Welcome to Spend Donate Invest! I go by GG, that’s short for Genet Gimja and I’m your host as we explore the topic of how we can align our values, our beliefs, our politics, and what we do with our money on a daily basis.
A few months ago I had a conversation with one of the directors at Give Directly. I had been following them for the past…at least 5 or 6 years that I can remember and I was surprised, pleasantly surprised to get an email from them.
GiveDirectly is a nonprofit that gives people cash directly, with no strings attached. It’s very simple. You and I can donate to GiveDirectly and then they pass that money over to people that need it.
It sounds really simple but it is a paradigm shift for how most charities and nonprofits work. Usually, nonprofits give things, not money. So they might give a family food, they might build a well for a village, they might give an adult access to job training programs. So you or I would typically donate money to the charity and then the charity would give the item or the service to the person that needs it.
GiveDirectly is well, giving directly, like the name implies. If someone needs money, they give it to them. Because, as GiveDirectly puts it, “giving cash is life-changing, respectful, proven, direct, and scalable.”
And in September of 2023, a paper was released by independent researchers who found that GiveDirectly’s program in Kenya where they are, you guessed it, giving people cash, is working.
I’m going to include the link to the research paper so you can read that if you want, but I’ll also link a much simpler read from the NPR article where they summarized the findings.
So here’s what they did. They identified about 5,000 adults living in villages in Kenya and informed them that for the next 12 years, they would be receiving $50 a month as a direct cash transfer. No strings attached, you do what your family needs. And each adult in the family gets the $50 a month. So they set up this program with 5,000 people.
The program is designed to last for 12 years but the research paper that came out in September 2023 was just covering the first 2 years that has ended so far.
In order to study what the impact was of these cash transfers, GiveDirectly also studied what happened with another 9,000 adults who got the same monthly $50 but only for two years, these adults were not told that they would receive $50 a month for twelve years, they knew they were getting the monthly cash transfers for 2 years. And GiveDirectly also studied another 9,000 adults who got that same two years worth of income but in a lump sum payment. And finally there was a control group of 12,000 adults who received no money.
So those are the groups that were studied. People who got no money. People who got 2 years worth of monthly $50 cash. People who got 2 years worth of monthly $50 cash but knew that they were going to continue receiving that for the next 10 years. And people who received a lump sum payment at the beginning which equaled two years worth of those monthly $50 cash transfers.
If you had to guess, what do you think the results were? Are you surprised that all people who received cash were better off than the people who did not receive any cash? Families were able to eat more protein, send their kids to school, etcetera. So cash donations were effective in general, but I want to share some of the takeaways about the different impact depending on whether you knew you were going to receive the cash monthly versus a lump sum, for two years versus for twelve.
Here were the 4 takeaways:
- Giving cash as a lump sum leads to bigger impact than giving monthly cash donations. When people were given the lump sums they were able to invest in their revenue generating activities. They were able to start businesses or grow their businesses, their incomes went up by a lot. So if the first paradigm shift is that society can in fact trust people and just give them cash, this is also proving that giving them a lump sum versus monthly payments is more effective.
- The people who knew they were going to receive 12 years of monthly cash were better off than the people who were getting 2 years of monthly cash. And the reason why is because in the villages where everyone knew they were getting these $50 monthly cash transfers for the next 12 years, they set up rotating savings clubs. Depending on your cultural background, you may be familiar with these. They are common in the Eritrean community in the American diaspora. The way it works is if there are 10 members of the rotating savings club, they all would pool their cash every month and then each month a different member gets to take the whole pot. It rotates until everyone has had their turn. So what the researchers found was that people were essentially creating their own lump sum payments even if they were not in that study group.
- Making the benefit universal, in other words, giving each adult in the village $50 a month had great impact because it was essentially injecting a boost into the entire community. More people started business yes, but also there were more people that could afford to buy the things that the needed from those new businesses.
- They did not see an increase in inflation.
So the study is going to continue all the way through the 12 years to find out if the positive impact lasts all the way through the 12 years or goes beyond.
I’m definitely going to continue to track what this organization is doing.
On a fundamental level, all of my studies and professional experience have led me to understand that lifting a community out of poverty is the most complex challenge in the world. It’s harder than inventing new technology, it’s harder than scientific breakthroughs, and I don’t want to suggest that we can or should apply the same research methodologies that we use in laboratories to social problems. I don’t think it’s always the most accurate way to know whether our efforts are working, I have reservations about the impact on the people we are studying, recipients of aid. And I do have a hard time with the collective cognitive dissonance that seems to exist where we need this type of research team and methodology including 30,000 Kenyans to prove that we can trust poor people to not drink and smoke their aid away when we require basically no research that proves that what we have been doing- donating to museums and libraries and our alma maters, whether that money actually has any effect. I get a lot of requests from the universities I attended asking for my donation and I can assure you, they are not providing me with a research study of 30,000 recipients to show me that this is the absolute most efficient, cutting edge, least waste, most effective, time tested, proven way to donate my money. The amount of proof that we, as a society seem to need, before we can get comfortable just helping poor people, is something that I wonder about.
And maybe you do too. Way back on episode 17 (TBC) the topic was whether we should give money to that guy on the street with the cardboard sign. This episode was one of the most popular episodes of that year. So maybe it struck a nerve, I don’t know, get in touch and let me know where your head is at.
So let’s recap and then I’ll end with a quote.
To recap, a huge study of 30,000 adults has been published and has proven that:
- Giving people cash helps people more than not giving them cash. In other words, they don’t drink or smoke the money away. They buy food for their families, they send their kids to school.
- Giving people a lump sum is better than giving the cash a little at a time month by month
- When people know the money is guaranteed for 12 years, they immediately experience bigger impacts compared to if they know the cash is only going to coem in for two years.
So let’s end with a quote today. This one is from Arthur Ashe and it is very short.
“Start where you are. Use what you have. Do what you can.”
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It has been a pleasure researching and recording this episode for you today. Let’s talk again soon!
Links
It's one of the biggest experiments in fighting global poverty. Now the results are in. NPR. December 7, 2023
https://www.npr.org/sections/goatsandsoda/2023/12/07/1217478771/its-one-of-the-biggest-experiments-in-fighting-global-poverty-now-the-results-ar?utm_source=Iterable&utm_medium=email&utm_campaign=campaign_8499655_nl_Philanthropy-Today_date_20231208&cid=pt&source=&sourceid=
Universal Basic Income: Short-Term Results from a Long-Term Experiment in Kenya September 2023
https://conference.nber.org/conf_papers/f192616.pdf