31 December 2013

East Africa: Charity Begins On Your Phone - East Africans Buoyed By Novel Way of Giving

US charity GiveDirectly transfers unconditional cash from donors via mobile phone to some of the world's poorest families

"We're totally different from other charities," enthuses Paul Niehaus, co-founder of GiveDirectly, a small, California-based non-profit that uses mobile money technology to transfer cash directly from donors to some of east Africa's poorest people. "We're the most stripped down, simplified model of giving help to poor people."

These are big claims but GiveDirectly - which first started working in Kenya in 2011 and expanded into Uganda this year - has sent shockwaves through the charity sector. Forbes has dubbed its approach radical, while the Economist said it's as extraordinary as "throwing money out of helicopters".

But what's so new or innovative about giving poor people money?

Cash-transfer schemes are estimated to reach up to a billion people in developing countries. A 2011 paper from the UK Department for International Development said a "quiet revolution" over the past 15 years has seen such initiatives move "from the margins of development policy towards the mainstream".

What GiveDirectly has done is to capitalise on the remarkable rise of mobile phone use in developing countries - and the growth of mobile money-transfer systems such as M-Pesa in Kenya - to give individual donors the ability to participate in such schemes too.

But it is more than that. Many of the largest and best-known cash-transfer schemes attach conditions to the money people receive. In the case of Brazil's bolsa familia, which is a decade old this year, cash is paid on the condition that children go to school and get vaccinated. GiveDirectly attaches no conditions - its recipients can spend the money in any way they want.

"People think this is radical and weird, but actually it is all the things we think of as conventional that haven't been tested," says Niehaus, who is uncomfortable about some of the attention GiveDirectly has received in this respect. Poor people, he says, know better than anyone what they need, and assumptions that they will waste the money they receive are not backed up by evidence.

An evaluation by economists at the Massachusetts Institute of Technology this year found recipients spent the cash on things such as food and healthcare, to replace thatched roofs with metal ones, buy livestock and invest in small businesses. It also found evidence to suggest the money reduced hunger and increased psychological wellbeing.

The charity's no-strings approach, it's minimalistic website, and even its name, give the impression that it heralds the end of the middleman. But underneath, there are lots of moving parts.

Recipients are identified, for example, using a combination of census data, satellite imagery and door-to-door visits looking for homes with thatched roofs - which the charity uses as an "objective indicator" of poverty.

Far from wanting GiveDirectly to disappear once it has proved its point, Niehaus thinks it can help other NGOs, and even governments, to implement their cash-transfer schemes. "Right now, people think we're interesting and innovative, but in the future I think we'll be known because we do this well," he says.

However, not everyone is convinced. Some point out the obvious: you can't use cash transfers to buy food or textbooks if they're not on sale. Others argue that such schemes do not directly tackle structural issues underpinning poverty and inequality.

Indian economist Jayati Ghosh warns that "the current tendency is to see this as a further excuse for the reduction of publicly provided services, and replace them with the administratively easier option of doling out money". The debate about whether conditions should be attached continues, and the answer is probably: "it depends".

For its part, GiveDirectly avoids casting cash transfers as a panacea.

Instead it argues they should be the benchmark against which charities evaluate their work: groups that ask for money on behalf of the poor should be able to prove they can do more good with it than the poor themselves.

At a time of budget pressures and concern about just how big and expensive some NGOs have become, it's no wonder this is a compelling challenge.

More on This

Development Must Be Less About Growth, More About Wellbeing

People and their wellbeing need to be at the centre of development, with less emphasis on economic growth, according to… Read more »

See What Everyone is Watching

Copyright © 2013 Guardian Global Development Network. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 800 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.