Planet Money
3:24 am
Fri August 23, 2013

The Charity That Just Gives Money To Poor People

Originally published on Fri August 23, 2013 1:41 pm

For more of our reporting on this story, please see our recent column in the New York Times Magazine, and the latest episode of This American Life.

There's a charity called GiveDirectly that just gives money to poor people in Kenya. No strings attached. People can spend the money on whatever they want, and they never have to pay it back.

The idea behind this is straight out of Econ 101: Poor people know what they need, and if you give them money, they can buy it. But many people in the charity world are skeptical of what GiveDirectly is doing. They say people will waste the money or become dependent.

We recently traveled to Kenya to see how the program was going. We talked to a man named Bernard Omondi who used the money — $1,000, paid in two installments — to buy a used motorcycle. He uses it as a taxi, charging his neighbors to ferry them around. Before he had the motorcycle, he says, he sometimes worked as a day laborer, but often couldn't find any work at all.

We talked to several other people who started small businesses. One family bought a mill to grind corn for their neighbors; another started selling soap and cooking oil.

All of the people who got money from GiveDirectly lived in mud-walled houses with grass roofs. Many of them spent part of the money on metal roofs to replace the old, grass roofs. As it turns out, grass roofs are not only leaky, they're also oddly expensive: They have to be repaired several times a year, which requires buying a special kind of grass. Buying a metal roof costs more up front, but it's cheaper in the long run.

GiveDirectly uses a Kenyan mobile money system that makes it cheap and easy to send money to anyone with a cellphone. (The group gives cheap phones to people who don't already have them.) Mobile money is spreading to other countries, and the people who started GiveDirectly think giving cash could become one of the major ways people in richer countries help people in the developing world.

If giving cash does prove to work, it will raise an awkward question about some of the other charities out there: Maybe they'd do more good if they took the money they're spending and just gave it to the poor.

We'll have more on that question later today on All Things Considered.

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Here's an idea for how to help poor people in the developing world: skip donating food and clothing, forget digging wells and building schools - just give them the money. That's what an American charity organization called Give Directly is doing. This year, it's giving away $5 million to individuals in Africa. The money is not a loan. Recipients do not have to pay it back. They can spend it however they want, no strings attached. Jacob Goldstein and David Kestenbaum with our Planet Money team went to Kenya to see how it's going.

DAVID KESTENBAUM, BYLINE: The idea behind GiveDirectly is simple: poor people know what they need. If you give them money, they can buy it.

JACOB GOLDSTEIN, BYLINE: There is one sort of obvious downside, which is if you give people money and let them spend it on whatever they want, they can spend it on whatever they want.

CAROL BELLAMY: Cigarettes, alcohol, weapons.

KESTENBAUM: This is Carol Bellamy, former director of UNICEF.

BELLAMY: Just gambling it away - all the kinds of things you don't want to have happen with money that just you find in your pocket.

KESTENBAUM: Is it fair to say that most of your colleagues in the charity world would be skeptical of this idea?

BELLAMY: I think they are.

KESTENBAUM: That seems to be true. When we got to Kenya, we talked to charities there, and people told us giving money could create dependency or recipients would mean well but they'd spend it badly. And inevitably, someone brought up the whole give a man fish thing.

ALFRED OKAI ODUNGO: I would rather teach them how to fish than to fish for them.

KESTENBAUM: This is Alfred Okai Odungo(ph) with a charity called SANA. He also said this other thing. He said, maybe I'm wrong.

ODUNGO: I'm curious. I would want to see how it is working. If it proves to work, we would be very, very grateful.

KESTENBAUM: So, we hired an interpreter and we went to see how it was working.


GOLDSTEIN: Kenya has this amazing mobile banking system that lets you send money to anyone with a basic cell phone. So, sending money to people in Kenya is really easy. But actually going to talk to them, still really hard.


GOLDSTEIN: We drive down a main road, past a sign that say equator, then we turn down a series of dirt roads...


GOLDSTEIN: ...then we get out and walk down a path past some farm fields, and finally we find the guy who got the money on his phone.



GOLDSTEIN: This is Bernard Ohmondi.

KESTENBAUM: He's 25 years old. He's got two kids. He lives in small house with mud walls, a dirt floor and an old couch. There's no running water and no electricity. The way it happened, he says, is that one day a village elder came by with some people he'd never met who said they wanted to give him $1,000. Bernard was suspicious, but they gave him a cell phone and then one day a text message appeared on it.

