Cash-transfers - The Borgen Project

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Africa, Developing Countries, Global Poverty, Kenya

GiveDirectly’s Cash Transfer Project for Kenyans

In March 2020, GiveDirectly launched The Kenya Emergency Cash Fund to protect vulnerable Kenyan communities by sending recipients cash through mobile wallets. GiveDirectly is a nonprofit organization operating in East Africa that works to alleviate extreme poverty. Since its founding in 2009, GiveDirectly has given over $160 million to 170,000 families in the region, eventually earning a 100% rating from Charity Navigator. GiveDirectly’s cash transfer project is an initiative to help low-income Kenyans, especially during COVID-19.

Kenya Emergency Cash Fund

The Kenya Emergency Cash Fund, also known as the Kenya COVID-19 Fund, was formed in partnership with the Shikilia Initiative, which is a collaboration between the Kenyan private sector and nonprofit organizations. In coordination with GiveDirectly’s cash transfer project, Shikilia’s goal during the pandemic is to provide 200,000 people with monthly transfers of $30 for the next three months.

“We currently have enrolled 11,000 adults into the program and have disbursed around $300 to these recipients,” Director of Recipient Advocacy, Caroline Teti, told The Borgen Project. Teti joined GiveDirectly in 2016. She hopes to put an end to the devastating and disempowering nature of poverty across Africa through innovative projects such as GiveDirectly’s cash transfer project.

GiveDirectly has already launched settlements in Mathare, Kibera, Korogocho, Mukuru and Kawangware. This is crucial since resident families of these settlements live on $2 or less and are therefore expected to take the hardest economic hit as a result of the pandemic. For example, Teti reported that as a result of COVID-19, 95% of people in Mathare are eating less.

Recipients barely had savings before the pandemic. So, without GiveDirectly’s cash transfers made available to low-income communities by the Emergency Cash Fund, Teti believes that “families would have snuck back to the villages, increasing transmission risks to older people living in the countryside.”

Making Cash Transfers Efficient

In order to ensure that these cash transfers made to recipients are efficient, GiveDirectly is partnering with Shining Hope for Communities, a grassroots movement that catalyzes large-scale transformation in urban slums in Kenya.

Methods GiveDirectly and SHOFCO use to reach recipients more rapidly include using existing databases of low-income households, using rosters provided by local vetted NGO partners and using rosters of mobile money subscribers recruited through partner mobile network operators.

Project 100

Though GiveDirectly’s priority is getting cash to hard-hit families in extreme poverty in Kenya, it also organized Project 100 to raise funds for U.S. families impacted by COVID-19. For this project, GiveDirectly partnered with Propel, a company that helps recipients of the Supplemental Nutrition Assistance Program manage their benefits. The project aims to raise a total of $100 million for recipients.

The Road Ahead

According to the World Bank, poverty in Kenya may still remain above 20% by 2030 if it continues on a minimal growth path. More job opportunities for youth and infrastructure investments that improve transportation and service deliveries would be necessary to raise Kenya’s productivity.

Through GiveDirectly’s cash transfer project, an efficient and simple method of delivering cash, small-scale businesses will have the opportunity to grow, especially when food insecurity is no longer an obstacle. As Teti says, “We must rethink recipient empowerment and consider cash as a model for changing the lives of people living in poverty.”

– Joy Arkeh
Photo: Flickr

December 11, 2020

Global Poverty, Nigeria, Poverty Reduction

Combating Extreme Poverty: Nigeria to Grant Millions

Almost 50 percent of Nigeria’s 180 million inhabitants live in extreme poverty, which is defined as living on less than $1.90 a day. However, the nation, noted for having the world’s largest population of people living in extreme poverty, is set for some distinctive paydays. In a show of national redemption, 300,000 households of Nigeria’s poorest will be gifted $14 per month for six years.

Recuperated Funds Put to Good Use

The unconditional cash transfers will come from the more than $322 million in recuperated funds, money originally looted by former Nigerian military ruler Sani Abacha, that had been recovered by Swiss authorities. The cash remittance was set to begin in July 2018 and will be administered to 19 of 36 states in Nigeria.

