This post inspired by the upcoming Day Without Dignity online event

GiveWell’s current top-rated charities focus on proven, cost-effective health interventions. These interventions appear to solve certain problems (malaria, parasites) quite well, while making no direct attempt to solve other problems (economic growth, education, gender equity, and more). One of the common lines of objection we get to these recommendations goes something like: “Why should I put all my money into fighting malaria, ignoring other important problems? Isn’t it unethical to ignore the other essential needs?”

We believe this objection commits the common fallacy of viewing the developed-world donor as the only person who can improve things for the beneficiaries. One term for taking this mentality too far is “Whites in Shining Armor” - often, in the media and in nonprofits’ communications, global poverty is presented as a simple fight between local problems and developed-world heroes. The problem is that as outsiders, we often have very poor understanding of the true dynamics behind overseas problems - and by attempting to solve problems that we understand poorly, we can make things worse.

We fundamentally believe that progress on most problems must be locally driven. So we seek to improve people’s abilities to make progress on their own, rather than taking personal responsibility for each of their challenges. How can we best accomplish this?

A common and intuitively appealing answer is letting locals drive philanthropic projects. This answer has some appeal for us; we have written before about, and given a small amount of money to, “low-insulation charities” that seem adaptive, locally connected, and overall driven by local needs rather than donors’ plans. At the same time, we have noted some major challenges of doing things this way. Which locals should be put in charge? There are inherent risks that the people who least need help will be best positioned to get involved with making the key decisions. In our reflections on our visit to India, we noted that some organizations seemed to consist simply of local elites making ad-hoc decisions, and that to truly reach those who most need help seemed to require being “systematically bottom-up,” a more complex and difficult approach.

Another approach to “putting locals in the driver’s seat” is quite different. It comes down to acknowledging that as funders, we will always be outsiders, so we should focus on helping with what we’re good at helping with and leave the rest up to locals.

Here I think an analogy to helping friends and family is somewhat illustrative. I try to help my friends and family in domains that I’m relatively knowledgeable about (for example, computer issues) and I tend not to put much effort into helping in other areas I’m not so knowledgeable about (for example, picking clothes) even if the latter are more important issues for them. I know I appreciate when my friends and family deal with me this way, and I don’t appreciate people who are determined to help me in domains that they don’t understand very well (even if these domains are very important to me).

We believe that the track record of outside aid points to health and nutrition as the areas that developed-world outsiders understand best and are best-positioned to help with.

It’s not that we think global health and nutrition are the only important, or even the most important, problems in the developing world. It’s that we’re trying to focus on what we can do well, and thus maximally empower people to make locally-driven progress on other fronts.

One more approach to “putting locals in the driver’s seat”: give to GiveDirectly to support unconditional cash transfers. We feel that global health and nutrition interventions are superior because they reach so many more people (per dollar), but for those who are even more concerned than we are about the trap of “whites in shining armor,” this option has some promise.

Note: we sent GiveDirectly an early draft of this post and have made modifications after some back-and-forth.

We’ve been interested for a long time in the idea of simply giving out cash to the very poor, as a promising form of charity, and we’ve long been puzzled over why there don’t seem to be any charities focusing on this approach. In 2009, while acknowledging the potential drawbacks of cash transfers, we argued:

Which would you bet on to get water to people in Kenya: an organization funded by wealthy Americans (motivated by guilt and the wish to display generosity, among other things), or an organization funded by Kenyan customers (motivated by a need for water)?

Why do cash handouts seem to be so rare in the charity world? Perhaps it’s because extensive experience and study have shown this approach to be inferior to others. Or perhaps it has more to do with the fact that giving out cash fundamentally puts the people, rather than the charity, in control.

As of a few weeks ago, there is a charity focused on cash transfers: GiveDirectly. GiveDirectly plans to use the M-PESA system to transfer money using SIM cards, and hopes to give out 90% of its total expenses as cash transfers.

We encountered this group - and had some back-and-forth - before its launch.

