GiveDirectly – What’s our baseline?

I recently had the chance to catch up with Michael Faye, one of the co-founders of GiveDirectly.   I first wrote about GiveDirectly in December 2012 after meeting with co-founder Rohit Wanchoo and being so impressed both by the approach they are taking as and by how they were going about building the company: a core great idea, being smart about leveraging technology, have a big focus on transparency and accountability, and run the organization with four volunteer founders and extremely lean staff (they were just hiring their first employee).

I met them early enough that my blog post was one of the first published pieces about their work.  Since then GiveDirectly has justifiably captured a ton of attention, including receiving a major grants from Google and from Facebook co-founder Dustin Moskovitz and being covered in The Economist, on NPR, and in the New York Times.

GiveDirectly is a platform for giving unconditional cash transfers to the extreme poor in the developing world, primarily in Kenya.  Their target clients make about US$0.67 a day and they receive cash directly from GiveDirectly via mobile cash transfer.   A typical grant in Kenya of $1,000 is equivalent to two years’ income for a recipient.

The most intriguing part of the GiveDirectly story (and, naturally, the focus of all the press they’ve received so far) is whether giving cash directly to a poor person works.  Like most people, you probably have a gut reaction to the question of whether a typical recipient will spend the money productively or squander it.  Interestingly, the data show that, by and large, the money is spent productively: in a random selection of households in 63 villages receiving cash transfers, according to The Economist, “the number of children going without food for a day has fallen by over a third and livestock holdings have risen by half.”  Perhaps most intriguing, these one-time cash transfers appear to create both short- and long-term improvements in well-being.  That’s a big deal.   (the Economist has lots of great additional details on all of these data).

What’s interesting from a marketing and storytelling perspective is that the fact that cash transfers work isn’t new, it’s just new to the mainstream.  As Michael is quick to point out, more than $100 Billion is already being transferred by governments to poor people through both conditional and unconditional cash transfer programs around the world.  The biggest and most-studied cash transfer programs are the Bolsa Familia in Brazil (which is directly credited for 1/6th of the reduction in poverty in Brazil over the last decade, at a cost of just $12 per child – about 0.5% of GDP) and Oportunidades in Mexico.  These have been in place for more than a decade and have helped tens of millions of poor people.

What IS new about GiveDirectly, beyond the fact that the cash transfers are unconditional, is that they are creating a platform that makes the entire transaction – from funder to end recipient – cashless.  This creates huge potential efficiencies in a massive global money transfer system that is ripe for evolution, and if GiveDirectly can serve as a leverage point to begin to transform a $100 Billion industry, allowing more of the money that goes into these programs to end up, safely and conveniently, in the hands of end recipients, then they will have significant global impact.

It strikes me that there is yet another important leverage point for GiveDirectly that I don’t hear people talk about, and it’s around how to benchmark impact.  The typical benchmark, whether for a large-scale, rigorous randomized control trial or for simple observational analysis of an intervention, is a control group with “no intervention.”  Put another way, this means that when we study whether a $10 million program worked, our question often is: “was there a quantifiably discernible impact relative to a group that received no intervention?”  Put more simply: did our $10 million do more than nothing?

That’s a dispiritingly low bar.

Wouldn’t it make much more sense to demand that we show that our $10 million created more impact than we would have created if we had directly handed $10 million over to end customers?  To show that, for example, $10 million put into a seed company or a solar lighting company or a sanitation company created $100 million in value – in terms of savings or increases in productivity?    This thinking is what led Acumen to develop the Best Available Charitable Option (BACO) methodology, and it feels like it is high time that we all use this higher benchmark to assess our work.

Surely our goal must be that we can do better than, figuratively, dropping money out of a plane.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.