With the high level of poverty in many African countries, many donors are prefering to give donations directly in the form of cash instead of providing food and material donations such as cattle. Research has shown that people know their needs and if they are given money, they can find solutions to their problems. Therefore, one of the most effective solutions to their problems is to provide them with money directly instead of channeling aid through corrupt governments.
» Ending poverty in all its forms is the first of the 17 goals of the 2030 Agenda for Sustainable Development.
» In 2019, 70 percent of the world’s poor live in Africa. This is up from 50 percent five years ago.
» The world’s poor are rural but not necessarily farmers.
» Only 20 million people are likely to escape extreme poverty in 2019.
In the past, there have been fears that money donations are likely to be misused through vices such as drug abuse. However, studies have shown the opposite. People know the solutions to their problems and are willing to invest and by providing them with cash, it will help them to venture into business. Material donations will benefit them only for a short while, but cash donations are a long term solution to their problems.
Why Money Donations?
It is easy to organise cash donations compared to material contributions. Besides, material donations have high expenses, such as transportation charges. For instance, it is cheaper to send money using a mobile phone worldwide than sending materials such as grains. Also, material donations are prone to loss due to theft, wastage and corruption by government officials. When one sends money to a particular country, the cash flows into the local economy and makes an impact immediately.
Even in most developed countries such as the Netherlands, the idea of unconditional cash relief is not yet clear. Unconditional cash relief worked in Brazil in 2003 through Bolsa Familia program during the reign of President Lula da Silva. This was a basic income program that helped many Brazilians out of poverty. Similar programs later followed this program in the Latin American and Asian countries with the support of the World Bank and other international donors.
Conditions for Conditional Cash Transfers
During the first programs, cash donations had conditions. For instance, some of the terms required children to be vaccinated or be taken to school. It is because there were fears that money would be misused by spending the money on stimulants or alcohol. Recent studies have shown that the opposite is true. Currently, people are willing to invest in other ventures other than only sending their children to school. They are investing in businesses which can support their daily needs.
What Is the Inspiration of Direct Giving?
A former diplomat and economist Jeroen de Lange came up with the idea of 100Weeks. He had worked in Rwanda in the Ministry of Foreign Affairs and the World Bank. He could observe how lots of millions of money were spent on projects without proper results. He saw it was better to give money directly to the poor for them to decide what they need. He got the inspiration for 100Weeks from cash transfers programs such as GiveDirectly.
I realized that if we are able to build a platform like Airbnb, connecting people in Europe, enabling them to crowdfund money and then just to give it directly to people in Africa, and to organize feedback about what they did with the money… hey! That would be good! – De Lange.
The program starts by first selecting poor women, an exercise that is supervised by a local organization. Once selected, they receive 8 Euros donations every week through their mobile phones. Young students from the local universities call these women and determine the effects of the program. Through an online platform, donors can see the effect of their donations.
Why A Hundred Weeks?
Research has shown that on average, people get out poverty in 100 weeks when provided with income. It is the same period that people get out of debts, have ample time to come up with a business ideas and put them into action. De Lange says that by just taking children to school and eating food, they will not make any progress in life.
Through direct donations, for example, GiveDirectly has helped over 125,000 households in Kenya, Rwanda and Uganda since 2013. The results have shown that people become mentally and physically stable once they receive the income. The results of the program are evident after nine months, when the investments start to generate income. It is important to train people since the temporary basic income is not a long term project. People can easily fall back into poverty in case their investment does not thrive or in case of a divorce.
Are Cash Donations the Absolute Solution?
Cash donations are essential instruments in eliminating poverty. However, they are not the complete solution. For instance, small basic incomes may not be enough for people to invest and meet their daily needs. Therefore, apart from cash donations, you need to guide and train people in financial literacy. There also remains the need for primary and general social welfare such as clean water and proper education. For instance, you cannot send your children to school if there are no teachers to teach them or the school does not have supplies.
Research has shown that people have higher chances of becoming entrepreneurs when they receive a steady income for a sufficient period of time. However, there must be an enabling business environment that encourages entrepreneurship for direct donations to work. There must also be a market for their products. After aggregating the results of the program, there has been a positive effect of direct donations to remote areas.