A Closer Look at GiveDirectly’s Experiment with Universal Basic Income in Kenya

Cover image courtesy of Africa Rising.

–by Donald Walker–

By trusting poor people to know best how to spend money to improve their own wellbeing, GiveDirectly is seeking to use technology to fundamentally change the way donors provide aid to the world’s poorest people. In Kenya, a large scale, multi-year experiment will test if countering paternalism and empowering the recipients of aid will make a signficant difference in the long term.

In 2008, four economics graduate students at Harvard and MIT – Paul Niehaus, Michael Faye, Rohit Wanchoo, and Jeremy Shapiro – established a giving circle with the aim of providing direct, unconditional cash transfers to people living in extreme poverty (Goldstein, 2012). Motivated by their own academic research into the effectiveness of philanthropy, these four researchers sought to develop a platform by which humanitarian assistance could be delivered with greater efficiency and have more of an impact in improving the quality of life of the poor. In 2012, this giving circle was formally launched as GiveDirectly (Goldstein, 2012). Initially focused on Kenya, GiveDirectly expanded into Uganda in 2013 and into Rwanda in 2016. In August 2015, GiveDirectly was able to significantly expand its giving operations after receiving a grant of $25 million from the philanthropic foundation Good Ventures. In April 2016, GiveDirectly announced a plan to use $30 million to evaluate the idea of a universal basic income. The stated goal of GiveDirectly with this initiative is to “try to permanently end extreme poverty across dozens of villages and thousands of people in Kenya by guaranteeing them an ongoing income high enough to meet their basic needs” and, if it works, pave the way for implementation in other regions”. The program was launched in November 2017 and will run for 12 years.

GiveDirectly provides unconditional cash transfers to families living in extreme poverty using mobile telephone payment technology. The process proceeds through four phases (GiveDirectly Operating Model). In the initial targeting phase, recipients are identified using public census data followed by door-to-door data collection. The average GiveDirectly recipient lives on $0.65 per day, so the $1,000 that they receive represents a budget of a single year (Give Directly Operating Model). In the auditing phase, independent checks developed by GiveDirectly are used to ensure that potential recipients are eligible and did not engage in bribery. In the transfer phase, individuals accepted into the program are provided with a mobile phone, and $1,000 is transferred in three payments. Recipients typically receive a text alert and are able to collect the cash from a mobile money agent in the nearest town. Finally, GiveDirectly contacts each recipient in order to confirm receipt of the funds, identify any issues that may have been encountered with the transfer, and evaluate overall customer service.

The founders of GiveDirectly were seeking to address several concerns regarding the efficacy of contemporary models for humanitarian giving. One area of concern was the inefficiency of governments and many humanitarian organizations in providing humanitarian assistance. In traditional models, due to corruption and the need to finance the organizational bureaucracy of non-governmental organizations, not all donated funds end up being transferred to those who actually need them. It is GiveDirectly’s goal to ensure that no less than $0.90 for each one dollar donated gets into the hands of a poor person who needs it (Karnofsky, H., 2012). More pressing was the idea that humanitarian aid organizations can actually be quite self-serving in their activities, with the organizational and fund-raising needs of non-governmental organizations gradually trumping the needs of the poor. In avoiding traditional models of humanitarian giving, the founders of GiveDirectly were seeking to avoid paternalistic models in which aid organizations direct how funds are spent. GiveDirectly was founded on the notion that the problem faced by those living in extreme poverty is not that they do not know how to spend money to improve their own lives, but rather that they do not have access to money (Goldstein, 2012).

The problem of paternalism is one of the main flaws with the institutional giving model that GiveDirectly is seeking to overcome. In mainstream, contemporary models of humanitarian giving, most aid is given as “in-kind” donations. The donation may be food, clothing, livestock, solar panels, or even skills training. While these efforts are not entirely void of efficacy, there is still the issue that an external player – the aid organization – has decided what the community needs. The founders of GiveDirectly did not just argue that the paternalistic approach to humanitarian assistance is unethical or immoral; rather, they argued that it is one of the main reasons that so much philanthropy is ineffective. The paternalistic approach to humanitarian assistance often results in inefficient aid distribution, limited effectiveness in actually reducing poverty, and occurrence of unintended consequences that can disrupt local communities and economies. By providing poor families with cash without any strings attached, some of the power in the relationship between helper and helped is transferred to the helped.

