Aid Watch: How to help the poor have more money? Well, you could give it to them
In 2007, people in the Western Province of Zambia lost their homes, their livestock and their crops when heavier-than-normal flash floods swept through their area. USAID’s office of disaster assistance stepped in with $280,000 worth of with seeds and fertilizer, training for farmers, and emergency relief supplies.
Two NGOs working in Zambia, Oxfam GB and Concern Worldwide, tried a different approach: they handed out envelopes stuffed with cash—from $25 to $50 per month per affected family, with no strings attached. An evaluation found that common fears about cash transfers—that the cash infusion will cause inflation in the market, that the money will be squandered, or that men will take control of the money—were unrealized.
What did people buy with the money? The list includes maize, beans, salt, cooking oil, meat, vegetables, clothes and blankets, paraffin, transport, soap and body lotion, and lots of other mundane household items. They also loaned it to friends, used it to pay back debts, purchased health care, education and transport, and rebuilt their homes. Only a very small fraction of the money (less than .5%) was spent on “unproductive” items, like liquor for the men.
Unconditional cash transfer programs can be fast and cost effective. With no technical experts’ salaries to pay, and no trans-Atlantic shipping costs for US-produced food aid, more of the cash can go straight to the recipients (in the case of the Concern Worldwide project 27% was spent on program administration, while 73% was distributed in the cash transfers.)
Cash transfers also acknowledge that poor people are capable of making good economic decisions without the help of outside experts armed with needs assessment checklists. ...
Two NGOs working in Zambia, Oxfam GB and Concern Worldwide, tried a different approach: they handed out envelopes stuffed with cash—from $25 to $50 per month per affected family, with no strings attached. An evaluation found that common fears about cash transfers—that the cash infusion will cause inflation in the market, that the money will be squandered, or that men will take control of the money—were unrealized.
What did people buy with the money? The list includes maize, beans, salt, cooking oil, meat, vegetables, clothes and blankets, paraffin, transport, soap and body lotion, and lots of other mundane household items. They also loaned it to friends, used it to pay back debts, purchased health care, education and transport, and rebuilt their homes. Only a very small fraction of the money (less than .5%) was spent on “unproductive” items, like liquor for the men.
Unconditional cash transfer programs can be fast and cost effective. With no technical experts’ salaries to pay, and no trans-Atlantic shipping costs for US-produced food aid, more of the cash can go straight to the recipients (in the case of the Concern Worldwide project 27% was spent on program administration, while 73% was distributed in the cash transfers.)
Cash transfers also acknowledge that poor people are capable of making good economic decisions without the help of outside experts armed with needs assessment checklists. ...
I don't know if this is the best approach or not, but I like the idea of cutting out the self-important NGO bureaucrats:)
Posted by: Ken | May 20, 2009 at 07:49 AM
John, We all want to help the poor. The story is great and inspiring. However one story does not prove the point.
I could tell you the story about how in 1980 I was hired by the census bureau to do work because the manager couldn't get the workers he was forced to hire off of welfare to work and he couldn't fire them. So they gave him more money to hire people who would.
I could go to downtown Atlanta and do a study of how homeless people who panhandle money spend it. You will find the save it to buy drugs and alcohol.
Studies have been done about how people who were poor and won lotteries faired. They for the most part lost it. They don't make good choices.
That is my point. What your study revealed is the character of the people in Zambia, not which form of aid is best. It is the ethics of the person, and their values that will determine how they spend money.
We in America have built an entire culture of people who due to no fault of their own have learned to manipulate the system to survive. Welfare enslaves people. Howevr, we can help people learn and live a better way of life.
Posted by: Joe Palmer | May 20, 2009 at 08:28 AM
Joe, I think your observations point out why three is no one-size-fits-all solution to poverty at a global level. Different contexts require different apporaches.
Posted by: Michael W. Kruse | May 20, 2009 at 03:21 PM