November 02, 2017

The power to make real choices

Joanna Macrae

At EVPA we know that trust is vital in shaping the relationship between investors and social purpose organisations. Building strong partnerships for impact relies on investors trusting the organisations they support and vice versa. Social purpose organisations also need to build trust with the people they aim to help.

We spoke with Joanna Macrae, Director of European Partnerships at GiveDirectly, about the role of trust and self-determination in social impact. GiveDirectly provides cash transfers to those living in extreme poverty, allowing recipients themselves (rather than aid agencies) to decide how best to invest in their own future.

How did GiveDirectly start?

GiveDirectly was founded in 2009 by a group of graduate students at Harvard and MIT who were looking for the best way to invest in global poverty eradication.

They started by looking at the evidence about what works in development practice (and what does not!).  They found very strong, experimental evidence that cash programmes work. The rise of digital payments, including mobile money systems, like M-PESA, meant that it was also possible to deliver cash cheaply and securely, including to communities living in remote rural areas.   

What do you do? How do you choose your recipients?

We aim to reshape international giving.

We are the only NGO specialising in delivering cash to those living in extreme poverty. Basically, we provide a platform to allow donors to make direct cash transfers to the poor.

We typically provide large economic grants of up $1000 to very poor households, enabling them to overcome savings and credit constraints, and so invest in their livelihods and to meet their most pressing needs.

We start by identifying the poorest households. We draw on data from governments and the World Bank which help us to identify particularly poor areas of the countries where we work (Kenya, Rwanda and Uganda).

Our field teams then visit different villages within those areas. We conduct a census of the whole village, speaking to the head of each household. We collect some basic data and build a profile of the household. We take a photo of the recipient next to their house, so that we are able to link that individual to a certain household and a specific location.  Then we upload that data and apply the relevant targeting criteria. For example, in Kenya, one of the things we look at his housing construction.  Those living in houses with a thatched roof (rather than one made with metal sheets), are likely to be particularly poor. So we target those households.

When we register families we  give them a mobile phone, if they don’t have one already, and make sure that they know how to access and use mobile money systems.  

Then we make the transfer - usually in two tranches. The first one is a test payment, to make sure that all the systems work.  After each payment, we phone the recipient to check that they’ve received it safely and not had any problems.  We also ask them how they’ve used the money they receive: many choose to share their stories through a GDLive, a special feature on our website.

How do you measure your impact?

We are very committed to measuring the impact of our work.  We published the results of our first randomised controlled trial in 2013, and we have a further seven experimental studies under way.  

Our study in Kenya confirmed the broader evidence base: cash works.  We have gold standard evidence that recipients significantly increased their assets and earnings as a result of the programme. Recipients are also less stressed, which is really important.  Levels of domestic violence reduce and it’s obviously better for kids that their parents are less anxious and worried.

The evidence that is coming out of our work is that when we trust the poor themselves to decide how to use aid, they make smart decisions. Traditionally, charities tend to do things for the poor - to provide them with goods and services.  Underpinning this approach is the assumption that recipients lack either the skills to use money well, or that they cannot be trusted to do the right thing.  

Compared to other social purpose organisations active in the field, what do you think are your main characteristics of being successful?

I think what makes us successful is that the core of our mission is to really connect donors very directly with those living in extreme poverty.

Donors trust us to make sure that their money reaches those living in poverty quickly and safely. We take that task very seriously. We use digital technology to track how money is moving through the system, and to monitor our delivery costs to the cent.  

We have robust field processes, designed to maximise efficiency and minimise the risk of fraud, theft and waste. That means that we can account to our donors as to what percentage of their contribution reaches recipients: on average 90% is put directly into the hands of the very poor.

Can you share with us a story that had an impact on you?

We visited the house of the gentleman in Western Kenya who had received a grant two years ago. He described his situation when GiveDirectly first came to his village.  him. He was depressed, seeing little future for himself and his family, and tended to drink too much.  As a result, his wife had left him, taking their children.

My immediate reaction was - should we have trusted someone like him with donor money? But he proved me wrong.  He had used the grant provided through GiveDirectly to transform his life, he saw an opportunity for change. He used the transfer to make a number of investments. He did bought a motorbike so he could set up his own delivery business. He also invested in some cows, as well as another small business with a friend. Combined, these allowed him to generate a much higher income. But perhaps the most important thing about this story is that the grant provided an opportunity to rebuild his self-respect and gave him hope. In the end, his wife and kids came back to him. Now they are all living together and he is not drinking.

This is such an amazing story. I think he felt for the first time he felt that he had the power to make real choices about the future and he seized that chance.

For me, it was a lesson as to how careful we need to be when judging who we should and shouldn’t trust when investing aid money.  

What are the challenges you have been facing?

I think the biggest challenge is in changing people’s minds that poor people cash can deliver good development outcomes.  Despite the sizeable evidence that cash works, people still think that they will always get better results if they pay aid agencies to do things for those living in extreme poverty.

Sometimes, of course they will. But I think that cash should really be used as the benchmark against which we measure other development interventions.   We should ask ourselves “by investing in this project, am I sure that I will get at least as much impact as I would if I just gave poor people cash to invest themselves?”  That means having good evidence about the cost and impact of different approaches.      

I do see signs of change. In 2016, the UN Secretary-General argued that cash should be the default approach to aid in emergencies, and many major donors are now investing more in cash. I think too that there is a new generation of very thoughtful donors who are more demanding in terms of wanting to see evidence of impact and to be reassured that charities are operating efficiently.

How would you define the success for Give Directly in 5/10 years’ time?

We have grown fast, becoming a $50 million organisation in just six years. We would like to maintain that growth trajectory, so that we can reach more people and also exert a bigger influence on aid sector.

Five years from now, we would like all donors - private and governmental - to be using cash more routinely. At the moment less that 2% of official aid is delivered through cash. We think that if this increased, so more people would be lifted out of poverty more quickly and at lower cost.  

More details about GiveDirectly.

Kindly supported by

European Commission

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