Critics of the direct cash transfer model invariably point out that it is not free of unintended consequences and comes with its own set of ethical problems. Professor Edward Miguel of the University of California Berkley has raised concerns about cash transfers raising tensions in communities between those who receive payments and those who do not (Aizenman, 2017). While Professor Miguel acknowledges that increased tensions as a result of GiveDirectly’s activities have not been observed, this is a concern as the program continues to grow in scope. While acknowledging GiveDirectly’s positive impacts, Professor Chris Blattman of the University of Chicago has expressed concerns about the lack of increased spending on health and education (Blattman, 2013).

Many of the concerns that have been raised with regard to GiveDirectly’s cash transfer efforts deal with community cohesion and the possibility of distorting wealth distribution within communities where individualism is not as important as a cultural influence as it is in the West. While it may be easy to dismiss the concerns of individuals like Professor Miguel, GiveDirectly’s experience with refusal rates exemplify how powerful cultural norms can be in impacting the success of poverty reduction initiatives. Will Le, GiveDirectly’s director in Kenya, has indicated that the organization’s offer of assistance is rejected by approximately 4 – 6% of Kenyans who are offered an unconditional cash transfer (Weller, 2016). While refusal rates have been low in Uganda and Rwanda, in the Homa Bay area of Kenya, refusal rates have been as high as 40% (Weller, 2016). GiveDirectly’s research has shown that some communities are skeptical and build their own narratives to justify refusing to participate in the program. According to Le, they find it “hard to believe that a new organization like GiveDirectly would give roughly a year’s salary in cash, unconditionally…As a result, many people have created their own narratives to explain the cash, including rumors that the money is associated with cults or devil worship” (Weller, 2016). The problem has been significant enough that GiveDirectly has created a special team to promote their cash transfer program, including working local leaders and making radio broadcasts to explain the program.

Despite these concerns, the results of field research have demonstrated that GiveDirectly’s model has had significant positive impact on improving the lives of the poor while avoiding or mitigating some of the unintended consequences of the institutional humanitarian giving model. According to GiveDirectly, “cash transfers have been shown to thoroughly and rigorously reduce poverty and improve lives” (GiveDirectly Research on Cash Transfers). In 2016, GiveDirectly partnered with Innovations for Poverty Action to evaluate the efficacy of its giving program in the town of Rarieda in western Kenya from 2011 to 2013. Funded by the National Institute of Health and led by Princeton’s Professor Johannes Haushofer and Professor Jeremy Shapiro, a GiveDirectly co-founder, the study sought to quantify the impact of the $1,000 cash transfer on the quality of life of the recipients. This research documented encouraging increases in earnings ($270), assets ($430), and spending on nutrition ($330) (Haushofer and Shapiro, 2016). Notably, the study documented that there was no increase in spending on tobacco or alcohol over the time period of the study.

Research external to GiveDirectly has also demonstrated positive impacts on poverty reduction while minimizing unintended consequences for recipients of unconditional cash transfers. While not all of these studies are specifically focused on East Africa, they are an important contribution to the academic research on the efficacy of unconditional cash transfers in reducing poverty. These studies are particularly useful because the specific, long term impact of GiveDirectly’s initiatives can be difficult to evaluate because the organization has only been operating since 2012. One of the challenges with researching the long-term impact of unconditional cash transfers is that the available data are limited due to these programs being fairly new. In many cases, the impact of increases in government-provided pensions can be evaluated in order to assess the impact of direct, unconditional cash transfers on poor families. Many of these studies document significant positive impacts on nutrition, health, educational outcomes, and overall quality of life without any increase in systematic abuse of the cash transfer (e.g. alcohol or illegal drugs consumption).

