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Timing the transfer

Mitch Riley, one of GiveDirectly’s field directors, explains the logic that goes into answering the question: “why do we use the transfer timing that we do?”

The decision on how to break up the approximately $1000 payment per recipient is more complicated than it might seem. We have to take into account a range of factors, and this balancing exercise leads to different timings in different countries.

First, we want to take into account recipients’ preferences. Second, we want to minimize adverse events like conflict, money going to the wrong person because of lost or stolen phones or incorrect phone numbers, and safety issues. Third, we need to ensure that the transfers are not so large that mobile-money agents run out of cash and thus recipients are not able to withdraw funds.

Taking these factors into account, in Kenya we divide the payment into three transfers: 7000 KES (about $75), 40,000 KES (about $450) two months later and 40,000 KES six months after that. We transfer a smaller sum initially so that we can deal with any adverse events before the larger payments. In a recent study, most GiveDirectly recipients nominated two transfers as their preferred option, confirming the current structure of a small payment followed by two large payments. Recipients stated, however, that they wanted the transfers to be closer together, so we are moving to shorten the gap between the first and second large payments to two months.

In Uganda we make ten monthly transfers of 250,000 UGX (about $95). The reason for so many transfers is the lack of mobile-money agents and the liquidity constraints of those agents. In many places this is such a problem that GiveDirectly has to organize for mobile-money agents to come from major towns to the villages so that recipients can withdraw funds. Since this poses a greater security risk, there are still ten monthly transfers in these villages.

Innovation is key at GiveDirectly, so we are constantly looking for ways to improve our processes, including improving our transfer timing. For example, in Uganda we are trialing a mobile-bank payment option, which allows us to reduce to three the number of transfers because of the increased security of partnering with a bank. In Kenya, in addition to our upcoming move to shorten the time between payments, we are involved in an ongoing study that allows recipients to choose the timing of their payments (except a small initial payment for the reasons stated above).