US Charity Sends Cash Transfers Directly to Recipients by Mobile Phone

Sending shockwaves through the third sector, US charity GiveDirectly transfers unconditional cash from donors via mobile phone to some of the world's poorest families.

Based in California, the small non-profit uses mobile technology to transfer money directly from donors to some of the poorest people in east Africa.

“We're totally different from other charities,” says GiveDirectly co-founder Paul Niehaus, “We're the most stripped-down, simplified model of giving help to poor people.”

The charity started working in Kenya in 2011, expanding into Uganda in 2013. Business magazine Forbes has described its approach as “radical”, while the UK's own Economist has called it “as extraordinary as throwing money out of helicopters”.

For many decades, it has been thought that the poor need to have everything done for them and that only experts knew how to go about this. Recently, however, there has been a shift in thinking about how to use aid to help the world's poorest. Today, cash-transfer schemes are estimated to reach up to a billion people in developing countries.

A 2011 paper from the UK Department for International Development said a "quiet revolution" over the past 15 years has seen such initiatives move "from the margins of development policy towards the mainstream".

"People think this is radical and weird, but actually it is all the things we think of as conventional that haven't been tested," says Niehaus, who is uncomfortable about some of the attention GiveDirectly has received in this respect. Poor people, he says, know better than anyone what they need, and assumptions that they will waste the money they receive are not backed up by evidence.

In addition to giving people money directly, GiveDirect offers its donors lots of data regarding how the recipients used the cash to improve their situation, including details of how the money was spent on nutrition, healthcare and education.

GiveDirectly locates poor households (typically families that reside in mud huts with thatched roofs) and transfers money to their mobile phones by using a system called M-Pesa, which is run by Vodafone. According to Niehaus, many recipients use the cash to upgrade their home by installing a metal roof.

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