Nutrition and health is an area where the academic research has demonstrated that cash transfers, either as donations or as government pensions, have had a positive impact on the lives of the poor. For example, cash transfers in the form of government pensions have been demonstrated to have a positive impact on the stature of female children in South Africa (Duflo, 2003). The end of apartheid in South Africa in 1994 resulted in pensions being paid to poor families living in rural parts of South Africa. These income payments were effectively the same as an unconditional cash transfer. During the 1990s, pensions received by women resulted in significant anthropometric gains by girls, including an improvement in weight given height by 1.19 standard deviations and a gain in height given age by 1.16 standard deviations (Duflo, 2003). These gains were sufficient to close the anthropometric gap between South African girls and American girls of the same age. In Malawi, a 2012 study demonstrated that providing a cash income to never-married women aged 12 – 22 years resulted in a marked decrease in infection rates of human immunodeficiency virus (HIV) and herpes simplex virus (Baird, S., Garfein, R., McIntosh, C., and B. Ozler., 2012). Data from Uruguay show a 15% decrease in the incidence of low birthweight when pregnant women living in poverty were provided with unconditional cash transfers (Amarante, Manacorda, Miguel, and Vigorito, 2011).

Improvements in educational outcomes associated with direct cash transfers have also been documented in the academic literature. Edmonds (2006) documented that the expectation of increased income from pensions resulted in increases in school attendance by both boys and girls and a corresponding decrease in participation by children in the labor force when South African families. These results indicate that expectations of future cash liquidity are an important consideration in household schooling decisions and that increases in expectations of additional liquidity can have a positive impact on enrollment. Fernald and Hidrobo (2011) report significant improvements in language skills of young children in rural areas in Ecuador when family income was increased by 10% through a direct, unconditional cash transfer program.

Additional concerns about unconditional cash transfers include the long-term impact on poverty reduction, the stereotype of poor people regarding the spending of funds on temptation goods (e.g. alcohol or illegal drugs), and concerns about discouraging work and economic self-sufficiency. However, numerous studies have addressed all of these criticisms. In 2013, researchers from Columbia University documented the impact of a large, one-time, unconditional cash grant on the incomes of recipients four years after receiving the transfer (Blattman, Fiala, and Martinez, 2013). Most of the participants in the study invested in vocational training, and their earnings rose by 40% over the four years following receipt of the grant. Del Mar, McKenzie, and Woodruff (2012), in a study on cash transfers to subsistence businesses in Sri Lanka, showed a 10% increase in enterprise survival rate and $8 to $12 per month higher profits (for male owned businesses) five years after the grants were received. Data from several academic studies in several different countries confirm either no significant impact or a significant negative impact of unconditional cash transfers on spending on alcohol or tobacco (Evans and Popova, 2016; Cunha, 2010; Rubalcava, Tereul, and Thomas, 2004; Attanasio and Mesnard, 2006; Maluccio and Flores, 2004). Additionally, multiple studies of labor force participation by recipients of unconditional cash transfers find no effect on the number of hours worked or an increase in the number of hours worked (Maluccio and Flores, 2004; Skoufias and Di Maro, 2008; Bertrand, Mullainathan, and Miller, 2003).

One of the reasons that humanitarian organizations have been slow to adapt the idea of unconditional cash transfers has been a lack of evidence supporting the claims that a basic universal income reduces poverty and improves quality of life over the long term while avoiding unintended consequences to the recipient communities. A major reason for this has been a lack of large scale studies over a multi-year period which is largely a result of the unconditional cash transfers being a fairly new idea. GiveDirectly is seeking to provide data to support the expansion of similar philanthropic efforts by conducting a large-scale test of the impact of unconditional cash transfers over many years. In April; 2016, GiveDirectly announced the launch of a large-scale experiment to test the efficacy and potential unintended consequences of providing a universal income in Kenya.

GiveDirectly’s universal income experiment was launched in rural Kenya in 2017 (GiveDirectly Basic Income). The experiment includes four groups of villages. In the first group, the residents of 40 villages will receive an income of $0.75 per adult per day delivered monthly for a period of 12 years. The goal of the first group is to test the impact of a long-term basic income. GiveDirectly will work with the villages in the second group to test the impact of a short-term basic income. In this group of 80 villages, recipients will be provided with $0.75 per adult per day for a period of only 2 years. In the third group of villages, the adult residents of 80 villages will receive a single lump sum that amount to the total received by a single adult recipient in the second group. Finally, the fourth group, which includes 100 villages, will receive no cash transfers and will serve as the control group. GiveDirectly estimates that 21,000 individuals will receive some type of cash transfer, and 5,000 people will receive a long-term, basic income as part of the initiative.

