文/Rachel Sandler
In a remote village in Rwanda, Esther, 47, a mother of three, sat on a wooden bench and explained to the listener how she would spend more than 850,000 Rwandan francs. The life-changing sum — about $850, equivalent to more than a year's salary — will be paid in the form of a grant over two months by GiveDirectly, a New York-based nonprofit.
In early June, Esther attended a video conference showcasing the nonprofit GiveDirectly's operations in the East African country. At the meeting, an interpreter told a small group of donors and journalists: "She will buy a farm." "With this farm, Esther intends to grow enough food for himself and his family. Like the vast majority of the village's roughly 100 people, she makes a living from farming. Subsequently, GiveDirectly's staff handed Esther a bag with instructions on how to get paid from his phone.
Founded in 2009, GivenDirectly aims to include every household in Esther's village in its direct cash transfer program, giving those who typically live on less than $2 a day an unprecedented income. Cash grants are usually paid over two months.
The concept of funding very poor people without strings attached, rather than giving them services they may not want or need, was once unfamiliar, but in the past two years it has been favored by a group of emerging billionaire philanthropists from the tech and cryptocurrency space. To date, GiveDirectly's wealthy patrons include: philanthropist MacKenzie Scott (ex-wife of Amazon founder Jeff Bezos, who has donated $125 million to GiveDirectly since 2020), 30-year-old cryptocurrency billionaire Sam Bankman-Fried, and Tesla CEO Elon Musk, the world's richest man) and former Twitter CEO Jack Dorsey (billionaire). Thanks to the generosity of these billionaires, donations to GiveDirectly jumped from $42 million in 2019 to $303 million in 2020, an increase of more than 600%. This is estimated to make GiveDirectly the fastest-growing nonprofit in the world in 2020, with its operating budget growing nearly fivefold in one year.
In Mugombwa, Rwanda, a GiveDirectly recipient named Uwitonze shows off the phone she uses to receive cash transfers. Image credit: GIVEDIRECTLY
The key to GiveDirectly's philosophy is to give cash to the poor so that they can address their specific needs while maintaining their dignity. In an interview with Forbes, Michael Faye, president and co-founder of GiveDirectly, said that with other forms of assistance, "everyone gets the same thing, and the reality is that people and people's needs are not the same." I just got back from Malawi and you can go to a village there – one family decides to feed their newborn baby (with charity money) and another family decides to put a roof over their head (with charity money). Their needs are really different. ”
The non-profit organization works in seven African countries, including Kenya, Uganda, Rwanda, Liberia, Malawi, the Democratic Republic of the Congo and Morocco, all of which have large populations living in extreme poverty. Since many rural villagers don't have cell phones, GiveDirectly also offers them very simple phones, usually priced at $14, deducted from their cash grants. GiveDirectly said it has distributed more than $550 million in cash to 1.25 million poor families since 2009.
GiveDirectly is also working on smaller direct cash transfer projects outside of Africa. In Yemen, where civil war has led to a catastrophic humanitarian crisis and severe famine, GiveDirectly is raising funds to launch a cash transfer program for at least 4,200 families starting in August. In Kenya, the nonprofit is also conducting a universal basic income (UBI) trial to provide monthly grants to recipients for five years. In the United States, GiveDirectly began giving charitable donations to Texans affected by Hurricane Harvey in 2017. Now, it's running the Universal Basic Income Program in Georgia (paying $850 a month for 650 women over two years) and was selected earlier this year by the federal government to manage the Chicago Basic Income Pilot Program funded by government grants. Last month, the company began giving $500 a month to 5,000 low-income Chicagoans.
