GiveDirectly shows the poverty-fighting power of direct cash giving

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Philanthropy experts are gradually coming to the conclusion that simply giving the poor money – rather than services or in-kind benefits – is the most effective way to make progress in the fight against extreme poverty. .

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 skyrocketing 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, with no strings attached – recently announcement he sent $1,000 each to more than 178,000 American households in need during the pandemic, with plans to reach another 20,000 over the next few months.

  • GiveDirectly is working 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 quickly.
  • The biggest advantage of the direct cash donation model is its “exceptional efficiency,” says Alex Nawar, U.S. director of GiveDirectly, who estimates that 98 to 99 cents of every dollar donated to the organization’s U.S. pandemic program charity goes directly to donations, with little overhead.

Between the lines: GiveDirectly’s program, successful as it is, is a drop in the ocean compared to the billions in direct stimulus checks and expanded federal unemployment benefits that have been paid out to Americans during the pandemic.

  • This aid — much of it in cash — not only prevented much of the massive economic pain that Americans might have suffered during the pandemic, 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 quickly distributed money to protect the needy from disaster and 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 issues people are facing during the pandemic,” Nawar said.

  • Globally, there has been a 148% increase in social cash programs during COVID-19, with a total of 782 cash transfer programs implemented or planned in 186 countries.
  • “I think there’s a lot of room for governments, NGOs and other types of disaster responders to increase how often we use cash, because we know it’s more effective than providing in-kind aid,” says Nawar.

By the numbers: Poverty has 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 a day per person— had fallen by 1.9 billion peoplee to 648 million people in 2019, even as the world’s population has increased by 2.5 billion people.
  • Extreme poverty levels were expected to fall to 537 million people by 2030, but the pandemic interrupted that trend, with the number rising for the first time since 1997 to around 588 million people.
  • “There are people who may have come out of poverty over the last few years or the last decade because of growth and all the progress that has been made, and unfortunately they have fallen straight back,” Vishal Gujadhur , deputy director of development policy and finance at the Gates Foundation, recently told Fast Company.

How it works: During the pandemic, GiveDirectly has worked with the government of Togo — where half of the citizens living 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 images indicative of poverty, such as houses with thatched roofs rather than metal, as well as mobile phone data, using an algorithm to find people who more often made short, inexpensive calls. — another sign of poverty.

Details: A 2018 review of 165 studies cash grant programs have found that it tends to increase spending on food and other goods – dispelling the idea that much aid is wasted by recipients – without reducing recipients’ willingness to work.

  • A study 2019 by GiveDirectly of its cash transfer program in Kenya has seen benefits even for those who did not receive cash, with little effect on price inflation.

The other side: “Money can’t buy everything,” says Drake University economist Heath Henderson written this year.

The bottom line: While cash is no panacea, when it comes to fighting poverty as quickly as possible, “it can be as simple as increasing liquidity,” Nawar says.

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