I was struck by the advent of a new form of overseas charitable giving. GiveDirectly, which opened this summer, allows anyone on earth to directly wire money to the poorest of the poor. The transfers go to very low-income Africans over mobile phones, which have become suddenly ubiquitous across the continent. The transfers are targeted to people very likely to be extremely poor, and almost all the donor’s money goes right into the recipient’s pocket.
Three things make this effort new. First, these are unconditional transfers. They are targeted to people living in low-quality structures in areas of high poverty, meaning that these people are destitute by the standards of almost anyone reading this blog. But the transfers are unconditional in that the people selected to receive the money don’t need to do anything to receive it. Second, this kind of giving only recently became possible because it arises from technological change. The money is wired directly to the recipient’s mobile phone, keeping cost, fraud, and leakage very low. And the targeting depends on easy digital access to granular area-level poverty data. Both of these were unthinkable in Africa just a few years ago. Third, the founding team involves some of the smartest young development economists in the world, people with a commitment to impact and rigorously evaluating that impact—so that others can learn from their experiences. Three cheers for that.
This mechanism is different from related mechanisms like DonorsChoose, GlobalGiving, and Kiva. GiveDirectly donors don’t pick and choose individual recipients from among the recipients who meet the targeting criteria (though with Kiva, that’s complicated). GiveDirectly transparently states the targeting criteria—other mechanisms have more discretion about who gets to be in the pool—and donors simply decide whether to donate or not. Also, unlike Kiva, GiveDirectly gives grants, not loans.
Because some of the founders are leading researchers, it’s not surprising that the GiveDirectly model is rooted in good research. Conditional Cash Transfer programs have taken the anti-poverty world by storm ever since Mexico created and rigorously evaluated the PROGRESA program. Conditionality on cash grants makes donors feel reassured. But recent research suggests that the on-the-ground consequences of such conditions are complex. A new paper in the Quarterly Journal of Economics points out that unconditional transfers can have many of the same benefits as conditional transfers, and conditions can have unintended consequences that change with children’s age. Michael Carter of the University of Wisconsin and his co-authors show that unconditional cash transfers in South Africa have large health benefits for children, benefits that translate into higher earnings when those kids grow up. Jenny Aker of Tufts University and CGD has co-run an experiment in Niger showing that unconditional cash transfers over mobile phones in particular can be cheap and highly effective.
And this is part of why new unconditional transfer models like GiveDirectly are interesting. Aid agencies must pay to enforce every condition, and those conditions often cause offsetting changes in recipients’ behavior. It remains an open question whether, net of their costs and unintended consequences, conditions on cash transfers improve their impact in some settings relative to unconditional transfers. The UK government has a good review paper on these issues (see especially page 49).
And there’s something undeniably compelling about the instant, person-to-person, very low-leakage channel of a transfer via mobile. In aid as in many other global phenomena, intermediaries are a slowly vanishing species.