GiveDirectly is a new organization and we have not done full due diligence on it: this is not a review. This post simply gives preliminary thoughts on a charity we consider to be worth watching. We have some concerns (see below) and the organization is too new for us to be able to assess these concerns and its general track record. That said, we think it’s worth noting a few things that stand out about GiveDirectly relative to other charities at this preliminary stage, and that we consider to be good examples of the sort of thing we’re looking for and trying to encourage. Most of these revolve around the idea of putting one’s plans on the record so one can be held accountable in the future.

Reasons to be optimistic

• GiveDirectly has committed to a clear and exclusive focus on a promising intervention. It’s our view that cash transfers ought to be considered the “starting point” for charity: if we had no evidence about the effectiveness of any intervention, cash transfers would be the one we’d support because it most directly empowers low-income people. GiveDirectly states that there is also a substantial case in the literature that cash transfers are helpful, and it’s our impression that this is true (though our investigation of this literature is still in progress and we have not reviewed GiveDirectly’s page on the matter).

  We do think there are some interventions (for example, health programs) with a strong enough track record that it’s reasonable to bet on them over cash transfers. But we’re glad to see donors’ options increasing, especially when the new option is one of the most intuitive ways of helping.

• GiveDirectly makes clear and specific statements related to room for more funding, i.e., the impact of marginal (as opposed to average) donations. It has committed to give away 90% of received funds as cash transfers and has provided documents for us (see below) regarding how much funding it has the capacity for. Along these lines, we like its statement on transparency:
  

  To us transparency means more than publishing financial statements. That tells you how we used money last year; real transparency means a clear commitment to how we will use the next dollar you give. It means focusing on providing one, easy-to-understand service; explaining exactly what it costs to provide that service; and doing so without vague language like “overhead” and “program expenses.”

• Not only is GiveDirectly conducting a randomized controlled trial; it has pre-announced the design of the study. GiveDirectly appears relatively convinced of the merits of cash transfers (see above) but is still conducting a major study to examine the impact of its own work and see whether some versions of the program are more successful than others.

  Our #1 suggestion for making social science research more credible is to “pre-register it,” i.e., announce in advance what data will be collected and how it is intended to be analyzed, so that the final result can be compared with the initial plan and a reader can form their view of whether the results are an artifact of publication bias. We made this case to GiveDirectly and it sent us (see below) a template for the full survey it will be using and a plan for analyzing the data. Now that we have seen these and posted them publicly, GiveDirectly won’t be able to cherry-pick results in the same way that we suspect many studies do. (Of course it will still be possible for the researchers to perform different analysis than they had originally planned; but they won’t be able to sweep any unfavorable conclusions of their analysis under the rug.)

These are major points in GiveDirectly’s favor. We do have some concerns.

Our reservations

• GiveDirectly is a new organization and does not yet have a track record. Its work could end up failing for many reasons - political, cultural, logistical - and right now its plans for monitoring, evaluation and transparency are just that, plans. We will become much more confident in GiveDirectly if it executes over the next couple of years, succeeds in meeting its commitment of 90% of expenses given out as cash, and continues to self-monitor and publish its data.

  (From GiveDirectly’s response on this point: “What readers should know about potential risks is that (a) while our organization is new, cash transfers are not (see discussion of conflict risk below); (b) we locate recipients prior to accepting donations, so there is little risk of our being unable to electronically transmit a donation; (c) we are therefore able to send 90% of donations to the poor as a commitment, not as a target, and would refund donations if we were unable to follow through.”)

• We’re uneasy about the idea of giving out cash, transparently, to some people and not others within a community. Incitement of jealousy and conflict seems possible, and if power dynamics are imbalanced enough, we’re worried that more powerful village members may take the benefits away from others. We’ve discussed these concerns with GiveDirectly, and it appears they have taken some reasonable measures to put themselves in a position to assess the extent to which this becomes a problem, but we remain uneasy at the moment.

  (From GiveDirectly’s response on this point: “targeted cash transfers per se are not a new thing by any means, but in fact one of the most widely used and evaluated development interventions … cash transfers now cover between 750 million and 1 billion people worldwide (p. 10) and are one of most researched and evaluated form of development intervention (p. 30), though they remain uncommon in the charity world … What donors should know about us specifically is that we include detailed questions on conflict in our follow up surveys and also as part of our ongoing, independent impact evaluation, which will assess whether transfers increase serious conflicts (such as crime). In the follow up interviews we have conducted to date, we have learned that some people have complained about GiveDirectly because they did not receive a transfer, but we have not learned of any conflict between community members.”)

