Philanthropy experts are gradually coming to the idea that simply giving the poor money – rather than services or in-kind benefits – is the most effective way to advance the fight against poverty. extreme.
The big picture: The divergent economic experiences between rich and poor countries during the pandemic have shown the value of giving money directly to those in need.
- With extreme poverty in developing countries increasing during the pandemic, direct cash donations are more important than ever.
What is happening: GiveDirectly – a charity that pioneered the practice of sending money to people in poverty without strings attached – recently announced that it is sending $ 1,000 each to more than 178,000 US households needy during the pandemic, with plans to reach 20,000 more in the coming months.
- GiveDirectly works with Propel – a company that provides software that helps Americans digitally manage food stamps and other benefits – to identify households in need and send money fast.
- The biggest advantage of the direct cash donation model is its “exceptional efficiency,” says Alex Nawar, US director of GiveDirectly, who estimates that 98 to 99 cents of every dollar donated to the organization’s US pandemic program. fundraising goes directly to donations, with little overhead.
Between the lines: GiveDirectly’s program, as successful as it is, is a drop in the bucket compared to the billions in direct stimulus checks and expanded federal unemployment benefits that were paid to Americans during the pandemic.
- This aid – much of it in cash – not only prevented much of the massive economic pain Americans might have suffered during the pandemic, but it actually helped reduce the poverty rate in the United States in 2020.
- But what private philanthropy and government aid demonstrate is the power of cash distributed quickly to protect the needy from disaster and actually lift people out of poverty.
What they say : “It was really exciting to see the United States embrace cash as the first solution to the financial security challenges people face during the pandemic, âsaid Nawar.
- Globally, there was a 148% increase in social cash programs during COVID-19, with a total of 782 cash transfer programs implemented or planned in 186 countries.
- âI think there is a lot of room for governments, NGOs and other types of disaster responders to increase the frequency of use of the money, because we know it is more effective than providing in-kind assistance, âsays Nawar.
In numbers : Poverty declined in the United States during the pandemic, but not in the world’s poorest countries.
- The number of people living in extreme poverty – defined as households spending less than $ 1.90 per day per person – rose from 1.9 billion people to 648 million people in 2019, even as the population world grew by 2.5 billion people.
- Extreme poverty levels were expected to fall to 537 million people by 2030, but the pandemic halted that trend, with the number increasing for the first time since 1997 to around 588 million people.
- “There are people who may have come out of poverty in the last few years or the last decade thanks to the growth and all the progress that has been made, and who, unfortunately, have fallen right back into it,” Vishal Gujadhur, Deputy Director of Development Policy and Finance. at the Gates Foundation, Fast Company recently said.
How it works: During the pandemic, GiveDirectly worked with the government of Togo – where half of the citizens live below the poverty line – to identify and distribute millions of dollars in cash assistance to those in need.
- To speed up the process, GiveDirectly used satellite imagery to identify revealing images of poverty, such as houses with thatched roofs rather than metal roofs, as well as mobile phone data, using an algorithm to find people who made short, cheap calls most often. – another sign of poverty.
Details: A 2018 review of 165 studies of cash donation programs found that it tended to increase spending on food and other goods – dispelling the idea that much of the aid would be wasted by recipients – without reducing the beneficiaries’ willingness to work.
- A 2019 study by GiveDirectly on its Kenya money transfer program found positive payoffs even for those who did not receive money, with little effect on price inflation.
The other side: âMoney can’t buy everything,â as Drake University economist Heath Henderson wrote this year.
The bottom line: While money is not a panacea, when it comes to tackling poverty as quickly as possible, “it can be as simple as increasing cash,” says Nawar.