The redistribution of embezzled funds is a part of The National Social Safety Net Program (NAASP), operated by The World Bank. NAASP is a project that administers cash transfers to Nigeria’s poor and vulnerable households. Of the reported $2.2 billion that Abacha stole from the Nigerian state treasury during his five-year reign that ended after a fatal heart in 1998, Switzerland has so far returned an estimated $1 billion to Nigeria over the last 10 years.

The World Bank currently administers 475 social safety net programs in 146 countries, serving over 1 billion people in developing countries. However, only 345 million people living in extreme poverty are covered by social safety nets. According to the World Bank, unconditional cash transfers occur in 118 total countries worldwide with school-feeding programs being the most common type of social safety net. Cash transferred to women is said to influence the reduction of sexual and domestic violence and curtail the spread of sexually transmitted diseases.

These cash transfers have had noted successes in alleviating social ills that accompany extreme poverty. A 2016 study by The Overseas Development Institute reports associations with improved health service use and school attendance. The Nigerian government will also provide public primary schools with free meals in an effort to provide food and education to the nation’s underserved population.

Alleviating Poverty Through Small Loans

Beginning in August 2018, the Nigerian government will issue the equivalent of $28 to petty traders through its Government Enterprise and Empowerment Program. The collateral-free loan initiative called Trader Moni aims to reach 2 million recipients by the end of 2018. Three states, Abia, Kano and Lagos will be Nigeria’s first beneficiaries. The state of Lagos will lead the way in August with thousands of loan recipients across five markets.

The Trader Moni loan stipulates that beneficiaries are eligible for additional loans between $42 and $138 providing that the initial $28 is paid back within the original six-month term. There are several requirements for the Trader Moni loan—the applicant must be a Nigerian citizen, 18 years old or above, a business owner or trader and be a member of a market cooperative union. Furthermore, applicants must have valid identification, a bank verification number and valid phone number registered with a service provider.

Supporting Micro, Small and Medium Enterprises

In addition to Trader Moni, a new government initiative for Nigerian business growth is underway. Vice President Yemi Osinbajo announced that the government will provide Micro, Small and Medium Enterprises (MSME) with a credit facility between $5,567 and $27,837. Osinbajo established the MSME Clinic in 2017 as a means to promote economic growth in Nigeria.

Partnering with The Central Bank of Nigeria and commercial banks, MSME loans have terms of five to seven years, an interest rate of 5 percent and require little to zero collateral. The Nigerian government also plans to provide MSMEs access to cluster-style facilities. The facilities are said to have affordable usage fees.

Cash transfers, though a short-term solution, accessible loans, and economic diversification are tools for extreme poverty alleviation and, to some extent, maintain President Buhari’s mission of reducing poverty through diminishing unemployment rates and supporting small and medium-sized businesses in Nigeria.

– Thomas Benjamin
Photo: Flickr

October 29, 2018

Global Poverty, Hunger, Poverty Reduction

How to Eradicate Extreme Poverty and Hunger

Poverty is like a cancer for society — it is debilitating and does not have a cure-all solution. People in extreme poverty live on less than $1.90 a day and face poverty traps due to factors such as geographic location, malnutrition, effort required to meet daily needs, lack of education and poor governance. With so many ways for people to become poor, it’s not surprising that different regions need to focus on different issues when determining how to eradicate extreme poverty and hunger.

Poverty Eradication Across the Globe

According to the 2017 World Bank Annual Report, Europe and Central Asia focused 41 percent of the $5.3 billion they borrowed from the International Bank for Reconstruction and Development as well as the International Development Association on energy and extractives but only two percent on education.

In contrast, South Asia concentrated 14 percent of the $6.1 billion they borrowed on energy and extractives, and 12 percent on education. Despite such disparities between these two countries’ prioritization of their energy and education sectors, both areas took action to build resilience to climate change, invest in human capital and improve infrastructure.

Benefits of Migration

For poor households trapped by low-productivity and in oftentimes remote, rural locations, migration could be a viable solution to increasing their standard of living. Such families may not be willing to migrate because it would put their sources of subsistence at risk. However, there are large potential gains from migrating to a highly productive country like the U.S.

