What would happen if poor villages were given cash for the next decade, no strings attached?
By Lin Taylor
LONDON, May 12 (Thomson Reuters Foundation) - What would happen if poor villages were given cash for the next decade, no strings attached?
That's the question one U.S. charity wants to answer through a pilot programme to provide poor Kenyans with a guaranteed basic income for 10 years.
In an ambitious social experiment, GiveDirectly plans to transfer cash to 6,000 Kenyans living in extreme poverty for a decade, making it the world's first basic income trial of its kind, it said.
With U.N. agencies, governments and private sector companies due to discuss ways of delivering aid more efficiently at the World Humanitarian Summit this month, GiveDirectly co-founder Michael Faye said cash transfers had huge benefits.
"Cash transfers are one of the most effective methods of development intervention," Faye told the Thomson Reuters Foundation. "You don't need to do anything to receive them. You simply get it and can spend it on whatever you like."
Cash transfers account for only about 6 percent of humanitarian aid, yet studies show school attendance and access to healthcare significantly improve when people receive cash. Recipients also tend to save or invest the money, which promotes income generation instead of reliance on food aid.
"Whether it's trying to assist them out of poverty, or in times of crisis and disaster, we need more tools on the table and cash transfers can be particularly effective at enabling flexibility and choice," said Sarah Bailey, a researcher at the Overseas Development Institute (ODI) thinktank.
GiveDirectly has yet to choose the recipients and the exact location for the trial, which is due to start at the end of the year and estimated to cost $30 million to run - with much of the funding coming from private investors and public donations.
Though details are still being finalised, each person will receive about $0.70 to $1.10 per day through mobile money transfer services such as M-Pesa. The target recipients live on about $0.65 a day, Faye said.
GiveDirectly has provided short-term cash transfers in Kenya and Uganda since 2011, and will soon operate in Rwanda.
For its pilot programme, the charity will randomly select villages in Kenya and give residents a basic income for at least a decade. Faye said an extra 10,000 people will receive some form of cash transfer as well.
The programme will run as a randomised controlled trial, meaning one poverty-stricken region will receive the money, while another region, the control group, will not. The charity will use a number of factors, such as the type of house someone lives in, to select the recipients.
"People who live in thatched roofs, mud houses, tend to be a bit poorer," Faye said.
Cash transfers have become more mainstream in development and humanitarian aid over the years.
The World Food Programme recently provided digital cash cards to displaced families across Iraq, giving them the choice to redeem money or food aid.
In Kenya's drought-stricken North Eastern region, the government routinely transfers cash to the most vulnerable residents every two months.
But ODI's Bailey said some charities and donors remain reluctant to use cash transfers because it "takes a tiny bit of power away from the giver".
"It gives the choice to the person who receives the money and that's not comfortable for charities," she said. "Some charities have obviously embraced this ... but it's still a smaller proportion compared to other ways of helping."
Yet there is little evidence to suggest that giving poor people cash would lead to negative outcomes, Bailey said.
A 2014 World Bank report, which analysed 30 global studies, showed that poor people who received cash transfers did not squander the money on alcohol, cigarettes, drugs and other 'temptation' goods.
This rings true for Faye and the people his organisation has helped over the past few years.
"Nobody wants the outcome of a cash transfer programme to be increased alcoholism or violence or anything of the sort," Faye said, "But I don't think we have much to worry about as the evidence makes clear that this is just not the case."
A team of economists and researchers will assess the impact of the programme over the coming years.
"At its core, it puts trust in the poor - and the poor have a pretty good track record to have earned this trust," Faye said.
(Reporting by Lin Taylor @linnytayls, Editing by Katie Nguyen; Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters that covers humanitarian news, land and property rights, human trafficking, women's rights and climate change. Visit http://news.trust.org to see more stories)
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