Why don't we just send aid money directly to poor people's cellphones?

GiveDirectly, a US-based startup NGO pioneering a new financing model based on cash transfers. The idea couldn’t be simpler: 1. People donate through GD’s webpage 2. GD locates poor households in Kenya (see below) 3. GD transfers your donation electronically (through the M-Pesa mobile payments system) to a recipient’s cell phone (they send each household $500 per year for two years) 4. The recipient collects the transfer GD reckons that in this way, it can get 90 cents in every donated donor into the hands of poor people. Step 2 is interesting: ‘We do this in give directly picthree steps.  We first select regions of Kenya with high poverty rates using census data.  We then identify villages with low-quality housing and access to an agent providing mobile-phone-based payment services. Finally, we identify the poorest households in these villages using simple, transparent criteria: we target all households living in homes made out of mud, wood, and grass. These criteria effectively identify relatively poor households and are generally perceived by the community as fair. We record eligible households’ phone numbers or, for those that do not have a phone, provide them with a SIM card. We follow up initial identification with a rigorous process of audits to prevent mistakes or fraud.’ What’s innovative about this is the coming together of cash transfers (CTs) and mobile payments systems to make the CT option available to individual donors, rather than (as previously) being exclusively a government, big aid donor or large NGO activity (Oxfam does lots of them – in fact it was our cash for coffins project that partly gave Paul the idea). There was a high level of agreement in the BBC discussion (doubtless to the horror of the producer – arguments make much better radio). This kind of approach is exciting, but only relevant to part of the aid and development story – for example in the Horn of Africa, we are doing cash transfers, but also have to work to get market traders to re-establish supply chains in the worst-hit areas or there is nothing for people to spend the transferred money on. While they help with short term consumption and investment, cash transfers don’t directly tackle the kinds of systemic problems that underpin poverty and inequality – dealing with those requires a more complex approach based on partnering with local civil society organizations, and all that brokering and convening stuff I write about on this blog. And what about gender – who owns the phones and gets access to the $500? It would be interesting to see if there’s a difference between how men and women phone-holders spend the money – I wonder if GD have included that in their monitoring and evaluation? Finally the approach seems inherently individualistic – there is no obvious way to fund community organizations in this model. At least not yet. I talked to our fundraisers prior to the interview and they linked this to a generational shift. Younger people are less trusting of institutions than older ones, so the pressure for this kind of person-to-person ‘disintermediation’ (sorry) is only likely to grow. People only believe their money is doing good if they can see it drop into the hand (or cellphone) of a recipient. Oxfam has already responded to this with schemes like Projects Direct, and new initiatives like Kiva and now GiveDirectly are addressing the same disquiet. An alternative approach is to do a better job in explaining why we need to use people’s donations to tackle the underlying structural causes of poverty, through a more complex (and expensive) engagement with the state, companies, civil society organizations etc. But another might be to put the two together. If the new generation is both more activist (Occupy, Arab Spring etc) and more sceptical of give directly logoinstitutions, how about adapting the GiveDirectly model to ‘sponsor an activist’? Your $10 a month would go straight to the cellphone of a named HIV activist, or a land rights organizer. In return you would get regular tweets, blogs or whatever so you can follow what they’ve been getting up to. Paul says he’s going to think about the idea, but is anyone already doing it? If so, how’s it going? You can listen to the piece here, with Paul Niehaus of GiveDirectly, Mike Jennings of SOAS and me, (although it might have got a bit truncated at either end of the 7 minute piece).]]>

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20 Responses to “Why don't we just send aid money directly to poor people's cellphones?”
  1. Shupiwe

    “Finally, we identify the poorest households in these villages”
    I suppose the other thing is that the project ignores any community politics, or the structure of the societies that the money is going too. I suppose it is also based on a Western assumption of need. My aunt for example in Zambia would be eligible as she lives in a mud hut, but her son happens to be an ex-minister so she may not be the best person to receive the money. If she received it as well, the community would no doubt perceive the project as bias and as centred on political and economic connections.
    In recent years there has been a lot of debate on the idea of development being led by communities and societies – the recipients – this project seems to ignore a lot of that debate.
    Interesting idea though!

  2. Chris Albertyn

    Thanks for the post and links – cash transfers are also making an important difference around food security issues in southern Africa. What prompted me to respond was a thought on the ‘conceptual polarity’ around the reported inability of such an approach to get monies to community organisations, and wondering about an implied trend of possible circumventing of institutional funding because of a growing generational mistrust of institutions. If they are established by “the community” in response to a commonly perceived need for a public good, “community” organisations should (in theory) receive “on-granting” from targeted beneficiaries of the direct grants … talk about real ownership then! Going beyond “community” and the essential need for more broadly focussed public institutions – surely these need to be made more responsive and effective such that the growing mistrust is reversed over time? Thanks for a great blog. Much appreciated. And best wishes for 2012

  3. Allison Burden

    I am relieved you mentioned the issue of gender dynamics within a household. I do hope that GD includes this in their monitoring and I would be fascinated to see the results. There is wealth of data in the monitoring of NGOs projects that indicate that control goes beyond gender dynamics. Other factors such as health, age, status as a first, second, third or fourth wife, an ‘adopted orphan, niece or nephew’ might influence how the resources are used in a household, who decides and who uses them for what.
    An interesting idea and one that appeals to me in many ways – I would like to get a better sense of what effect the $500 has on the various members of the households in question.

  4. Tracey

    PeaceDirect.org give money directly to peace activists I think – though doubt it is quite as direct as this – but the same principle of money going directly to a person (who may run an organisation)without any projects or logframes in between.

