A startup that gives out money to the poor for nothing.

An unknown person appeared on the threshold of Teresa's house with a very interesting proposal. Teresa and her family will receive money in the amount of her annual income. And she will not have to return anything. She will not need to pay money, and they will be able to spend it somehow.

Teresa was perplexed. "We did not believe that someone would give us so much money without requiring them to work off." But the money was given.
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This story was repeated many times. An organization with money, GiveDirectly , is unknown to a wide range of individuals. They almost do not spend on marketing, their Facebook page has collected only 7,000 likes.

At the same time, GiveDirectly is one of the most effective organizations trying to eradicate poverty. Two of the company's board of directors stood at the origins of Facebook. In the spirit of Silicon Valley, the company's work is based on data processing, and is more transparent than other charity projects.


Teresa, her husband Odiyambo and their family.

How it works. GiveDirectly transfers about $ 1,000 to a poor family over the course of a year. The company does not give any rules or even advice on the use of this money. Since its launch in 2011, the company has already distributed $ 15 million in the communities of Kenya and Uganda. These are not the poorest countries in the region - they are at the center of the African Mobile Banking Revolution, which is crucial for GiveDirectly. The likelihood that a person from sub-Saharan Africa will have a mobile financial account is 60 times more likely than a European to have such an account.

After GiveDirectly select a village based on available statistics on poverty, they use a simple way to determine who gets the money: they choose families who live in thatched-roof houses and earthen floors. Such use of organic matter is an accurate sign of poverty. This is understandable for neighbors in the community and for the company itself.



Money is transferred electronically. Recipients receive SMS and take money from the nearest intermediary involved in mobile payments. If they belong to an endangered minority that does not use mobile phones, GiveDirectly buys their phone for some of the funds listed.

Such a distribution of money reduces costs and the likelihood of corruption. In addition, it is the basis of the company's plan to spread its work to millions of people around the world.

The distribution of money is carefully studied by researchers. There are dozens of studies based on the experience of 13 countries on four continents. The UK agency calls this practice "one of the most studied forms of developmental interventions."

A study from 2013 in Uganda claims that people who received such funds increased their annual income by 49% in two years, and by 41% in four years, compared with those who did not receive money.

How many people just spend the money on alcohol and smoke? The World Bank, which studied 19 studies last year, claims little. “Almost without exception, studies show that spending on alcohol and tobacco either does not change or decreases. This result is consistently observed around the world. "

Distributing money is not a panacea. As part of one of the programs in Libya, they distributed $ 200 each to those who did not have a home, or to those who earned money through drug trafficking and theft. Leading researcher Chris Blatman summed up her results as follows:

" Almost no one squandered money . Most of them lived, ate and dressed better in a few months. Unlike Ugandans, whose business grew, people in Libya returned to the same thing they started. $ 200 was not enough for them to become businessmen But it improved their lives for a period of time, for which this program was started. "



Already aware of several successful charity programs related to health and medicine. For example, there was a program to provide people with bednets to counteract the spread of malaria and various parasites.

In addition, money alone cannot always help in the absence of basic social services. Recipients of money could spend them on education and health, but if there are no good schools and clinics nearby, they will not be able to improve their health and education.

But still, the positive results of cash assistance can become permanent and spread widely. This may include improving nutrition, and better health of newborns, and reducing HIV infections. As a result, in 2011, according to a UK research firm, global assistance programs underwent a " quiet revolution ", in which in developing countries, between 750 million and 1 billion people received assistance.

GiveDirectly is the first non-profit organization dedicated exclusively to money transfers. It was founded by four MIT and Harvard graduates. They were inspired by the proliferation of mobile banking, which enables low-cost and secure money transfers. But in addition, in Cambridge, they became part of a movement that promoted a scientific study of charity events.

The leader of this movement is Esther Duflo. The Financial Times called her " one of the best economists in the world " - she went to work at MIT at 29, the winner of the MacArthur Foundation Prize, the laureate of the John Bates Clarke 2010 contest - the so-called. mini Nobel Prize. "She likes to repeat that charity programs can and should be tested comprehensively - then you can get amazing results that do not coincide with what people think about them. (For example, the fact that the poor people didn’t they rush to drink it.) In 2003, Daflo and his colleague Abhijit Banerjee founded the Poverty Action Lab at MIT, which studied many studies confirming the benefits of money distribution.

After many years of experimentation, Daflo and Banerji published the popular book Poor Economics ( Poor Economics ), which refutes the view that poor people do not understand finances. They argue that poor people have finer finances, because it is very important for them to calculate everything correctly. Poor people manage their own loans for themselves and their neighbors, calculate the benefits of loan offers, without relying on financial institutions, manage daily expenses and income based on non-permanent income. This explains why the distribution of money to the poor, and not the allocation of capital on their behalf, is so effective.

