Fast Company: Giving And Relieving: How GiveDirectly Cuts Out The Middleman

June 1, 2013

In one of the many feature-less buildings that comprise Google’s sprawling Mountain View campus, Michael Faye and Paul Niehaus, two directors of the charity GiveDirectly, are being told to dream bigger. “Think of yourselves as a billion-dollar organization influencing the big funders like USAID and the World Bank,” Jacquelline Fuller, Google Giving’s director, tells the pair. “This is a way to transform how people think about aid. There is no reason why a lot of development dollars couldn’t be shifted to a model like this.”

The model in question is the unconditional cash transfer program that GiveDirectly has launched in Kenya: $1,000 given to qualifying households in two lump sums, no strings attached. No grand development agendas, no middlemen, no foreigners rolling up in lumbering four-wheel drives. In other words, no resemblance to the majority of Kenyan nongovernmental relief organizations, which a 2007 University of Nairobi Institute for Development Studies estimate says grew in number from 836 in 1997 to 4,099 in 2005. Just the cash, sent directly to the poor via mobile money service M-PESA for them to use however they see fit.

In 2011, the United Kingdom’s government aid agency, the Department for International Development, published a review indicating that the cash transfer model “directly reduces poverty, hunger, and inequality” and notes that in the past 15 years, a “quiet revolution” has seen the idea move from “the margins of development policy toward the mainstream.” This transformation has coincided with the rise of technology such as M-PESA, letting people across the globe link wallets in ways that previously were impossible. The collision of evidence and technology is behind the creation of GiveDirectly, which seeks to empower the world’s poorest while promoting a sea change in the development industry.

According to the Organization for Economic Co-operation and Development, an estimated $51 billion in official (read: government-to-government) development assistance went to Africa in 2011 alone. The NGO industry has blossomed alongside these funds–yet accountability has rarely kept pace. “The system rewards storytellers and brands, not the most effective organizations,” says Ken Stern, author of With Charity for All: Why Charities Are Failing and a Better Way to Give. “There is far too little money committed by donors and organizations into researching the effectiveness of what they are doing.”

It was this hunt for transparency that produced GiveDirectly. In 2008, Faye, Niehaus, and two other Harvard and MIT economists were surprised to learn that economics literature pointed to unconditional cash transfers as one of the most potent poverty fighters. But no organization existed to facilitate such transactions. Pooling funds from friends and family, they launched GiveDirectly. The charity selects recipients–most of whom live on 65 cents a day–based on their village’s per-capita income and whether their home has a thatched roof, seen as a near-certain poverty indicator. Kenyan contractors and GiveDirectly then vet the recipient, provide him or her with a SIM card if needed, and transfer the money.

Since 2011, GiveDirectly has enrolled 1,669 Kenyan households and completed 1,503 transfers of as little as $200. The results have been impressive: 33% fewer homes reported having children who went for whole days without food, and investment in land, farm supplies, livestock, and housing–including tin roofs–jumped by more than 100%. That performance, and the organization’s relentless data gathering, has helped GiveDirectly raise more than $5 million, including $130,000 from Facebook cofounder Chris Hughes and $2.4 million via Google’s inaugural Global Impact Awards, which support “organizations using technology and innovative approaches to tackle some of the world’s toughest human challenges.”

“Donors typically give to large international nonprofits, which use some funds for management and fundraising, and then work with partner organizations abroad to implement programs,” wrote Niehaus, an assistant professor at the University of California, San Diego, in GiveDirectly’s annual letter. “These partners have their own cost structures, which typically are not reported. Every organization that asks for money on behalf of the poor should make a clear and compelling case that they can do more good with it than the poor could do for themselves.”

In its own fundraising, GiveDirectly chooses to emphasize data. Yet in today’s charity landscape, it’s unclear whether statistics can supplant photos of a suffering child or an inspiring story of poverty overcome. “Donors respond to emotional stories,” Faye says. “We are trying to take a step back and focus on the product and the impact. The data is less sexy than the anecdote, but it is also largely right.”

Critics of the idea behind GiveDirectly argue that efficiency is not everything. In India, a push to replace government subsidies with direct cash transfers has met with public resistance and fears of both “massive social exclusion,” especially in rural areas, and misuse of aid that comes as cash rather than food. The latter concern is one of the reasons donors cite most often for their reluctance to fund direct grants to the poor, as opposed to high-touch aid interventions. According to Niehaus and Faye, one of the first questions asked by potential givers is, “Won’t people waste it on alcohol or cigarettes?”

GiveDirectly will keep harnessing its data to battle these assumptions as it grows–the organization is presently scouting other countries for expansion, including Tanzania and Uganda. If Faye and Niehaus are going to live up to Google’s lofty expectations and their own, it will be because they don’t waver from GiveDirectly’s data-oriented approach. As Chris Hughes, who also serves on the organization’s board, notes, “I don’t think unconditional cash transfers are a silver bullet, but they are a useful baseline. It is a cheap way to know that you are having an impact on families who are barely able to make it.” When it comes to big dreams, that’s not a bad place to start.
Market Values

GiveDirectly offers $1,000 to qualifying Kenyans. How far will that go? Brydie Hill of a charity that supports primary education across Kenya explains living costs.
This recipient in Koga village spent his $1,000 transfer on health care, school fees, food, and home goods.

Hill: The most popular items are ugali flour, a type of cornmeal, and mboga, green leafy vegetables. [See examples of prices, below.] There’s no real nutritional base there, but they fill you up. Rural populations don’t have the electricity needed to run a refrigerator, nor do they have ovens, so they need to
buy milk and bread daily. That can be a struggle.

Much of it is also used on health care–usually dealing with bronchial infections, malaria, typhoid, or diarrhea. There are clinics in most villages with a nurse and rotating doctor, but the community often doesn’t have confidence in them. Hospitals are at least 20 kilometers away, so people only go as a last resort.

Nicer food like rice or a cut of meat. They also save up for cell phones, which are around $12 for a flip phone and up to $70 for a smartphone. Practically speaking, families save up for pit toilets to prevent the spread of disease. A lot of the work we do is in designing and installing cheaper eco-toilets, which cost about $50, so users can compost their own waste.


Ugali flour: 2.2 lbs, $1.75
Beef: 2.2 lbs cut, $2.30
Bread: Loaf, 50 cents
Goat: Whole animal, $45
Tea: 1.1 lbs, $2.30
Mboga: One bag, $25 cents
Rice: 2.2 lbs, $3.50
Milk: 1 liter, 50 cents
Chicken: Whole animal, $4.70
Charcoal: 2.2 lbs, $9-$12