The challenge
Aid programs were costly to run and rarely let poor families choose what they needed most.
The case
Starting in 2011, the nonprofit GiveDirectly sent unconditional transfers of either $404 or $1,525 (adjusted for local prices), a large share of a year's consumption, to poor households in rural Kenya through the M-Pesa mobile money system. A randomized trial covered 1,440 households in 120 villages, comparing recipients with similar non-recipients. Recipients spent more on food and invested in durable assets such as metal roofs and livestock, and their psychological wellbeing improved. There was no increase in spending on alcohol or tobacco, a common worry about giving cash without conditions. The trial's authors found a significant increase of $302 PPP in recipients' asset holdings, against a control group mean of $495 PPP.
Why it worked
Poor households used the money for their own varied priorities, and digital payments kept costs low and diversion hard. Unconditional cash is now the benchmark other aid programs are judged against.
Sources
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