Government cash assistance programs require people to take action before they receive money — for example, vaccination. In this state. help is usually small and rare. GiveDirectly acts differently - it gives a large amount at a time for a shorter period of time. The goal is to give the amount that will be invested in long-term projects. In addition, GiveDirectly transfers are made without any conditions and requirements.

So how do people spend their $ 1000? "We saw a lot of things," said Paul Niehaus, co-founder of GiveDirectly. “What we understand is that everyone has their own needs.” Sometimes money goes to food, home improvement, health and education. "Sometimes something does not work - money is spent on unsuccessful investments, or a failed business." But each situation is unique. “One friend bought musical instruments and organized a band, released an album,” says Nyhaus. “Everything that you can imagine that can happen in our eventful and unpredictable life.”

But so far responsibility is not the standard in the world of financial assistance. Few organizations try to confirm or measure the success of their programs. More rarely, there are NPOs that resort to testing the effectiveness of programs using randomized controlled trials (RCTs), tests of the same type that pharmaceutical companies use to test drugs. These tests are expensive, complex and time consuming.

GiveDirectly leaders do not just encourage such research. In 2013, they publicly announced an upcoming RCT check before it began. Thus, they took responsibility for any result that the test would show.

GiveDirectly has gained particular popularity in Silicon Valley, where it sympathizes with people trying to change the world with data and technology. The company is supported by Google’s charitable division, Facebook co-founder Chris Hughes sits on the board of directors, and another co-founder, Dustin Moskowitz, donated $ 12 million through his foundation .

“For a private company, the main indicators are cost and customer satisfaction,” says Michael Fay, one of the co-founders. “This is not yet in our field of activity.” Therefore, they are trying to change the situation.

Charities usually focus on how much they spend on their activities. GiveDirectly professes a different approach: when a sponsor transfers one dollar, how much money does the poor person have in his hands? In the case of GiveDirectly, this is 90 cents , which is a very good result in the world of NGOs.

GiveDirectly also deals with performance tracking, and polls its customers. Was it easy for them to get their money? Did they ask for a bribe? And all poll results are published on the site.



The GiveDirectly website reflects the company's desire to base its work on data processing. Instead of heartbreaking photos of starving children, you will find statistics on the site from which it can be concluded whether the company's efforts are achieving the goals set. “This means that if we make a mistake somewhere, you will see it at the same time as us,” says Nyhaus. “We think this is a very powerful standard that we are trying to set.”

The site still has personal stories of recipients of money, but the company claims that they took these stories from random people. Niehaus speaks of this as an alternative approach to advertising a charitable organization - providing sponsors with a faithful reflection of the lives of poor people. “It's a great opportunity to exclude intermediaries from the process of delivering information about those in need to the Americans. We give them a more honest idea of ​​what life is like in Africa, without any censorship, and tell them what people do with the money they received. ”

Often these are not glossy stories of hope or tearful stories about poverty that can be found in charity advertising. In one interview, the recipient of the money, Kevin said that at first he thought that this program was being run by Satanists. “On the radio, we heard that in other places, those who worship the devil work in charity, give out money, and then demand to sacrifice your child, wife or yourself.” In another interview, the recipient Selina describes in detail her donated purchases: a wooden door, various furniture, and a chicken.

Teresa, who received the money and did not believe that it really was, also gave an interview to the creators of the site . She criticized the company's employees for not explaining too well what was happening, and was surprised that her family moved to this village just before the program from GiveDirectly was launched. “We were so lucky that we arrived the same year when the funds arrived,” she says.

“And we don’t just choose some stories that put us in a good light,” says Nyhaus. “We actually give a real sample of what happens if you give people money.”

In addition, GiveDirectly seeks to provide sponsors with a fair amount of accurate data. “Just as you can track a package sent by FedEx, you can track your donations — when they come to Kenya, when we find a recipient, we check it, when money goes to his bank — all these steps,” says Fay. “Until we force everyone to observe discipline and clearly reflect all stages of activity, increase transparency and efficiency, get rid of forgeries - our sector will not change.”

Digitizing the entire charity chain not only provides more data to sponsors, but also ensures more reliable work with beneficiaries. It is very difficult to keep track of the work of employees of a charitable organization when they are scattered over large and remote territories. In our case, all the work “in the field” is monitored, all actions are time and georeferenced. If an employee says that at a certain time he was in a certain house - this can be checked. Managers can monitor real-time data when workers go from house to house, entering into contracts with new recipients.



