By Jen Gordon, Social Investment and Innovation Advisor
The idea is very straightforward. Give people who are living in extreme poverty unrestricted cash to improve their lives in whatever way they see fit, because they know best what they need.
At Comic Relief we’re interested in exploring the most effective ways of using our funds to create maximum impact in people’s lives, and through our Red Shed fund we have been able to understand the potential of unrestricted cash transfers through working with GiveDirectly.
We have supported two projects of GiveDirectly’s, one in Uganda working with refugees from Rwanda and the Democratic Republic of Congo, as well as host communities, and a Universal Basic Income pilot project in Kenya. Both programmes, using mobile money, are producing encouraging and fascinating results, and there is no doubt that the cash transfers are changing lives in ways that other non-cash services alone cannot.
I’ve had the privilege of visiting both of these cash transfer projects in the past 12 months and both times I have come away with renewed passion and excitement for it as a tool to help people living really tough lives. In this post I’ll talk about what I’ve learnt from speaking to cash recipients, community leaders and the project workers involved in the programmes.
What do people spend the money on?
Spending obviously varies from person to person but in the Uganda pilot the top three ways people invested, accounting for 62.9% of all spend were; home improvements (28.3%), producing crops for subsistence and to sell (20.8%) and investing in setting up and sustaining businesses (13.8%). Saving or not spending the money was fourth with 9.4%.
Dignity and Choice
When I met with people receiving cash in both countries, the overriding message is that through cash transfers they feel they have been given a choice. A choice to spend their money according to their priorities and ambitions, not the pre-defined options of an aid agency, such as handouts or restricted cash that must be spent on specific items.
One family in the Kyaka II refugee camp in Uganda chose to prioritise paying school fees for their children with the transfers, another chose to bulk buy maize and sugar for them to consume but also sell, another used funds to buy a motorcycle so the father could be a Boda Boda (motorcycle taxi) driver and earn an income.
In Siaya County, Kenya, the village elder said that the community is far more peaceful since people started receiving the transfers, there are fewer conflicts and incidents of petty theft. There I saw more investment in homes; cement walls, steel roofs and solar panels. Many told me about the dignity they feel the transfers have given them, and the power they have felt, for the first time in a long time, to make their own decisions about their future.
Photo: Milka A
A number of individuals and families I’ve met have chosen to spend their funds in very creative ways, often strategically investing small chunks in different community savings and loans groups, having carefully calculated their plans according to their household needs and budget. One family I met in Siaya split their funds between meeting their immediate needs, three community savings groups and one community loan group which charged a small amount of interest to borrowers, meaning that by storing that money away for say 9 months, they could get more back than they put in.
What happens when the cash stops?
A common criticism of cash transfer programmes is that while they serve people’s immediate needs, they are not seen as sustainable in the long term. What happens when the cash stops? While I understand this point of view, research has shown that recipients often save or invest a large proportion of cash transfers, generating increases in future income. When I have met recipients, they are very cognisant of the fact the money is going to stop and are planning accordingly.
Also, I wonder if cash transfer programmes are held to a higher standard with regards to sustainability, more so than non-cash projects, and why is that?
Photo: Elijah O
What’s the future?
I think it would be interesting for NGOs and donors to explore the additionality of cash transfers alongside other services to maximise the impact for both recipients and NGOs. Would, for example, a water and sanitation project have more impact in a community if there was also some form of cash transfer programme in place whereby communities would have money available to invest in sustainable sanitary solutions?
I believe the potential for cash transfers as a transparent and effective tool for change is huge, and I’m excited to see how projects like GiveDirectly’s, can continue to provide a solid evidence base for them as a tool to reduce poverty and improve lives globally.
To find out more about the work of GiveDirectly visit their website