The surge in GiveDirectly's donations is largely related to the organization's response to the COVID-19 pandemic. During the pandemic, unconditional cash transfer programs have evolved from a relatively unknown policy intervention to a reality. More than 200 governments around the world, including the United States, have implemented cash transfer programs in response to the outbreak. This, Fay said, legitimizes cash transfers in a way that has never been done before. In April 2020, GiveDirectly launched the "100+ Project", a COVID-19 stimulus package funded by private donations, and funds began to roll in. By the end of the program in October 2021, GiveDirectly had donated $200 million, distributing $1,000 to nearly 200,000 families in the United States. In addition, another $142 million was spent on cash transfers, targeting people in Kenya, Malawi, Liberia and Rwanda who have lost their income due to the COVID-19 pandemic.
"I think COVID-19 has forced each of us to ask ourselves, what do you want? What do the people you want to help? And many people come to the conclusion that they want to make their own choices. They want money. Fay said.
More and more billionaires have the same idea. Scott has donated $125 million to the aid organization since 2020, the fourth largest donation she has made to a single organization to date. It's easy to understand that Scott would donate money to GiveDirectly, after all, she herself would make an unscheduled donation. Facebook co-founder Dustin Moskovitz describes himself as an "efficiency-oriented altruist" with a net worth of about $10.5 billion. Since 2012, he has donated $58 million to GiveDirectly through his own foundation, Good Ventures. Melanie Perkins and Cliff Obrecht, founders of graphic design startup Canva, also donated $10 million to GiveDirectly to launch a cash transfer pilot project in Malawi, to date GivenDirectly's largest project in the country, with the goal of being in 12 months. It provides $50 a month to more than 12,000 people and has since gradually expanded.
In the first year after the outbreak, billionaires like Mackenzie Scott and Twitter co-founder Jack Dorsey donated millions of dollars to GiveDirectly — scott donated $125 million. The organization later expanded its philanthropic programs to provide cash assistance to the poor in the United States.
At the height of the cryptocurrency boom in February 2021, Elon Musk donated $10,000 worth of Dogecoin to GiveDirectly, and then casually announced the donation on Twitter in his typical style: Ethereum founder Vitalik Buterin tweeted that he had made a donation to GiveDirectly, and Musk replied: "Just donated some too." A month later, Dorsey put his first tweet on auction and donated the entire proceeds to GiveDirectly, worth $2.8 million. It's another $10 million he donated to the agency's "100+ project" a year ago. Neither Musk nor Dorsey responded to Forbes' requests for comment about their donation to GiveDirectly.
Cryptocurrency mogul Bankman Fried, the founder of the FTX exchange, donated $500,000 to GiveDirectly through the FTX Foundation, as the latter fully fits Bankman Fried's philosophy of donating wealth as a "efficiency-focused altruist, a philosophy whose adherents use data and reasoning to try to maximize the benefits of philanthropy.
"It's one of the most effective ways to make people's lives better," Banksman-Fried said of GiveDirectly in an email.
In 2009, Faye founded GiveDirectly with his friends and economists Paul Niehaus, Rohit Wanchoo and Jeremy Shapiro. Both Fay and Wanchoo served as research analysts at the United Nations in 2002. After that, Faye went on to study economics at Harvard's graduate school, where he met Niehaus and Shapiro, both of whom had PhDs in economics.
After reading a study on the effectiveness of cash transfers, the friends wanted to find a charity that allowed anyone to donate money directly to the poor, but they couldn't find it, so they decided to open their own one. The advent of mobile payments — the ability to transfer money to people using their phones — made the idea feasible. "There was no end-to-end channel for donors to transfer money directly to people living in extreme poverty, although we were looking for that channel from the beginning," Fay said.
