Donors interested in microfinance shouldn’t miss the recent posts by Philanthropy Action. Note that Philanthropy Action is co-edited by Timothy Ogden, a member of our Board of Directors.

The coverage discusses papers that we don’t yet see at Innovators for Poverty Action (co-host of the conference and a favorite source of ours). To me the two most interesting posts are:

• A challenge to the conventional wisdom that microfinance should target women. Personally, I don’t find the analysis here very compelling - it’s looking at grants, not loans, and as such the characteristics of clients could be very different from those of a typical microfinance program. I’d be very interested in seeing the same analysis for loans.
• The results of the first true randomized controlled trial on a microcredit program - finding “no impact of access to credit on outcomes for education, health, or women’s empowerment.” This directly contradicts our current, weakly optimistic take, not to mention conventional wisdom. We eagerly anticipate checking this paper out once it becomes available.

As a reminder, our blog is a personal and informal forum, and does not represent the official views of GiveWell. Our About This Blog page states:

While our main site features researched and edited content, aiming to present all our information in a neutral way for you to make your own decisions, our blog is highly personal. Posts do not represent the official views of GiveWell; they represent the unfiltered opinions of project members, who may (and often do) disagree with each other.

We aim to share all of our thoughts relating to the choices faced by individual donors. The Prop 8 issue strikes me as a particularly good opportunity, to the point where I’ve made a personal donation partly on “ROI” grounds (as opposed to purely personal grounds); so I’ve posted my personal decision and reasoning. In general, we have a principle of full disclosing our values and biases, rather than denying or hiding them.

However, GiveWell the organization, as represented by the Board of Directors as well as Elie and me, does not officially endorse or oppose Proposition 8 (and the donation I referred to was a personal one).

I gave to a group fighting Proposition 8 in California because it struck me as a really good opportunity to make a difference with a donation. This is about as far from our normal focus as it gets, and I don’t have nearly the knowledge of political advocacy that I would like to have, so I’m not going to go into this much. But in a nutshell:

• The polling on this issue looks close. Unlike the Presidential election, it may be close enough that some extra advertising could make the big difference.
• I’d also guess that it’s relatively easy to translate dollars into votes for something like this. A lot of people will be turning out primarily to vote for President; a well-done ad or phone call, or just a reminder, could be enough to get them to vote No on Proposition 8.
• As such, I don’t really need to be convinced that the people running this organization are particularly brilliant or have amazing advertising abilities; as long as they’re using money to do things like run ads and make phone calls, it’s probably money well spent. (And there is enough content on the website that I don’t fear fraud.)
• I feel strongly that gay couples should be able to get legal marriage licenses. I think most political issues are more complex/two-sided than advocates recognize, but not this one. If you feel differently, this post doesn’t apply to you, and that’s fine.

I hope that sometime in the future, we’re able to learn more about the conditions under which advocacy money matters and the conditions under which it doesn’t. With what little I know, and even without an ability to remotely quantify it, this seemed like too good of a buy to pass up, so I’m passing it on.

GiveWell has maintained a mailing list since late July that we use to share our notes on research in progress. The emails tend to be more detailed and less theme-driven than blog posts, and the volume tends to be higher (averaging around an email a day, except when we’re heavily focused on non-research aspects of our project).

We are now making the contents of the list (though not the full identities of participants) public. We also invite anyone who is interested in participating to apply via the list’s page; we will approve anyone we feel is applying out of legitimate interest in our research. The list’s page is here:

GiveWell Research Mailing List on Yahoo! Groups

Note that old emails to the list (between its start in July and its opening late last week) are not currently available, due to our recent switch from Google Groups to Yahoo! Groups (the latter offers superior privacy protection for list members).

This book excerpt (via Overcoming Bias) suggests that stressing the health benefits of latrines can be less effective than stressing the pride benefits of “feel[ing] royal, because the royal family had one.”

Also mentions that the Community-Led Total Sanitation program (which we’ve discussed before) stresses “disgust” over safety concerns.

More evidence that health education can work in counterintuitive ways, implying the value of constant experimentation and evaluation rather than merely recording “class attendees.” (Similar ideas discussed previously here).

We received the following email from reader David Micley:

I want to donate $500 to an effective charity. Ive been doing research on your site and it seems like PSI is a great choice in terms of helping global health. I have not yet made my decision as to which charity I will donate to, but as I continue to research, I continue to ask myself a fundamental question. How much of my money actually makes a difference in the effectiveness of a large charity? The amount of money that a huge charity has such as PSI makes me feel as if my $500 will be but a penny in a wishing well. Will my money be more effective donating to smaller charities that are in more need of money? Or is the large charity truly the place to find the most effective charitable work, and even if I feel my impact isn’t so strong relative to the size of the charity, it will be the most efficient way to help other people in need?

