Give Directly has an extremely simple model – find poor people and give them money. That’s it. It’s a radical idea which sometimes rubs people up the wrong way – a popular refrain is, won’t people just drink the money? But the program, which gives extremely poor people in Kenya and Uganda $1000 split over two payments and transferred by mobile phone, is gaining ground thanks to the data it’s gathered backing up its claims. Impressed by its findings, Google GOOG +1.09% gave Give Directly $2.4 million in 2012. In 2013 Give Directly transferred about $4 million of $6 million raised to the extreme poor in Uganda and Kenya, with a sizable chunk of donations over $100,000 from the likes of the Nike Foundation and Wellspring Advisors.
At the beginning of this month Good Ventures announced they’d match the $5 million Give Directly had received in the past 8 weeks.
Give Directly gives cash directly to the world’s poorest via mobile transfer.
Set up by Harvard economists, with Facebook cofounder Chris Hughes a board director, the charity which was started in 2008 is rapidly scaling up.
“Our model is built to scale to the billions,” says Michael Faye, a director at Give Directly with a Ph.D in Economics from Harvard. “With $100 million, we could begin testing the model at scale and dramatically improve the lives of half a million people.”
The system works by removing the usual arbiter, an NGO, and putting money straight in to the hand of poor people to spend on whatever they want. Faye hopes the approach will make donors think about more about giving to non-profits – will they do more good with the money then the poor could do themselves?
“In this world, cash transfers could play a role like index funds play for private investors: They could be a sizeable share of your philanthropic portfolio and a benchmark used to evaluate more expensive, “actively managed” investments,” wrote Jacqueline Fuller, Director of Google.org in the Harvard Business Review. “We’d learn more about which programs need additional funding and which are falling below the “direct to the poor” mark.”
“Cash has been called one of the most thoroughly researched interventions, and has robust evidence for long-term impact,” says Faye.
He points to studies that show that four years after one-time cash transfer earnings had increased 38% and hours work 17%. It’s also been evaluated by Innovations for Poverty Action through a randomized control trial, which finds a 30% increase in income along with significant improvements in hunger, he says.
The randomized trials showed up some eye opening and counterintuitive effects. When a family was given a cash transfer, their stress levels (as measured by cortisol levels) fell. Household conflict, including domestic violence also fell for recipients and their neighbors.
Additionally, “similar to previous studies, we found that the transfer had large impact on business and agriculture income, which increased by 28% of grant size,” says Faye. “Food security also increased substantially – for example, children were 42% less likely to go whole days without eating.”
But tempting employees from the private sector with backgrounds in engineering or payment transfers hasn’t been easy. “Finding a talented team is that hardest part of my job, and also the most rewarding. We hope that the chance to have impact at this scale and work with exceptional talent is enough to encourage folks to join,” says Faye.
For now, Faye is continuing to work on breaking down naysayers with strong research and data. “We hear different types of objections, many of which initially seem plausible. Ultimately, it is an empirical question to which we respond with robust scientific evidence and transparency,” he adds.