Last year there was the most serious violation of all: 2% of monthly payments were stolen. The manager for Uganda colluded with a local financial intermediary, and convinced the recipients that some of their money was withheld due to the rising cost of SIM cards. Some of them did not believe him and reported this by calling GiveDirectly support, but it turned out that the call center operator was also at one with the scammers. This became known when Nyhaus wrote about the incident in the corporate blog . “It was very important to set this precedent,” says Nyhaus, “and declare that we are transparent in everything, things are going well, or not.”

"We want to talk in detail about our failures, cases of fraud," adds Fay. - This is an integral part of work in this sector and we have been silent about such cases for too long - people pretend that they are not happening. Until we can honestly carry on a conversation and say that we have high costs or fraud, we cannot begin to correct these shortcomings. "

All this sounds like music for Eli Hussenfeld, a hedge fund analyst who has moved to the field of appraisal of charity programs that helped create GiveWell . She is involved in challenging work to identify the most effective charity companies. GiveWell usually selects 3-4 best companies every year. And GiveDirectly has been on this list for three years in a row.

“We are looking for companies in which all incidents become known, are covered, and serve as a lesson for the future,” says Hassenfeld. “If bad news goes public, that's good.” If you hear only the good, that is bad. Such an approach should be the standard, instead of striving for an unattainable ideal. ”

The results of the company are not long in coming. According to a report published by companies, over the past year, beneficiaries increased their income by 34%, assets by 52%, compared with those who did not receive assistance (cattle were assets, home improvements and savings). 36% less people go to bed hungry, and the number of days children spend without food has decreased by 42%. They spend more on education, health, food and social opportunities. There is no increase in spending on alcohol and tobacco.



The psychological impact of this infusion has also been studied. The lead researcher, Johannes Haushofer, a behavioral economist from Princeton, is studying the combination of poverty with psychological health. He wrote about the “psychological poverty trap”: poverty generates stress, anger and sadness, which are associated with loss of productivity and reduced interest in long-term investments such as health and education, which, in turn, leads to poverty - a vicious circle turns out.

The GiveDirectly test participants received several tests that should have assessed their overall condition and level of happiness. Researchers even took saliva samples for analysis of the content of the stress hormone cortisol - this was first done on such a scale in a similar study. A significant increase in psychological health was found. Recipients said they were happier, life began to bring more satisfaction and less stress. At the same time, it does not matter from what level of psychological health the recipient started - everyone felt the improvement. Cortisol levels were significantly lower (in some cases).

Since the recipients of money can spend it on everything, the assessment of spending and achievement becomes difficult. What is more important - improvements in health or education? “We keep talking about it,” said Fay. - That's a very difficult question. One person must send the children to school, another needs surgical help. ” In this regard, the assessment of changes in the level of psychological health helps. No matter how people spend money, they all as a result began to get more satisfaction from life.



Periodically GiveDirectly encounters resistance in its path. Many US residents are skeptical about giving money to poor people. The opinion of American sponsors is very different from the opinion of specialists in the development of poor regions. And not only they doubt. Last year, a Chinese financier offered to give $ 300 to homeless New Yorkers, the charity organization New York City Rescue Mission refused to do so . They were afraid that the money will go to drugs and alcohol.

Despite skepticism, GiveDirectly support is gradually increasing. In 2013, it amounted to $ 5.5 million, and this year it is expected to reach $ 40-50 million. Most come from young philanthropists working in the financial or technical sector.“These people are used to evaluating approaches and take care of clear evidence,” says Nyhaus. “They want to go to the charity’s website and read in detail about how, for example, it is fighting fraud.”

Some large charity organizations learn from this experience. One of the largest agencies, the World Food Program, manages about $ 4 billion a year. In 2009, $ 10 million was spent on money distribution programs and vouchers. By 2014, these figures rose to $ 1.25 billion, going to 87 programs in 56 countries.

GiveDirectly works with data to help improve similar programs that other companies are working on. “We ask questions like: what happens to the business structure after the transfer of money? How is the local government changing in this regard? How do schools change their budget? What happens to the prices of goods?

Also GiveDirectly continues experiments.to test your main model. The company is trying, in particular, to transfer money to women who are at the head of the family, in particular, to young women, or to try criteria different from the “thatched roof”. But the results of this do not change much. Experiments are being conducted in which recipients of money can control exactly when the money comes to them. Some want everything at once to pay for something expensive; others want to distribute payments so that their relatives do not pester them with requests for a loan. In one of the following experiments, the company will try to give advice on the best ways to spend money.

This does not mean that charity should completely switch to a simple distribution of money. There are other forms of assistance - the provision of free vaccines, medical services, road construction, training.

But those who promote such a form of charity, believe that the distribution of money should be a standard with which it will be possible to compare all other forms of charity. As Dustin Moskowitz said, transferring $ 5 million to GiveDirectly: “Do not ask whether you need to finance this project, or not. Ask if you need to finance the project, or you can simply distribute money to those in need. And now we have this opportunity. ”