Our FAQ recommends that small donors with little information give to larger charities, but doesn’t address this angle - the question of whether $500 has more impact when it’s a larger percentage of the budget.

My view is that the size of a charity is less relevant here than whether it is operating at full capacity.

If a charity is already at an “equilibrium” where its costs are about equal to revenues, and it’s serving everyone its core activities can serve, then it will get questionable value for an extra $500. This is true whether the charity is large or small. It may attempt to expand its activities, start new programs, and serve more people, but a $500 donation seems unlikely to be the key driver behind such an expansion.

If a charity has more clients than it can currently afford to serve, or more worthwhile projects on the table than it can currently fund, a $500 donation can help it serve more people (or serve them better) - regardless of how big the charity is as a whole. To use a for-profit analogy, when you give McDonald’s 99c, your contribution is an extremely tiny percentage of its overall revenue, but it still produces an extra burger. McDonald’s, Inc. had no role in endorsing or funding this analogy.

Figuring out the extent to which a charity is “at capacity,” and what the impact of additional funds will be, is something that we struggle with, and we have no easy or fully reliable way of doing it. However, it’s worth noting that a large charity may be better positioned to handle increases in revenue, and use them to expand projects that are already repeatable/scalable, than a small one. And we feel relatively confident that the large charities we recommend are very far from serving everyone they could serve.

For this reason, the “will I make a difference?” question seems to tilt slightly in favor of giving to large charities when making small donations. $500 might be a small percentage of PSI’s revenues, but if you put credence in our estimate that PSI prevents a death for every ~$1000, that donation can be a huge deal in human terms.

We constantly emphasize the huge amount of money that is given by individuals. However, the figures we usually point to refer to all giving; people often, correctly, point out to us that many individual gifts are made to support churches, alma maters, public goods, etc., rather than to help those in need.

A study by Google.org and the Center for Philanthropy at Indiana University provides some analysis on exactly this point. It uses survey data to examine how much of individuals’ giving is actually intended to help those in need. It estimates both the amount given directly to humanitarian organizations (3rd column) and the amount given “indirectly” to help those in need - for example, donations to churches that use some of their funds for humanitarian programs (4th column). The summary table is below, taken from page 29.

Note that individuals making less than $1 million per year account for ~$66 billion of giving focused on the needs of the poor, $17 billion of which is given directly to relevant organizations. These numbers are smaller than the headline number of $223 billion, but they’re still huge (and still dwarf the giving of Gates and other foundations).

(This study has been around for a while and we cited it in our original business plan, but we’ve never made this point directly on our website.)

The last blog post shares general thoughts on Money Well Spent. Specifically, though, this bit really struck me (page 12):

In our personal lives, we regularly make year-end gifts to organizations for which we have warm feelings. These gifts make us feel good, and doubtless they help good organizations. But this isn’t the way to change the world, and it certainly is not a responsible way to give away someone else’s money.

Why give away your own money in a way that would be “irresponsible” with someone else’s?

Why be smart, disciplined and strategic when giving large grants, and then drop all of these principles for your individual gifts?

Especially when individual gifts collectively dwarf foundations’ grants?

I just finished reading Money Well Spent. (Disclosure: I was sent an advance copy.) The book gives a clear and public picture of how the authors conduct their grantmaking, something I believe is relatively rare in the sector; I’d like to see more people in this area laying out their approach and their positions on key debates (summarized below), as Brest and Harvey have.

Concise and example-backed arguments are given for many principles that we agree are important, including:

• The importance of forming a clear theory of change (i.e., laying out where a given program fits in the causal chain necessary to achieve desired outcomes, and what evidence there is that each link in the chain works as hypothesized).
• The case for providing general operating support (Brest and Harvey concede that there are times for restricted funding, but on balance feel that more gifts ought to be unrestricted).
• The importance (and meaning) of rigorous evaluation, citing two of our favorite organizations - the Poverty Action Lab and KIPP - as examples.
• Why “charity” can be as good a use of funds as “philanthropy” (something we discussed here and here).
• The case for quantifying “cost-effectiveness” of different approaches (although we disagree with the authors’ emphasis on “social return on investment” as measured in dollars, for many of the same reasons that we take issue with the Disability Adjusted Life-Year metric).
• Most importantly, a plea to “consider how failure can contribute to the knowledge base,” and publicly publish impact studies even of failed projects. (Good examples of such studies are scattered throughout the book.)

The authors also discuss many topics of more interest to larger funders; their emphasis is very much on creating and driving initiatives, rather than finding already-strong programs that just need more funds.

