Here’s What Happens When You Give $1,000 to Someone in Extreme Poverty
My wife, Adrienne, and I are long-time supporters of unconditional cash giving. From handing $5 to a homeless person on the street in Manhattan to raising $450 to give to a working father of one in rural South Africa — we believe in the virtues of sharing abundance in an empowering fashion that enables people to decide how best to allocate their resources themselves. When we found GiveDirectly in November 2015, an org that gives $1,000, unconditionally, to people who are in extreme poverty, as a solution to get them out of extreme poverty, we fell in love. Unconditional — they can do anything they want with it — which is incredibly empowering to recipients, but many people in ‘the west’ think it’s risky…or even foolish.
We’ve told countless friends and family about GiveDirectly, and the concept of transferring cash is met with much skepticism; soliciting responses such as “eh, I only give people food,” and others such as;
“How do they make sure people aren’t defrauding them or stealing the cash?”
“I bet most people waste or squander the cash.”
“It probably doesn’t have long-term impact, such as building a school could.”
“General angst about the “Savior Barbie” complex, where western people go out to save people in poor countries by telling them what they should do — often a self-serving endeavor.”
After dealing with the frequent barrage of opposing views, but always holding strong to our personal convictions; we decided to dig for some more answers — and see how many of these holes they were poking in our own justifications could be filled. Since we currently travel abroad full-time, and Kenya is an incredible country, we decided to head out for a field visit and take a real peek under the hood of GD’s operation.
In August 2016, my wife and I visited GiveDirectly’s office in Kisumu, Kenya and spent two 10-hour days in the field, visiting real past recipients in the Siaya (where President Obama’s grandmother lives!) and Homa Bay regions. After meeting the team on the ground and hearing about their day to day work, we were really surprised and impressed by five main things that actually directly addressed a lot of the negative feedback we’ve heard in the past:
- ) The vast majority of the team are local Kenyans; only two of around 80 or so employees are expats. We think that’s fantastic, since we’ve already known that 91% of the cash that we personally give to GD goes directly into the field, but actually a solid portion of the 9% administrative cost actually funnels into creating local jobs that afford hundreds more people in East Africa the opportunity to build bright futures for themselves. There’s a huge unemployment issue in Kenya and other East African countries and foreign investment is still far behind demand, so this kind of job creation has a huge impact on the community.
Beyond the employment opportunity, the real incredible moments for us came when we had the chance to speak individually with a few of the locals on the team. Candidly; they are all proud to be working their asses off to improve the lives of people in their own community. We even heard two separate stories from some senior-level guys (still under 30 years old) who were driven to work at GiveDirectly after having their own first real exposure to abject poverty; even just a few miles from where they lived. They were moved to make a difference, to pour their energy every day into giving other people in their community better lives.
One of the most interesting stories we heard was about a young woman who received a cash transfer from GiveDirectly in 2014. She used a large portion of the transfer to cover her school fees so that she could complete her schooling, and then graduated and immediately sought employment. She applied to work for GiveDirectly (GD often has 200–600 applicants for any one vacancy) and she got the job. From living off of less than one dollar a day, to now being employed in one of the most competitive roles available, the cash transfer from GiveDirectly has completely altered the path of her life, and she will reach heights that only two years ago she would have thought to be completely unattainable for her.
2.) There was really no “savior barbie” complex in the GiveDirectly operation — no one is coming in from wealthy nations and telling anyone else how to live their own lives and what’s best for them, and no one here is swooping in from some rich country on a self-serving mission ‘save the world.’
3.) Auditing — The rigor behind this operation is crazy. They have 5 separate teams of people for each stage in the transfer process — from initial outreach through final follow-up, the recipients almost never see the same people, so there’s no nepotism, and absolutely everything is audited.
4.) Let’s face it — ‘data’ is boring and unsexy, yet it’s likely the most powerful foundation for any for-profit or charitable organization to build upon. GiveDirectly is almost annoying with how data-centric they are. Every decision, literally every single question we asked them about why they do or do not do something, was backed by data. And we’re not talking about just any old data. We’re talking about peer-reviewed, audited, and randomized controlled trials (RCTs) — the holy grail of “I’m right and you’re wrong.” Not that they carry that swagger on their shoulder whatsoever (I’m humble-bragging on their behalf), but if they’re doing something, it’s because their data, and 3 other independent sources’ data has proven that’s the right decision.