GiveDirectly will collect data in all four groups of villages over the 12-year duration of the project, with initial results becoming available in the first 1 – 2 years of the study (GiveDirectly Basic Income). Data will be collected for a wide range of considerations for assessing the impact of unconditional cash transfers on economic outcomes and impact on the community. GiveDirectly will assess changes in economic status, mental wellbeing, changes in the way recipients use time (education, work, community involvement, leisure, etc.), risk taking (starting a business, relocating to find a new job opportunity, etc.), and impact on gender relations (GiveDirectly Basic Income). The results from the first and second groups are important for assessing how the expectation of continued income impacts decision making. The comparison of data from the second and third groups will allow the researchers to understand how the timing of cash delivery (a lump sum vs. payments over a period of time) impacts outcomes. GiveDirectly’s experiment in Kenya will represent one of the largest, most comprehensive, and most ambitious studies to date to assess the long-term impact and potential consequences of unconditional cash transfers as a model for philanthropic giving.

Given the scale of GiveDirectly’s experiment and the legacy of unintended disruptions that many Western humanitarian efforts have caused in Africa, it is important to consider the ethical questions that could be raised by this type of study. The criticism that unconditional cash transfers could disrupt established patterns of wealth distribution within a community and create tensions between those who receive and do not receive cash transfers has already been discussed. This is a valid concern, but it is important to note that in GiveDirectly’s experiment, all of the adult members of a village enrolled in the study will receive transfers. The income is universal, at least at the scale of the village. Fairness – who gets to be included in the first group versus the second group (or the fourth group) – is a more pressing ethical concern.

The GiveDirectly experiment raises an important question. When data from a variety of sources provide encouraging indications that a guaranteed, universal, basic income proves more effective at reducing poverty and improving overall wellbeing of a person living in extreme poverty, is it ethical to take some risk of doing harm or causing disruption in a community if the study has the potential to have a profound impact on improving the efficacy of humanitarian assistance? The detrimental effects of the paternalistic dimension to the institutional giving are well documented. Rich people telling poor people what they need and how to spend their resources typically does not result in significant improvements to the lives of the poor; it more likely serves the interests of humanitarian aid organizations and their fundraising staffs. Is some degree of risk taking acceptable when the results of the initiative could potentially lead to a widespread adaptation of a new model of philanthropic giving that would greatly reduce the paternalism inherent in the institutional model and reduce the inequality in power that currently characterizes the relationship between helper and helped? In an increasingly globalized and interconnected world, is it reasonable to place some burden of responsibility for a certain degree of cultural flexibility on the part of recipients of unconditional cash assistance when those transfers are being made by genuine non-profit organizations?

GiveDirectly’s universal income experiment has the potential to achieve significant changes in the way humanitarian assistance is delivered to families living in extreme poverty in Africa and around the world. While unconditional, direct cash transfer are not a panacea for the challenge of poverty, abundant research has demonstrated that this model of giving has positive, long term effects on the lives of poor people without significant unintended consequences. While concerns about the potential for tensions resulting from jealousy or fairness have been raised, it is important to consider that the negative impact of paternalism on the efficacy of humanitarian initiatives is already well established. Progress requires taking risks, and possibly even learning to accommodate some disruptions.

This post may have been edited by admin for clarity and length.

Works Cited

Primary Sources

GiveDirectly Basic Income. Retrieved 12 August 2018. https://givedirectly.org/basic-income

GiveDirectly Research on Cash Transfer. Retrieved 17 August 2018. https://givedirectly.org/research-on-cash-transfers

GiveDirectly Operating Model. Retrieved 22 August 2018. https://www.givedirectly.org/operating-model

Haushofer, H. and J. Shapiro. 2016. The Short-term impact of unconditional cash transfers to the poor: experimental evidence from Kenya. 25 April 2016. Princeton Review.