Overall, I recommend this book to grantmakers interested in an overview of good general practices in grantmaking. There are many interesting examples throughout the book, but its focus is general (grantmaking strategy in the abstract) rather than on specific issues (i.e., what the most promising programs are). We’d like to see more public discussion of the latter, even more than the former, but welcome both.

We’re currently working to find vehicles for donors to fund certain highly appealing program-based interventions. It’s not a simple task, because when dealing with large organizations, it’s rarely clear just how an individual donor’s “drop in the bucket” fits in.

Large organizations like UNICEF run a huge variety of programs - including programs such as iodine fortification (something we’re very positive about) and programs such as water infrastructure construction (which we are less excited about). From conversations with such organizations, we feel that a donor has the following options:

1. Gain confidence in the entire organization by getting a bird’s-eye view of its strategy, priorities, and activities; then give unrestricted.

In my view, this is the ideal way to donate: it means finding a charity that shares your vision (not just one capable of carrying it out) and avoiding micromanagement. However, getting a decent bird’s-eye view of a large international aid organization can be extremely difficult.

2. Mark your donation for a particular ongoing program, or even for a particular piece of a program (as outlined in this post).

This is the possibility most often raised by the organizations we talk to. For example, when asking how a donor could contribute to expanding micronutrient coverage, one organization offered a chance to participate in an existing program that distributes fortified biscuits, such that “each $X could buy one biscuit.”

The drawbacks of this approach are discussed in our earlier post: often such a donation essentially amounts to an unrestricted donation.

3. Fund the entire budget of a large-scale project (for example, bringing iodization to a new region).

This approach involves giving funds in exchange for a new project’s being carried out, giving the donor true control (not just attribution, as in #2). The obvious problem is that it requires enough funds to pay for an entire large-scale project, and is therefore outside the reach of many individual donors.

#3 might become an option if individual donors coordinated with each other, pooling their money to fund a particular sort of project. We are considering trying to facilitate this sort of coordination sometime in the future.

For now, though, we feel that the only way we can satisfactorily answer this question is through approach #1: finding organizations that are either “simple” enough (focusing overwhelmingly on a particular kind of project) or well documented enough that we can understand, and endorse, unrestricted donations to them.

One of the questions we struggle with a lot is the question of what impact a donation has - i.e., what happens because of your donation that wouldn’t have happened otherwise? In other words, what do you get for your dollar?

It’s a tricky question, especially for relatively small donations going to relatively large organizations. A future post will discuss a couple of approaches we’ve taken to answering this question; for now I want to focus on an approach we haven’t taken, that of literally attributing each donation to a “set of purchased items.”

A good example is this GlobalGiving project, which promises to educate 1 woman for every $45 you give. Organizations like GlobalGiving, Kiva, DonorsChoose and Heifer International make similar offers.

We’ve never been sure what to make of projects like these. For example, I see two interpretations of the “teach 4200 women” project:

1. The pitch is literally true. For every $45 that comes in, one woman will be educated. Therefore, if the project is underfunded by $45, one qualified and interested woman will be turned away from the class.
2. Funds are fungible. The organization conducting the class (Women for Women International, a large international aid organization) has already drawn up a full budget for the project, and will fund it with “general” funds if necessary. Therefore, for every $45 you give, the organization moves $45 of its “general” funds back into the “unrestricted” pool, meaning that your $45 is effectively an unrestricted donation to the organization running the class.

I’m guessing that #1 is the one that donors subconsciously picture when they are drawn to the “tangibility” of a project. It’s the scenario under which a donation is literally matched to a discrete person or item. Yet if #1 were the case, this would seem a horribly inefficient way to run projects - spending all the overhead to pay staff, set up the class, etc., and leaving one woman out because of a $45 shortfall. (Or in the case of Kiva, setting up a micro-bank and then turning away a screened, qualified borrower because of a missing $850.)

Yet if #2 is correct, your donation is really an unrestricted donation to a large organization; to understand your impact, you need to understand the entire organization.

GlobalGiving’s FAQ suggests a mix of the two scenarios: sometimes a funding shortfall is covered by other funding, and sometimes a project is scaled back or canceled when funding falls far short. As a side note, I would guess that when a project is scaled back, the “cost per person” generally increases (since the program’s overhead can’t fall fully in proportion to people served).

Other organizations are explicit that #2 is the case (see small print on this “buy a sheep” page).

All in all, I’m skeptical of any claim that says “your $1000 buys X.” It’s a good way to make things feel tangible, but a donor truly trying to understand his or her impact should take a different approach. (Some possibilities will be discussed in a future post.)