But it must be said that cash transfers were not invented by GiveDirectly. The Mexican and Brazilian governments piloted such trials as early as the 1990s, but the difference at the time was that only those who sent their children to schools and clinics for treatment received the money. Some Governments in Latin America, Asia and Africa have continued to replicate this model to this day, and many still retain certain conditions. GiveDirectly is also not the first humanitarian aid group to implement cash transfers without strings attached. Degan Ali, executive director of Adeso, a Nairobi-based NGO, launched an unconditional cash transfer program in Somalia in 2003. She initially recommended unconditional cash distribution because the food distributed by the United Nations World Food Programme (WFP) did not match the local culture. "The food that the World Food Programme gives to these people [the recipients] is fed to livestock," she said. They don't eat these foods because [the World Food Programme] gives them grain and corn, but they don't eat them. They eat rice and pasta. ”
In The Huye region of Rwanda, In April 2022, GiveDirectly President Michael Fay with GiveDirectly Uganda Chief Ivan Ntwali and former UK MP Rory Stewart at a mobile payment agency booth. Image credit: GIVEDIRECTLY
Ali added that Western humanitarian aid has an ugly and racist history because they like to ignore real needs on the ground and support solutions that don't actually work. Ultimately, she said, she wants to see citizens thrive on their own without relying on foreign organizations like GiveDirectly. "One day, you'll need to transition from unconditional transfers to finding ways to get people into long-term employment," she says.
GiveDirectly has a great appeal to efficiency-focused altruists. For efficiency-focused donors like Bankman Fried, GiveDirectly is transparent about the percentage of dollars that go directly to recipients — 94 percent of all its projects. Cash programs bypass government bureaucracy, and the administrative costs of unconditional direct money projects are often lower than other types of aid projects. GiveDirectly also has lower indirect costs than other international development charities such as Save the Children and World Vision. All in all, cash grants are less expensive to manage and have a greater use in Africa, such as $850 in the United States, which is only enough to pay monthly rent, but in Rwanda, that's enough for villagers like Este to buy a farm.
What more reasons are needed? All the research on direct cash transfers suggests that this is a good thing. And there's already a lot of research on this: GiveDirectly lists more than 300 in its website's searchable database.
Craig McIntosh, an economics professor at the University of California, San Diego who studies the impact of cash transfer programs, said: "There was once a view that the poor were irresponsible, that if given cash, the money would be wasted or squandered, and you need paternalistic policies to produce welfare benefits; Now this view has certainly been overturned. ”
A peer-reviewed study co-authored by McKintosh and published this month in the Journal of Development Economics found that GiveDirectly's unconditional cash transfer grants were more effective than usaid's job training program for unemployed youth in Rwanda. Other peer-reviewed studies have also shown that cash transfers can improve well-being and economic outcomes.
However, the findings of the study conducted in the United States are more complex. Earlier this year, researchers at the University of Michigan published two papers finding that GivenDirectly's cash transfer grant program during the pandemic had little or no impact on low-income recipients. Another harvard researcher published in June also found that the impact of $500 and $2,000 in cash transfers on recipients disappeared after 15 weeks. The researchers even speculate that getting some but not enough money to meet people's needs actually makes them feel worse because it makes their problems more prominent. Tyler Hall, GiveDirectly's director of communications, said the results mean researchers "have to look at how best to design Philanthropic programs in the United States to have the greatest impact." ”
"The sum of the studies we've seen so far on U.S. cash transfer grants still shows that it has a significant positive impact on the poor. Some recent ineffective or negative results in the United States do not mean that cash assistance is ineffective. He added.
But not enough research has been done on the long-term effects of unconditional cash transfers on poor areas. While there are several studies that document lasting results three to five years after a cash transfer, nothing else. "Obviously, these effects dissipate over time, but there's still some debate about how they dissipate completely." McKintosh said. "I think there are very few cases where a one-time cash transfer by itself can actually lift people out of poverty."
Fay acknowledges that unconditional cash grants are not a panacea for all of the world's poor, and that GivenDirectly does not directly address the structural problems that contribute to global poverty, a pervasive criticism of cash transfer grants.
"Cash transfers shouldn't be the only things people do," Fay said. "Cash transfers will not lead to the development of a COVID-19 vaccine. Cash transfers can't build roads or protect frontiers, and they can't do anything you want to do at the level of public government. So we need to recognize the limitations of cash grants. "Still, Faye has big ambitions for GiveDirectly." There is very little money needed to eradicate extreme poverty, and I think we should build channels for that, and I think we should do it. ”