According to a study by Clemens, Montenegro and Pritchett in 2016, the annual gain from working in a high-productivity environment is more than four times the total lifetime value of the most successful anti-poverty program.

Cash Transfer Solutions

On the policy side, well-targeted and structured cash transfers have been an increasingly popular tool for alleviating poverty in low-income countries. Cash transfers not only provide safety nets by raising the incomes of the poor, but they also help them escape from ‘psychological poverty traps.’

Contrary to the common concern that welfare programs can discourage work, a study done by Banerjee et al. in 2016 found no systematic evidence that cash transfer programs affect the overall number of hours worked nor the propensity to work among the men and women in the seven programs carried out in the Honduras, Indonesia, Morocco, Mexico (which had two programs), Nicaragua and the Philippines.

There are also solutions that require the consideration of measuring poverty based on other factors besides income and consumption. One example would be the offshoring of low-skilled jobs. While these jobs do provide a steady source of income, they are often also unpleasant, risky and may lead to adverse health effects. So, although these jobs can provide a short-term safety net, they are not a long-term solution to poverty.

Small Changes, Big Outcomes

Specific strategy government programs that have lasting effects countering poverty involve multifaceted household-level interventions. In one study by Banerjee et al., implementation of an anti-poverty program at the household level in India, Ethiopia and Pakistan (as well as both the village and household level in Ghana, Honduras and Peru) led to at least a year’s worth of lasting impact after the short-term intervention of the program.

Statistically significant impacts were made in the areas of consumption, food security, productive and household assets, financial inclusion, time use, income and revenues, physical health, mental health, political involvement and women’s empowerment. The intervention consisted of six elements: a productive asset grant, temporary cash consumption support, technical skills training, high frequency home visits, a savings program and health education and services.

Pros and Cons of Policy Change

On the other hand, governments also need to be careful when deciding on policies that involve low-income countries. Bill Clinton admitted in 2010 that his policy to dump American tariff-free rice in Haiti was a mistake. By forcing Haiti to drop tariffs on imported subsidized U.S. rice, the damage done to rice farming severely hindered Haiti’s ability to be self-sufficient.

In response to the incident, Oxfam recommended that food aid should be bought in local markets inside the country receiving aid.

Oxfam also said the Haitian government should decentralise services away from the capital, make sure farmers have credit access and improve their land tenure system where farmers could be cheated by judges able to transfer land into the hands of ‘whoever offers the biggest bribe.’

Eradicating Extreme Poverty and Hunger

The same goes for humanitarian organizations in deciding what kinds of resources and assistance to provide. To answer the question of how to eradicate extreme poverty and hunger, these organizations need to first determine what consequences their intervention would lead to. By looking for methods to complement local capacities to combat poverty, humanitarians can prevent their efforts from displacing local businesses.

A great example is The Hunger Project — a global nonprofit organization dedicated to ending world hunger. With programs throughout Africa, South Asia and Latin America, this organization empowers women and men in rural villages to sustainably overcome hunger and poverty. Members of the community accomplish this feat by mobilizing and fostering effective partnerships to engage local government.

In conclusion, there are many factors to consider in different parts of the world when looking at how to eradicate extreme poverty and hunger. Auspicious solutions to poverty traps include migration, conditional cash transfers and multifaceted household-level programs. On the side of humanitarian organizations and the government, much deliberation is essential to providing goods, services and policies that complement and protect rather than displace local needs and markets.

– Connie Loo
Photo: Flickr

June 5, 2018

Aid, Banks, Development, Global Poverty

Highlighting the Benefits of Cash Transfers

Cash transfers are one of the most thoroughly evaluated types of humanitarian aid that have been shown to effectively reach individuals and families in developing countries and can be provided with accountability. This form of aid has proven effective in reducing suffering by increasing limited household budgets and providing for basic needs.

According to a report by the Center for Global Development (CGD), cash transfers may come in the form of “an envelope of cash, a plastic card, or an electronic money transfer to a mobile phone, with which [recipients] can buy food, pay rent and purchase what they need locally.”

