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Charities Aid Foundation

The rise of direct giving in development philanthropy

27 August 2013

Give Directly is challenging other not for profits to prove that they can do more for the poor with a dollar than the poor could do for themselves.

Anyone who has an interest in trends in global philanthropy, or international development for that matter, could not fail to have heard of Give Directly. Indeed, listeners to the excellent This American Life radio programme/podcast were given a unique insight into the thinking behind the direct cash transfer charity in the recent episode entitled "I Was Just Trying to Help", which included interviews from co-founders Michael Faye and Paul Niehaus and a number of beneficiaries in Kenya. Further analysis by Planet Money reporter Jacob Goldstein also appeared in an article in the New York Times Magazine.

the proposition

The idea at the core of Give Directly is a simple one - that the most efficient way to alleviate extreme poverty is by giving money directly to the poorest people in the world and that they are in the best position to know how to spend it. The first part of this proposition is indisputable. Extreme poverty, defined as between $1.25 and $2.50 a day, would be eliminated more quickly, in the short term at least, were all charitable funds to be simply transferred directly to the poor. But whether beneficiaries of cash transfers from Give Directly are able to spend the money effectively and experience better outcomes in the long run is a matter for debate in the development community. Until now.

To attempt to answer that question Give Directly are undertaking a large randomised controlled trail of their activities in Kenya to measure the outcomes for recipients of cash transfers on a wide range of variables against people who have not received funds. This approach to impact measurement poses a challenge for not for profits interested in alleviating poverty and its associated problems to demonstrate impact for their total spend against those seen in cash transfers. Give Directly co-founder Paul Niehaus told This American Life:

"We would like to see organisations make the case that they think they could do more for the poor with a dollar, than the poor could do for themselves. That would be fantastic and I think some may be able to make a convincing case but if you go to the websites today, I don't think you are going to see that argument being made."

long term impact

But whether all of the underlying causes of extreme poverty and the associated problems it causes are best alleviated by cash transfers will be difficult to ascertain even with this data. Whilst the outcomes for the individuals who receive money may be improved, the research won’t be able to tell us what the long term impacts for society are.

It seems unlikely that some of the more complex issues that are holding back development in many countries will be addressed by cash transfers alone. Cash transfers are unlikely to address the problems caused by alcohol abuse or prostitution for example, and may in fact contribute to them. Factors like Gender inequality, disability, conflict, environmental sustainability and corruption which hamper growth may well be hitting the finances of the poor as hard, or harder than cash transfers can replenish them. But this is much more difficult to measure.

Some of the language used by advocates direct giving suggests that other forms of philanthropy are somehow patronising beneficiaries by not trusting them to spend their money wisely. But providing advice, training and human compassion whilst incentivising behaviours that have been shown to be beneficial to society are fundamental to bringing about social gains in every community, in every country.

should we welcome this innovation?

Overall, direct giving is an innovation that should be welcomed as a new and important tool in the philanthropist’s toolkit. The benchmark it sets for impact could be hugely important for philanthropy and could transform the way we think about international development. However, direct giving is not a panacea.

In an era where the public are increasingly being exposed to negative narratives about not-for-profit waste and failure and when scandals are more newsworthy than success stories, it is important that we do not over simplify poverty alleviation and the bigger picture of international development.
In addition, we also need to think about the importance of engaging communities in building capacity in a domestic civil society. Because simply receiving money through mobile phone transactions is unlikely to empower communities to tackle the underlying barriers to development.