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The Ladder

A Blog from New America's Asset Building Program

From your pocket to theirs: a new approach to charity

Published:  January 12, 2012

The Global Assets Project has written extensively about the virtues of international aid agencies and national governments transferring money directly to poor households. As such, we are thrilled to see a US-based NGO, GiveDirectly, taking this idea "to the streets" and enabling people to directly donate money to poor households in Kenya via their mobile phones. Similar to other cash-transfer programs, GiveDirectly’s model is incredibly efficient, with around 90 cents of every dollar ending up in the hands of beneficiaries, and enables recipients to decide for themselves how to go about meeting their needs.

GiveDirectly works in 4 steps: 1. An individual donates money, 2. GiveDirectly locates poor households in Kenya, 3. GiveDirectly transfers the donation to recipients' cell phone, and 4. The recipient collects the transfer. The most complicated step is step 2, which GiveDirectly describes as follows: “We first select regions of Kenya with high poverty rates using census data. We then identify villages with low-quality housing and access to an agent providing mobile-phone-based payment services. Finally, we identify the poorest households in these villages using simple, transparent criteria: we target all households living in homes made out of mud, wood, and grass...We follow up initial identification with a rigorous process of audits to prevent mistakes or fraud.”

Of course, as we have pointed out in other contexts, simply giving money to the poor cannot be the complete story. Work is also needed to maintain functioning markets and hospitals, so that the poor can use their money to buy food, clothes and medicine. In addition, on a broader level, giving cash to individuals cannot address systemic, structural causes of poverty, which require broader engagement with the government, private sector, and civil society.

As noted in Duncan Green's blog, similar initiatives have been launched by other organizations, such as Oxfam’s Projects Direct and Kiva, though the former only allows donors to fund projects (thus the recipients don’t decide how to spend the money) and the latter gives money in the form of loans which must be repaid. Though there are certainly objections to the individualistic model of GiveDirectly, we believe in the cost-savings and empowerment that results from trusting the poor to best address their own needs, and we look forward to seeing more initiatives of this sort in the future.

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