This report also suggests that these transfers should be complemented by services such as immunization and sanitation, where cash transfers may not be sufficient.

Other benefits through transfers include the transparency provided. They allow precise measurement of how much aid is arriving to the desired target population.

Receivers are granted the benefit of being able to choose what the aid is spent on. This decision making process further empowers communities and allows them to receive what they really need.

Despite the benefits, the CGD states that cash transfers are still often overlooked in favor of other forms of assistance. Today, cash payments make up only six percent of aid. Evidence from global crises, in Ethiopia, for instance, has proven that “cash was more effective than food aid by 25-30 percent,” says the CGD.

There are also challenges in the distribution of cash transfers. According to the World Bank, one challenge is ensuring that cash directly reaches needy recipients, avoiding corrupt processes and opportunistic elites.

Overall, cash transfers are practical. They can also reduce administration and operating costs. Respected nonprofits such as Give Well assert that unconditional cash transfers help the poor begin to create a better life on their own terms.

Giving the impoverished the freedom to utilize cash payments means they have the ability to meet individual needs and accelerate progress in their developing countries.

– Mayra Vega

Sources: Center For Global Development, World Bank, The New York Times
Photo: Flickr

March 29, 2016

Activism, Bangladesh, Development, Global Poverty

Dr. Bjorn Lomborg on Tackling Poverty in Bangladesh

The government of Bangladesh recently dedicated itself to pulling more than six million people out of extreme poverty by 2020. Dr. Bjorn Lomborg, the director of the Copenhagen Consensus Center wrote an article for the Daily Star, an independent newspaper in Bangladesh, on the most efficient ways to tackle poverty in the country.

Bjorn Lomborg is also the author of several books, including “How to Spend $75 Billion to Make the World a Better Place” and has been ranked one of the world’s 100 most influential people by Time magazine.

In this article, he writes that poverty is one of the most crucial challenges that Bangladesh faces. There is much work to do to solve the problem, with 20 million Bangladeshis considered extremely poor.

Bjorn Lomborg is a part of the Bangladesh Priorities project, which works with stakeholders across Bangladesh to find, analyze, rank and publicize the best solutions for the country. Two of the project’s economists, Munshi Sulaiman of BRAC International and Farzana Misha of Erasmus University Rotterdam, have analyzed three of the most important ways to end extreme poverty in Bangladesh.

The first way to tackle poverty is through cash transfers. Bjorn Lomborg writes that this method has proven to be popular in Kenya and Uganda. According to research, the most efficient method is providing no-condition transfers (no conditions on how the money can be used).

However, Bjorn Lomborg notes that the benefits of cash transfers diminish over time. “A one-time stipend for someone in extreme poverty may help for a little while, but the effect is fleeting.”

The second strategy is developing “livelihood programs.” These programs essentially give a livelihood boost to those living in poverty so that they can eventually thrive on their own. Programs include agronomic training and growing inputs. Lomborg says the return on spending is one-to-one in programs of this kind.

The third way out of poverty, the one Lomborg calls “the most promising,” is graduation programs. In these programs, ultra-poor participants first receive a small gift of food or cash, which allows them to meet basic needs and start saving.

Then participants receive an asset, such as a cow, as well as technical and financial education. They also receive healthcare support so they can weather emergencies and not be forced to sell all of their assets. Lastly, participants get social training, which Lomborg notes is an important factor that is overlooked in escaping poverty.

“The assistance in the form of money, assets, and financial and social support allows participants to ‘graduate’ out of extreme poverty over a set timeframe,” he says.

“Graduation programs would increase recipients’ incomes by at least one-third,” he continues. “And it’s likely that household benefits are somewhat understated because the analysis has only estimated the income benefit but not the improved nutrition status of children.”

Although this approach is expensive, Lomborg says the rewards are worth it.

– Kerri Whelan

Sources: The Daily Star, Copenhagen Consensus, Lomborg
Photo: Flickr

March 28, 2016

Aid, Extreme Poverty, Global Poverty

Controversy v. Proven Impact: Cash Transfers to the Poor

Controversy v. Proven Impact: Cash Transfers to the Poor
Giving cash directly to the poor has always been seen as mostly counterproductive. People are even reluctant to give to a person who is physically in front of them.