  5. Ken Smith

    I think it’s a bit misleading to say 90% of the donations get to the hands of poor people. There are “organisational costs” ,of which their website says
    “We cover these costs ourselves or with help from donors”.
    I haven’t studied their accounts in detail but you can bet some journalist will , and you can bet it will add to the “organisational costs” to deal with the queries from donors that follow.

    • Max Ghenis

      The fixed organizational costs are covered by a separate (small) set of donors. So 90% of donations to GiveDirectly from their website truly do go to the poor.

  6. kalyani

    What about the corrupion dynamics that exist in any communities.Often when poor get cash, the first to come calling are thelocal power brokers Cash transfers must be accompaanied by training to stregthen voice and control, especially womens

  7. Rob

    In fact there has already been a good-quality study of using mobile phones for cash transfers in a humanitarian intervention. The paper is here: http://www.cgdev.org/files/1425470_file_Aker_et_al_Zap_It_to_Me_FINAL.pdf and there’s a good summary here: http://blogs.cgdev.org/open_book/2011/10/zap-it-to-me-first-randomized-trial-of-micro-transfers.php
    The payments were made only to women, so they couldn’t look explicitly at the gender questions you raised – but the study did find some differences in how money received by phone was spent (compared to money distributed in person). The researchers suggested that this may be because mobile money was more private: it was easier for women to conceal mobile money from other people, including their husbands.
    Not surprisingly, they also found that mobile money reduced transaction costs, both for the organization doing the distribution and for the recipients.

  8. Mmm, development 2.0?
    1. On Projects Direct, last time I worked in OGB we were setting up all these bloggy things and tried it with Projects Direct. Problem then was that the busy, successful people who contribute to PD had no time to read project blogs (and now tweets)
    2. Which is a more positive gloss on one of the negative aspects of the online trends you describe: that people click and forget, or click to forget – which is true of both millenials and those of us from the last century
    Finally, good discussion on the same topic from Linda Raftree, with some excellent historical analysis http://bit.ly/wxBV8j

  9. John Magrath

    The methodology of transfer is innovative; the criteria for selection seem much less certain; the approach feels far from innovative. I can’t see how this is much different from an old-fashioned “charitable” mindset to – basically – “sponsor a poor person”, like “sponsor a child”. Even child sponsorship organisations though have, usually, progressed beyond sponsoring individuals to finding ways for wider communities to benefit (even if they’re not always so transparent about it in their appeals).

  10. Cynan

    >95% in favour on this, Give Directly do make their transfers to recipients quarterly though (in order to keep transfer costs down).
    How much will this influence what people spend the funds on, ie investment/assets rather than ongoing consumption needs? If this is targeted at the poorest households, might support to their ongoing consumption be more of a priority?
    I’ll watch with interest their RCT/evaluation on where recipients spend the money, but if its high on assets I’ll wonder to what degree it was function of the design. I’m not aware of an OECD country social safety net that makes payments this infrequently; Bolsa Familia is also monthly.

  11. Joe Crook

    Sponsoring an activist sounds interesting but doesn’t that open up a can of worms? After all, one man’s “peace activist” or “rights campaigner” is another man’s “terrorist”. You make reference to the Arab Spring and this would be the perfect example. All aid is inherently political but what if we were able to send money directly to support a Muslim Brotherhood activist? Some would be in favour of that but others would oppose it depending on one’s political opinion.

  12. Joe

    Seems pretty daft to me, all kinds of potential for fraud. How do you know if the number is of the person you-think-it-is? What happens if they’re pressurised to give the phones or the money to someone else?
    Are there any strings? Can the recipients use the money in any way that they like?

  13. Lots of thoughtful comments — thanks to everyone who has posted. I thought I’d react to a couple of themes that I see emerging in these posts.
    One is on gender and the household. Like many of you, we at GD are keen on understanding these issues, which is why currently we are giving to men in some cases and women in others. We’ll have detailed data on the long-term implications of this by 2013. In the meantime we have also been calling each recipient to ask whether they household had a hard time reaching agreement on how to use the money; we’ve seen two such cases thus far out of around 350 interviews, so recipients are self-reporting a fairly harmonious process.
    A second theme is about choosing who is ‘poor’. As several of you have pointed out, there are tough tradeoffs here. One drawback of our approach is that there are surely households that are poor by any reasonable standard but do not live in mud huts. On the other hand, it is much easier to prove whether a household lives in a mud hut than it is to, say, prove what their income was last year. This is important for preventing fraud — you or I can walk into any village and see for ourselves whether a recipient is eligible or not. (In fact we can even use Google Earth to check what their roofs are made of.) Alternative approaches like asking village elders to choose who is poor are known to create potential for bribery and collusion, so we want to keep power out of the hands of local power-brokers. Looking at all these, we decided to go with mud huts, but also to constantly keep looking for ways to improve that rule without losing objectivity. Your thoughts are of course welcome.
    Duncan’s idea, which I thought was interesting, is to make people eligible not so much because they are poor but because we think they can do great things, e.g. bring about needed political reforms. Thoughts on how we might identify such people?

  14. It is great to see an NGO taking up the ideas of cash transfers directly to the poor, as these types of programs have led to great successes in Latin America and throughout the world. We at the New America Foundation’s Global Assets Project have been advocating for some time now that official development assistance also be transmitted directly to beneficiaries, and that government cash transfers be linked to savings opportunities. Thanks for this very thoughtful post, which inspired a post of my own highlighting our work in this sphere:

  15. Laudable and innovative – while demonstrating true understanding of the poor. It is a concept that will be refined over time but it’s a really great start. Harnesses technology very well – from google earth, to mPesa payment platforms.
    I’d be very interested in the gender results.

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