OHMONDI: (Through Translator) It was sent very early in the morning. I was still in my bed. I jumped up. My wife asked me, Bernard, what is it? Then I told her the guys of GiveDirectly sent us the money. It's here.

KESTENBAUM: He stills has the message on his phone.

OHMONDI: (Through Translator) (Foreign language spoken)you have received 41,000 (Foreign language spoken).

KESTENBAUM: For Bernard, $1,000 was just this unimaginable sum of money.

GOLDSTEIN: It was more money than he'd ever had in his life. He only made a couple bucks a day.

KESTENBAUM: So, what did he do with the money? He bought one of these:


OHMONDI: (Through Translator) It's called Bajaj Boxer. He says it consumes lower fuel.

KESTENBAUM: Motorcycles are basically used as taxis around here. Bernard bought his so he could become a taxi driver. It beat his old job. He used to work as a laborer. Often he would spend all day carrying heavy stones from one place to another. Now, he says, his work is much steadier. His kids used to go hungry and they don't anymore.

GOLDSTEIN: People bought all kinds of things with the money. One family bought a little mill to grind corn for people in the village. Another started selling soap and cooking oil. Lots of people bought cows.

KESTENBAUM: And there was this one thing almost everyone spent money on: new roofs. They replaced their grass roofs with metal ones. And if a new roof sounds like something that's nice to have but isn't really going to help you be less poor, you've probably never had a grass roof.

CAROLYN ODIAMBO: I was just very happy. I was very happy about the money.

GOLDSTEIN: This is Carolyn Odiambo. She bought a metal roof and explained why everybody was doing it.

KESTENBAUM: She said grass roofs are terrible roofs. They leak and they need to be constantly maintained. You have to keep replacing the grass, and apparently you have to buy this special kind of grass.

ODIAMBO: The grass is very expensive because you have to buy grass every year, even three times a year. And it costs a lot.

KESTENBAUM: With the metal roof, she won't have to buy grass anymore. Every year, she'll have more money in her pocket. It's like he just boosted her income for years to come.

GOLDSTEIN: All these things people spend money on seemed like reasonable choices. In fact, they seemed so reasonable, we started to worry people were only telling us good news stories. So, we asked a different question: not what did you do with the money but what did your neighbors do?

KESTENBAUM: And then we started to hear different stories. Bernard told us, sure, I spent the money well but walk around and you'll see not everybody did.

OHMONDI: (Through Translator) Some of them are drunkards so they probably used it to buy alcohol. Others just spent the whole amount on food. They just ate and became fat and nothing has remained of it.

KESTENBAUM: Bernard didn't name anyone, but another guy in the village - his name is Julius Okumu-Okelo said, my neighbor right over here, look, he still has a thatched roof on his house. He wasted his money. He was so embarrassed he didn't even want to talk to you.

JULIUS OKUMU-OKELO: (Through Translator) He saw your vehicle and he knew that you were around. He decided to run away but they're nowhere now.

GOLDSTEIN: So, we went to the neighbor's house, and just like Julius said, he wasn't home. There were two little kids there who told us their parents had gone into town.

KESTENBAUM: It seemed like Julius might be right, so we asked GiveDirectly about the neighbor, and a local staffer managed to reach him on the phone the next day. He told her he wasn't hiding. He said his first wife had died and he wanted to get remarried. But in this part of Kenya, the groom traditionally has to pay the bride's family. So, apparently, that's what he spent the money on. He spent it on a dowry so he could get remarried.

GOLDSTEIN: That's why he still had a thatched roof.

KESTENBAUM: The folks who started GiveDirectly are convinced that giving cash is a good idea. They think in the future this could be one of the major ways richer companies help the poor, by just sending money to people's phones. It's simple, there's minimal overhead. You don't need experts or a large staff.

GOLDSTEIN: And if giving cash does work, it'll raise this awkward question about some of the other charities out there. Maybe they'd do more good if they just took the money they're spending and instead gave it to the poor.

KESTENBAUM: We'll have more about that later today on ALL THINGS CONSIDERED. I'm David Kestenbaum.

GOLDSTEIN: And I'm Jacob Goldstein. NPR News.


MONTAGNE: This is NPR News. Transcript provided by NPR, Copyright NPR.