5.) The ‘mission’ per se of how GD gives isn’t about funding what they believe will have the most ‘profitable’ result, rather, funding is based on who has the greatest need. Basically it’s the ultimate “anti” ruthless capitalism. I loved hearing that. (i.e. not favoring a 22 year old with a bunch of entrepreneurial ideas over a 35 y/o single mother of 4)
Now, for the meat of it — we went into small Kenyan villages and met these people who’ve taken a cash transfer of $1,000 (3 installments over a year). Here’s the breakdown of how their money was spent:
1.) Housing — everyone that we met improved their housing situation in some way; they were fixing the following core issues; (and FYI we didn’t see a single home that was larger than 20 feet by 20 feet (That size home would house 5–9 people))
a. Thatched roof — which leaks in every rain and must be replaced every 1–3 years.
i. Completely sleepless nights (who can sleep getting rained on?)
ii. Leads to frequent illness / sometimes chronic, and death
iii. Leads to missed frequently school for children
iv. Leads to missed work and income
b. No home — living with 4–8 people in a 10x12 one or two room mud hut
c. Upgrading home — living in a mud hut (with holes in the walls)
d. Dirt floor in home — constant insect infestation, including “jigas” which burrow in your feet causing crippling pain.
2.) School Fees — After primary school, Kenyans have to pay $60-$70 per 3-month semester for school, given that people in extreme poverty often earn less than $5 a day for a family of 2–4 kids, that meager amount can be a mountain, forcing thousands of kids to miss out on school from 5 or 6 years old and onwards.
3.) Food — probably the saddest of expenditures, in my opinion, but a lot of people that we met were purchasing a few month’s worth of corn to feed their families. I see it as the saddest because such a basic need, that’s consumed and gone without perpetual benefits
4.) Other — Outside of those top three, which everyone seemed to have spent at least some portion of their transfer on, people purchased medicines for chronic illness (Cancer, HIV, etc), livestock for income, and clothing & shoes.
5.) I’ll hide this little gem in here: Many skeptics think that large portions of the transfers will be wasted on vices like alcohol, drugs, or tobacco, or that the sudden influx of cash may increase a person’s propensity to seek these substances, however there is no evidence that vice consumption is different from others in the community who did not receive transfers.
With GD’s rigorous measurement and auditing, they find the effect on vice spending (tobacco, alcohol, etc.), is “negative and insignificant,” meaning there is no statistically significant effect on vice consumption…Here is the 3rd party study conducted by Princeton.edu
This finding is consistent with a publication from World Bank on vice spending and cash transfers that surveyed dozens of studies from around the world.
Now this ended up being a pretty diverse array of purchases considering that half were from one little village, and half from another, and for us it just highlights the variety of need that exists within any small community. I think that if an organization went in to build clean water wells, offered solar panels, mosquito nets, donate clothes, built schools or built houses — only a fraction of the gross value of the investment would be felt by the people in the community. Shoving a square peg of charity into a round hole of need. This is exactly why we believe in giving cash, and why we believe in GiveDirectly. Of course these people still have needs for more, but I can confidently say that 91% of what we give them goes directly to people who need it most, and 97% of that cash transfer served immediate needs in their lives, and I don’t think other NGOs can say the same.
I think a more open and participatory conversation on eradicating extreme poverty is critical in this day and age. Extreme poverty sits at the bottom of Maslow’s hierarchy of needs and contributes to massive issues all the way up the pyramid; leading to widespread health epidemics, overpopulation, lack of education, lack of environmental and conservational awareness, increased violence and pollution. We’re all connected, and the more people who live in dignity, the better off we can all be. Do you think cash transfers are a terrible idea? Do you know of a better way? If you’re a giving-conscious person, please share this post with your friends and family and open up the dialog.
Now, because I’m feeling cheesy, watch this new rendition of an old hit that a bunch of your favorite celebs released on Sept 15th 2016 :) https://www.youtube.com/watch?v=YsRMoWYGLNA
Andrew & Adrienne McDermott
Adrienne McDermott: @byebyeAdrienne
Andrew McDermott: @heyheyAndrew
*This is an unsolicited Op-Ed by an individual who is not being compensated by GiveDirectly, it’s patrons, benefactors, affiliates, or partners.
GiveDirectly is a nonprofit organization currently operating in Kenya and Uganda that aims to help people living in extreme poverty by making unconditional cash transfers to them via mobile phone.
Starting in 2016, GiveDirectly plans to scientifically test the idea of a universal basic income by providing regular cash payments to thousands of extremely poor households for more than ten years. The study will aim to answer the key questions at the heart of the global debate:
Could Basic Income end extreme poverty?
A fully universal, long-term pilot of a basic income has never been rigorously tested, so they intend to do just that. At a minimum their money will shift the life trajectories of thousands of low-income households. At best, it will change how the world thinks about ending poverty.
Learn More About How Your Donation of $1 Per Day Could Help End Extreme Poverty: https://www.givedirectly.org/basic-income