Paul Niehaus, an assistant professor of economics at UC San Diego and a board member of GiveDirect, came up with the idea of transferring money to poor peopleâ€™s cell phones back in 2008. He was working with the Indian government to limit corruption and saw how the government there transferred money to peopleâ€™s phones. â€œI realized I could do that myself,â€ Niehaus told me. He told the gathering in San Francisco that most of the money thatâ€™s donated to help poor people goes to international development organizations, not poor people directly. GiveDirectlyâ€™s giving has had â€œbig impacts on nutrition, education, land and livestockâ€ and â€œhasnâ€™t been shown to increase how much people drink,â€ Niehaus emphasized. â€œA typical poor person is poor not because he is irresponsible, but because he was born in Africa.â€
GiveDirectly finds poor households â€“ typically people who live in mud huts with thatched roofs â€“ and uses a system called M-Pesa, run by Vodafone , to transfer money to their cell phones. Transaction fees eat up a mere 3 cents per donated dollar. Niehaus says plenty of recipients use the money to upgrade their homes by adding a metal roof.
Which is why I like to give money through Kiva.
Slate’sÂ Matthew Yglesias says much the same thing in Slate
Poverty is, fundamentally, a lack of money. So doesnâ€™t it make sense that simply delivering cash to poor people can be an effective strategy for alleviating it?
Transferring money to poor Americans has been a much bigger success than most of us realize. When it comes to the global poorâ€”the hundreds of millions of slum-dwellers and subsistence farmers who still populate the worldâ€”one might be more skeptical. Perhaps the problems facing these unfortunates are simply too profound and too complex to be addressed by anything other than complicated development schemes. Well, perhaps.
But thereâ€™s striking new evidence that helping the truly poor really is as simple as handing them money. Money with no strings attached not only directly raises the living standards of those who receive it, but it also increases hours worked and labor productivity, seemingly laying the groundwork for growth to come.