CAMBRIDGE, Mass.- As micro-lending becomes a huge trend, GiveDirectly is gaining attention for its work from some of the world’s largest businesses while also achieving great success in the fight to alleviate poverty.
GiveDirectly is an organization based in Kenya and Uganda that gives people in need $1,000 in two separate payments delivered by mobile phone. The organization found that this type of giving was helping people, despite the common belief that giving out money will only result in people “drinking” the money. In 2012, after these positive findings were released, Google donated GiveDirectly $2.4 million.
GiveDirectly was created by a group of Harvard and Massachusetts Institute of Technology students in 2008 as they were earning advanced degrees in economic development. The founders realized that mobile banking was becoming extremely popular in the developing world and saw that this system would allow for a secure and inexpensive way to give donations. They noticed that non-profit groups at the time were not using this technology, so they created their own non-profit organization to donate money to the poor.
One of GiveDirectly’s directors, Michael Faye, has spoken about how the model will only continue to grow and that, “Our model is built to scale to the billions. With $100 million, we could begin testing the model at scale and dramatically improve the lives of half a million people.”
The benefits of one-time cash transfers are quite surprising and from this data, it is clear why GiveDirectly is so passionate about the work it is doing. Studies show that four years after a one-time cash transfer, earnings increase about 38 percent and hours worked increase 17 percent.
Additionally, Innovations for Poverty Action performed a randomized control trial in 2011 that showed that income increased 30 percent, as well as improvements in hunger. The trial also showed that after a family was given a cash transfer, stress levels, conflict in the household and domestic violence decreased for both the family and its neighbors.
In regard to dissidents of cash transfers who claim that poor individuals would spend the money on products like alcohol, one of GiveDirectly’s co-founders, Paul Niehaus, said, “It’s a welcome vote of humility and respect for the poor. There is no systematic evidence that people are blowing money at the bar. They are making smart investments and their lives are getting better.”
Innovations for Poverty Action did an evaluation of some of GiveDirectly’s recipients in Kenya, who received approximately $500 over a period of 12 months. These recipients were able to increase their current assets by nearly 60 percent in comparison to individuals who were not receiving any transfers. These recipients also saw a 42 percent decrease in the amount of days they were not able to feed their children.
Niehaus also discussed how cash transfer will not be the solution to ending poverty because they “won’t change everything.” He hopes instead that they will become a “benchmark for development activity” across the globe.
Faye believes that the data speaks for itself, especially when it comes to objections to giving cash transfers. Faye has said, “We hear different types of objections, many of which initially seem plausible. Ultimately, it is an empirical question to which we respond with robust scientific evidence and transparency.”
For now, the data is drawing donations and support from the Nike Foundation, Wellspring Advisors and Good Ventures. As studies continue to show how giving one-time cash transfers is continuing to produce results, GiveDirectly will continue to do as much as it can to help the world’s poor.
– Julie Guacci
Sources: GiveDirectly, Forbes, The Independent