Universal Basic Income

The nonprofit GiveDirectly has initiated a new cash transfer experiment that will provide at least 6,000 Kenyans with a test of universal basic income for 10 to 15 years.

According to the founders of this initiative, “…experimental tests show that the poor don’t stop trying when they are given money.” Instead, cash-based development initiatives result in people feeding their families, sending their children to school and investing in businesses.

Research also reveals that people prefer cash transfers over social programs because it provides them with more flexibility, freedom and dignity. In a study conducted in Bihar, India, 80 percent of the poor were willing to sell food vouchers for cash, with many offering discounts of up to 75 percent.

Considering this evidence, according to a Slate article, U.N. Secretary-General Ban Ki-moon has argued that “cashed-based programming should be the preferred and default method of support.”

According to Vox, basic income or universal basic income is defined as a regular payment to a group of people just for being alive. This cash transfer experiment by GiveDirectly is perhaps the first truly universal basic income program recorded in history, because unlike previous policies, it provides payment for whole villages over long periods of time.

For this project, GiveDirectly will randomly select dozens of villages in Kenya and provide every resident with a payment of between $0.70 and $1.10 for least 10 years. While $240 and $400 per year is extremely low by U.S. standards, it is equivalent or more than what the recipients ordinarily make.

World-leading academic researchers, including Abhijit Banerjee of MIT, will rigorously test this new system. The experiment will cost around $30 million, of which 90 percent will go directly to extremely poor households and the rest going towards having the money delivered.

The idea of universal basic income is currently being debated around the globe, with support from across the political landscape and pilot programs being considered by Finland and Canada.

To get the experiment started, GiveDirectly’s co-founders Michael Faye and Paul Niehaus are using $10 million of their own funds to match the first $10 million donated by others.

“At worst that money will shift the life trajectories of thousands of low-income households,” writes Faye and Niehaus in a Slate article. “At best, it will change how the world thinks about ending poverty.”

Kerri Whelan


Why not just give the poor cash?  Rather than funnel the funds through a development organization, why not give it directly to the poor themselves?  GiveDirectly, a U.S. based nonprofit operating in Kenya, asked just that question and couldn’t come up with a reason why not.  Solid evidence shows that rural and poor individuals use the money wisely.  Many of the world’s poor are not irresponsible; they were born in circumstances that complicated their economic condition.  Thus evidence shows when they are given money they use it in positive ways.

Google and Facebook reviewed the research backing GiveDirectly and decided the idea was worth taking a second look.  Facebook co-founder Chris Hughes and a host of venture capitalists and tech entrepreneurs gathered over wine and conversation for an introduction to GiveDirectly.  Hughes was frustrated with nonprofits after a venture of his failed to gain traction and found GiveDirectly excited him and got him interested again in humanitarian issues.  Rather than funding major projects, GiveDirectly focuses on giving donated funds directly to poor individuals.

Research shows it can be effective and Hughes joined the board in addition to providing monetary support for the organization. Partnering with Hughes was Jacquelline Fuller, Director of Giving at Google. After an initial air of skepticism among Google superiors, Fuller was able to convince them that Google should support GiveDirectly.  Hard data on how recipients used the cash to improve nutrition, health, and their children’s education worked to convince Google superiors of the positive effects GiveDirectly is having in Kenya. Google donated $2.5 million to the cause.

The idea for GiveDirectly came from Paul Niehaus, an assistant professor of economics at UC San Diego, who originally came up with the idea of transferring money to individual’s cell phones. In 2008, he was working with the government to reduce corruption and saw transferring money directly to cell phones as one way to do that. GiveDirectly has significant impacts on nutrition, education, land, and livestock.

The organization finds poor households, typically people who live in mud huts with thatched roofs, and transfer money to their phones using a system called M-Pesa. The transaction costs a mere 3 cents per donated dollar. Many of the recipients use the money to upgrade to metal roofs. GiveDirectly admits that giving cash is not the solution for ending poverty, but it does provide an ability to meet immediate needs and ensure money gets to the people who need it the most.

– Amanda Kloeppel

Source: Forbes