Google-Funded Study Finds Cash Beats Typical Development Aid
Traditional international aid programs typically offer some combination of clean water, livestock, textbooks, and nutritional supplements. A new study funded by Google.org and the US Agency for International Development asks whether the poor would benefit more if they were given cash and free to spend the money as they see fit.
A number of studies on unconditional cash transfers are underway, but the government agency’s involvement demonstrates a willingness to question whether the status quo is cost effective, says Michael Faye, cofounder and director of the US-based nonprofit GiveDirectly, which distributed the mobile cash in 248 villages in Rwanda, where the study took place.
USAID’s involvement had been kept quiet to avoid controversy over using taxpayer funds to give money to people in Africa, reports the New York Times. Daniel Handel, the USAID official who instigated the trial, got the idea after hearing about GiveDirectly on NPR while stationed in Rwanda. Handel is now a senior adviser on aid effectiveness at USAID, a job that was created for him.
Researchers had two goals: compare an established program to combat childhood malnutrition with giving people the equivalent value ($117 per month) in cash, and compare the cash equivalent to a much larger sum, $532 per month. After a year, results released Thursday found that found that neither the established program nor its cash equivalent were able to improve child health, but the large cash transfers significantly improved people’s health and financial standing.
On the surface, that’s not surprising. Of course giving people more than four times as much money gives them access to better nutrition. But the study’s co-author Andrew Zeitlin, a professor from Georgetown, says the idea was to provide benchmarks for future programs; it’s not unusual for nutritional aid programs to cost $500 or even $800 per month, he says.
The traditional malnutrition program, called Gikuriro, was funded by USAID and administered by Catholic Relief Services. It combined help with water, sanitation, and hygiene with training on nutrition, some small livestock and seeds, and guidance on financial habits like saving. The study focused on households with children under the age of 5 and women of reproductive age, with an emphasis on the first 1,000 days of the child’s life.
The results indicate that Gikuriro helped recipients increase their savings and increased overall health knowledge and vaccination rates in villages, two of the program’s goals. However, neither the malnutrition program nor its cash equivalent led to a more diverse diet, or improved child health, as measured by height and weight. The larger cash transfer, on the other hand, led to improvements in food diversity, a drop in child mortality, an increase in household wealth, and improvements in child health measurements, as well as improvements in village vaccination rates. USAID did not immediately respond to request for comment.
The health gains from the $532 per month transfers were modest, says Zeitlin, considering that the children in the study were well below the World Health Organization’s guidelines for height and weight, with evidence of chronic malnutrition. “It is an improvement for sure and one to be celebrated and may be relatively good value for money compared to other programming in this space,” he says.
GiveDirectly says it is involved with five other studies testing how well cash transfers can achieve USAID’s goals, like youth empowerment, including experiments in Malawi, Liberia, the Democratic Republic of Congo, and another study comparing cash to a youth employment project in Rwanda. Facebook cofounder Dustin Moskovitz and his wife, Cari Tuna, have donated more than $50 million to GiveDirectly over the years through their foundation Good Ventures, $15 million of which is earmarked to support cash transfer studies. Google.org contributed $2 million to the study released Thursday, part of $6.4 million it has donated to GiveDirectly since 2012; the funding also supported cash transfer initiatives in Kenya and Uganda, as well as a grant to launch three studies on impact and design.
Silicon Valley philanthropists, who increasingly prefer to structure charitable donations like a business venture, have gravitated to unconditional cash programs, such as the idea of universal basic income. For them, the concept ticks all the right boxes. It’s a contrarian idea that questions conventional thinking about international aid, it has low overhead, it’s easily scalable using mobile phones, and it’s measurable.
Faye, the GiveDirectly cofounder, called the study, “The first ever A/B test for USAID.” Zeitlin, the Georgetown professor and co-author of the study, says this research aligns with Silicon Valley’s interest in disruptive ideas because it questions the effectiveness of traditional aid programs.
A recent cash transfer study showed early gains disappearing over time. Initially, a program in Uganda raised hopes after young adults who received cash were earning 38 percent more than a control group after four years. But after nine years, the control group was earning just as much as the beneficiaries who received cash, according to a new paper released in September.
Still, tracking the way beneficiaries spend the cash gives researchers a window into what recipients actually need, value, and believe is in their best interest—insights that could add nuance to future aid programs. For instance, the study found that cash recipients chose to pay down debt, rather than increasing savings, which may make more sense if they are dealing with high interest rates. “That is a great example of a donor preference that is probably not what beneficiaries would choose,” says Faye.