We focus on finding charities that are doing demonstrably good work already, rather than on proposals for new sorts of projects. This post is an exception: we’ve been tossing around an idea for “philanthropy vouchers” that we think could be worth trying in a broad variety of contexts, and we’re interested in others’ thoughts.
The idea is a variation of the “development vouchers” idea put forth by William Easterly in The White Man’s Burden (see page 330). Prof. Easterly proposes that official aid agencies co-create an independent “voucher fund,” and issue vouchers to people in developing countries that can be redeemed for money from the fund. The basic appeal of the idea is that, like cash handouts, it may shift the power and choice to the hands of the people we’re trying to help, rather than the hands of well-meaning outsiders at charities; but the two major concerns with cash handouts (fraud/manipulation by less poor locals and poor/irresponsible use of the money) could be mitigated by some basic regulations on what sorts of services the vouchers can be spent on.
While Prof. Easterly proposes a coordinated effort by major aid agencies, our proposal can be carried out at very small scale, unilaterally, by a single funder. The funder would simply issue a set amount in vouchers, set its own rules for how they could be redeemed, and set aside the necessary funds.
Specifically, to carry out a philanthropy vouchers program, a funder would do the following:
- Determine how much “money” it wanted to inject into a community in the form of vouchers.
- Form a definition of a “philanthropic organization,” i.e., an organization that would be eligible for collecting these vouchers from people and trading them to the funder for cash. This classification could be formed in a variety of ways: the funder might lay out a set of general criteria for “philanthropic” organizations and take applications for formal designation as “philanthropic,” with approved organizations’ getting the right to trade vouchers to the funder for cash; or it might do something as simple as accepting vouchers from any organization classified as a charity in its country of origin.
- Print vouchers and distribute them to the people in an area (trying to target those in need, but the targeting wouldn’t be as high-stakes as it is with cash).
- From there, any organization classified as “philanthropic” could offer its goods and services, and all such organizations would effectively be competing for the funds embedded in the vouchers.
- The funder would still be well advised to do its own monitoring and evaluation of how the program is going – in particular, spot-interviewing participants to ensure that vouchers were obtained through transparent and mutually consensual transactions
For a hypothetical example, consider an “alternative Millennium Villages” powered by philanthropy vouchers.
- The funder would create a definition of “philanthropic organization” as any US-registered public charity, or local government agency, whose activities in the village consisted of providing or “selling” the following: vitamin and mineral supplements, health services, water, primary education, food meeting basic nutrition standards, or electricity. Organizations would apply to the funder for recognition as such an organization, a process that need not be nearly as involved as applying for direct funding. Organizations with other ideas for helping people, such as cellphones, could apply as well, and their status would be at the funder’s discretion.
- The funder would print 5,000 vouchers for $50 each, and distribute them throughout a village of 5,000 with a rough goal of allocating one voucher per person (or N vouchers per family of N). (Assuming $50,000 in funder overhead, this would be equivalent in cost to Millennium Villages). Alternatively, the funder might allocate some of the vouchers to a “common fund” allocated through a voting procedure among villagers, in order to encourage the purchase of “public goods” such as well construction (though of course the villagers could also arrange such a “common fund” themselves, or simply choose to “pay” ala carte for water).
- Nonprofits and government agencies would then hopefully offer services in attempts to win clients’ vouchers. If a nonprofit perceived that others were focusing excessively on farmer training as opposed to water, it could invest in providing water and hope to take in more revenue in vouchers than its costs.
- With each voucher submitted to the funder, an organization might submit a brief description of what was provided in exchange for the voucher, and to whom; the funder would then perform “spot interviews” to see if these descriptions were confirmed by villagers.
Though the example given is for the developing world, I think the concept could as easily be used in poor communities in the U.S.
There would be many challenges involved in such a program. Tensions could arise between different “competing” organizations, and they may resort to misleading advertising or even coercion in order to win more vouchers. Vouchers wouldn’t be distributed perfectly fairly or evenly among participants. However, these issues could be monitored to some degree using spot interviews, and the concerns would be smaller than with a cash handout program. On the flip side, voucher revenues would provide strong indicators of which services people valued most and how that changed over time, and the actual services provided could adjust in real-time to these indicators. Incentives and possibilities for innovation and adaptation would likely be much greater than for a centrally planned project.
All in all, it seems to us like a project along these lines would be worth trying, hopefully accompanied (as with any pilot) by strong monitoring and evaluation. What do you think?