The general consensus is that poverty-centered foreign assistance programs are what will work best, which is why the U.S. doled out $24 billion on such programs in 2014. However, there has been significant evidence that cash transfers have a better effect on alleviating the poverty impact on the world’s poor.

There are two types of cash transfers: conditional and unconditional.

One conditional cash program gave one-time cash grants of $374 to young adults affected by the conflict in northern Uganda. The Ugandan youth were provided grants on the condition that they submitted a business plan.

Among those who received the cash transfer, there was a 41% income increase compared to a group that did not receive the grant money. Of this same group, 65% were more likely to have a job in skilled trade and women were particularly benefited. 84% of those in the program had higher incomes than those who were not.

According to a Poverty Action study done in 2013, people provided with an average amount of $513, and no other assistance, had a substantial increase in “income, assets, psychological well being, food consumption, and female empowerment among the extreme poor.”

Give Directly is one organization that has emerged as a favorite to donate money to, which they in turn, as the name implies, give directly to the poor. The organization received a $25 million grant this year from GoodVentures.

The nonprofit plans to use $16 to $19 million to actually give directly back to the poor and $6 million to $9 million to build their marketing and fundraising team. Backed by GiveWell and Google, it is hard to deny the claims backed by solid evidence on Give Directly’s website about the effect that direct cash transfers have had.

A quick summary on their main page states that their impact on those they have given cash to directly includes: a 34% increase in earnings, 52% increase in assets and 42% reduction in the number of days children go without food. They even claim that 0% of the money they give has been used to buy alcohol or tobacco.

According to Give Directly, the study from which these stats were obtained was “led by Johannes Haushofer (Princeton) and Jeremy Shapiro (Princeton), with a measurement conducted by Innovations for Poverty Action and funding from the National Institutes of Health. It was conducted in Rarieda, Kenya between 2011 and 2013.”

Although cash transfers cannot address the deeper root problems that cause extreme poverty, the evidence that is now available and that continues to emerge does not lie. Cash transfers to the poor are having significant positive impacts on fighting poverty, many individuals at a time.

– Drusilla Gibbs

Sources: Poverty-Action, Devex, Give Directly
Photo: Pixabay

October 15, 2015

Development, Sustainable Energy and Development, World Bank

Palestinian Development Long After the Cameras Leave

Caroline Anstey, from the Global Arab Network at the World Bank, identified how development is extremely challenging to achieve in places where conflict, war, or any kind of political instability is present. In particular, she shed light on Palestinian development. She expressed how there were little improvements, which marked the light at the end of the tunnel, such as students learning animation skills at an institute, roads being paved to facilitate transportation, and access to health and education. However, despite those, the 50% unemployment rate marks a hopeless and almost helpless Palestinian economy.

There has been some success, according to Anstey. “Since 2004, 11 countries have graduated from fragile status.” However, she emphasizes that it takes a certain sustainable commitment to end cycles of violence and develop a country, a commitment that remains “long after the cameras leave.” Each country is different, and so it might take different approaches to fulfill each country’s needs. In the Palestinian case, development work and projects can meet immediate needs and offer short-term solutions to help better prepare for the future. On a different note, it is crucial to recognize that no real substantial long-term development can happen in Palestine without a political solution.

On the bright side, Palestine is one of the countries that met the U.N. Millennium Goals because they halved the number of people living on less than almost 1 dollar a day. According to Anstey, the World Bank has worked directly with the Palestinian Authority on “social safety net reform[s]” where they reached out to the poorest Palestinians and offered them cash transfers. Just as well, social safety nets in Palestine have not been costly in relation to GDP and have been successful in reaching out to the poorest Palestinians, those who truly needed help and qualified.

Anstey realizes that in order to achieve tangible development results, solutions must be crafted specifically to meet each distinct circumstance, for again, not all countries have the same needs.

– Leen Abdallah
Source: Global Arab Network

May 31, 2013