reasons. First, empowering the poor to make their own decisions advances our core value of respect. Second, imposing conditions requires costly monitoring and enforcement structures be put in place. One detailed estimate put the administrative costs of a conditional cash transfer scheme as high as 63% of the transfers made over the first three years of the program.1 Our read of the existing experimental evidence comparing the impact of conditional to unconditional transfers is that there is little evidence to suggest these added costs produce commensurate benefits.
The evidence on the impact of cash transfers is far stronger than that for micro-loans, whose impacts have generally been below expectations. We think that micro-loans are likely beneficial for the poor, but given the evidence see no reason to incur the added costs of administering them.
We suspect that the disappointing track record of micro-loans may have to do with their structure. These loans often bear high interest rates, reflecting the high costs of administering and monitoring them, which in turn limit their benefit to borrowers. They also tend to have short-term structures and require borrowers to begin making repayments shortly after borrowing. These features make micro-loans less useful for financing the kinds of long-term investments (e.g. education or durable goods) that recipients often make with grants.
How can I help?
No; we let donors choose which countries to donate to, but not individual recipients. In part this decision reflects legal risks we would face if it were possible to use our system as a money transfer service. In part it reflects our decision to target the poorest possible recipients, and not those with compelling profiles or narratives. Finally, it keeps costs down.
First, talk to friends about whether they give money directly to the poor. It's a great and important conversation we need to be having.
We expect to deliver money into the hands of recipients within at most twelve months of receiving it. We budget and plan our fieldwork on an annual cycle and then deliver funds fairly continuously over the course of each year.
The direct giving movement has grown quickly with the help of supporters who believe in evidence of impact and respect for the poor and want to help spread that message. People have raised money for the poor through their workplaces, schools, religious communities, and friends and family. If you are interested in organizing a fundraising activity or campaign, we'd love to hear from you.
Lastly, you can help by referring great talent. We're always looking to meet exceptional people who are excited about our vision.
GiveDirectly was founded by Paul Niehaus, Michael Faye, Rohit Wanchoo and Jeremy Shapiro, who were studying economic development at Harvard and MIT at the time and also looking for the most effective way to give their own money to reduce poverty. They found that cash transfers had a strong evidence base, and that the rapid growth of mobile payments technology in emerging markets had opened the door to delivering cash transfers securely and efficiently on an unprecedented scale. They created GiveDirectly as a private giving circle in 2009 and opened it to the public in 2011 after two years of operational testing.
We manage the transfer process from end-to-end ourselves and do not outsource any parts of it to other organizations. We partner with research organizations to conduct independent evaluations of the impact of our programs and with a range of organizations to increase awareness about our work.
Over time we hope to expand to other geographies where there are large numbers of extremely poor people and where we can further test our model and generate new knowledge about cash transfers. Currently we are focused on scaling up in Kenya and Uganda; we evaluate opportunities to expand to new countries on a case-by-case basis.
We currently do not accept public support for our fundraising and outreach work. These functions are funded by a smaller group of private donors.
Segovia is a fee-for-service for-profit started by three members of GiveDirectly's board. Whereas GiveDirectly's purpose is to deliver cash directly to the poor, Segovia's focus is to develop the technology to allow institutional customers — including governments, multilaterals, and NGOs — to manage field logistics. More information about the relationship can be found in this blog post.