Additional Sources

Aizenman, Nurith. “An Experiment Gives Cash Aid to the Poor. Is that Ethical?”. Goats and Soda, National Public Radio. 13 September 2017. https://www.npr.org/sections/goatsandsoda/2017/09/13/542261863/cash-aid-changed-this-family-s-life-so-why-is-their-government-skeptical

Amarante, V., Manacorda, M., Miguel, E., and A. Vigorito. 2016. “Do Cash Transfers Improve Birth Outcomes? Evidence from Matched Vital Statistics, and Program and Social Security Data”. American Economic Journal: Economic Policy, vol 8(2), p. 1 – 43

Attanasio, O. and A. Mesnard. 2006. “The impact of a Conditional Cash Transfer Programme on Consumption in Colombia”. Fiscal Studies, December 2006, vol. 27(4), p. 421 – 442.

Baird, S., Garfein, R., McIntosh, C., and B. Ozler. 2012. “Effect of a cash transfer programme for schooling on prevalence of HIV and herpes simplex type 2 in Malawi: a cluster randomised trial”. Lancet, 15 February 2012

Bertrand, M., Mullainathan, S., and D. Miller. 2003. “Public Policy and Extended Families: Evidence from Pensions in South Africa”. World Bank Economic Review, June 2003, vol. 17(1), p. 27 – 50

Blattman, Chris. “And the Cashionistas Rejoice”. 15 October 2013. https://chrisblattman.com/2013/10/25/and-the-cashonistas-rejoice/

Blattman, C., Fiala, N., and S. Martinez. 2013. “The Economic and Social Returns to Cash Transfers: Evidence from a Ugandan Aid Program”. CEGA Working Paper, April 2013.

Cunha, J. 2010. “Testing Paternalism: Cash vs. In-Kind Transfers in Rural Mexico”. Technical Report, Stanford University. March 2010.

Del Mar, S., McKenzie, D., and C. Woodruff. 2012. “One-Time Transfers of Cash or Capital Have Long Lasting Effects on Microenterprises in Sri Lanka.” Science, vol. 335(6071), p. 962 – 966

Duflo, Esther. 2003. “Grandmothers and Granddaughters: Old-Age Pensions and Intrahousehold Allocation in South Africa”. World Bank Economic Review, June 2003, 17(1), 1 – 25

Edmonds, Eric. 2006. “Child labor and schooling responses to anticipated income in South Africa”. Journal of Development Economics (81), 2006

Evans, D.K. and A. Popova, “Cash Transfers and Temptation Goods”. Economic Development and Cultural Change, November 2016, vol. 65(2), p. 189 – 211

Fernald, L. and M. Hidrobo. 2011. “Effect of Ecuador’s cash transfer program (Bono de Desarrollo Humano) on child development in infants and toddlers: A randomized effectiveness trial.” Social Science & Medicine (72), 2011.

Goldstein, Dana. “Can 4 Economists Build the Most Economically Efficient Charity Ever?”. The Atlantic, 21 December 2012

Karnofsky, Holden. 2012. “Our Top Charities for the 2012 Giving Season”. GiveWell. https://blog.givewell.org/2012/11/26/our-top-charities-for-the-2012-giving-season/

Maluccio, J.A. and R. Flores. 2005. “Impact Evaluation of a Conditional Cash Transfer Program: the Nicaraguan Red de Proteccion Social”. FCND Discussion Paper and Technical Report 2004

Rubalcava, L., Tereul, G., and D. Thomas. 2004. “Spending, Saving, and Public Transfers Paid to Women”. On-Line Working Paper Series CCPR-024-02, California Center for Population Research 200. https://escholarship.org/uc/item/95m9f476

Skoufias, E. and V. Di Maro. 2008. “Conditional Cash Transfers, Adult Work Incentives, and Poverty”. The Journal of Development Studies, 2008, vol 44(7), p. 930 – 960

Weller, Chris. 2016. “A Revolutionary Experiment in Giving 6,000 People Free Money May Face a Surprising Challenge”. Business Insider. 8 September 2016. https://www.businessinsider.com/givedirectly-basic-income-experiment-unexpected-trouble-2016-9

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