• We wouldn’t be comfortable with GiveDirectly raising as much money as its stated capacity. In discussing room for more funding with GiveDirectly, we asked for a statement of the maximum amount that could be given out as (90%) cash grants in the short term. They responded:
  

  If one supervisor can add enough capacity each month to handle $0.5M for 4 years, or a total of $2M, then $2M per month is an upper bound on our capacity with a single supervisor (i.e. Jeremy). Based on that I’d say I’d start to worry if we were pulling in more than $20M per year — where by “worry” I mean hire more supervisors. I’ll be frank and say I don’t have an objective assessment of how many of these we can readily get our hands on; I don’t think 5 would be hard but I suspect 25 (to get us to $500M annual capacity) would.

  While GiveDirectly’s analysis is logical, we just wouldn’t be comfortable seeing a charity this new and unestablished raise more than a few million dollars (serving several thousand people at $500 per year) over the short term - the risks of poorly spending (or harmfully spending) those funds if its model hit unforeseen challenges would be too great.

  (From GiveDirectly’s response on this point: “Given that cash transfers have received arguably more extensive scrutiny than any other development intervention I think there is plenty of evidence to address such concerns, but of course readers should examine the evidence and decide for themselves.”)

Bottom line: GiveDirectly is too new for us to fully assess the concerns above, but it is definitely a charity to watch.

Attachments GiveDirectly has sent us:

• Survey for randomized controlled trial (XLSX)
• Analysis plan for randomized controlled trial (PPT)
• Consolidated response to blog post draft (DOC)
• Literature review on impact of cash transfers (PDF)
• Note on targeting methods (DOC)
• Note on capacity (DOC)

We mentioned before that we were planning a trip to Mumbai (also known as Bombay, in India). At this we have been here for a few weeks. We will be coming back to the U.S. between mid-November and mid-December.

From a GiveWell perspective, one of the things that is very different about being here vs. in the U.S. is that here we are in close proximity to extreme poverty. We have written before that we see promise in giving cash directly to the poor; here, more than in NYC, I could arguably carry out a mini “cash transfer” program on my own. The question is whether I should.

Below I lay out a few possible options. My interest is not in whether these options are better than giving nothing, but whether they are better than reserving the same funds for my annual donation to a GiveWell top-rated charity (last year I gave to Stop TB Partnership).

Option 1: give to the children who chase after me.

I pass people asking for spare change in NYC, but in Mumbai I am chased after by children, which is a very different (and more emotionally difficult) experience. It seems pretty clear that these children are legitimately poor, and I’m tempted to give to them.

However, I think this option is clearly inferior to Option 2 below.

• These children, poor though they may be, are probably better off - and bringing in more money every day - than the children deep in the slums who are not venturing out to the nicest parts of town to chase after Westerners. (When we walk around in Churchgate, an upscale area, children run after us. When we walked along Juhu beach and ended up in a slum, people just asked if us we were lost, though I’d guess that they are at least as poor as the children we see daily.)
• There is also an incentive problem: I’d rather minimize the degree to which my gifts turn begging into a profitable operation. It’s possible that parents are keeping their children out of school to beg, or even that the children are essentially “employed” by someone in far less need; I don’t want to contribute to that dynamic.

Option 2: walk deep into the slums and give out cash more or less at random (or to people who “look busy”)

This is the approach apparently favored by Tyler Cowen. It has the advantage that it seems more likely to reach the people most in need, and that it seems less likely to contribute to bad incentives.

I still find myself hesitating to do this, and the primary reason is that cash transfer programs are so rare among nonprofit organizations. (I believe a nonprofit, while not giving out cash “at random,” could still find designs that minimize the negative effect on incentives, such as requiring proof of both low income and employment and using an EITC-like scheme). We have in the past vigorously questioned the fact that nonprofits don’t tend to give out cash, and we think it’s possible that this has more to do with self-serving attitudes toward their own value than with a considered judgment that such programs are not promising. Still, in the end I think it’s more likely that there’s just something I’m missing.

Perhaps the risks of money being used on alcohol and similar purchases are too high. Perhaps the recipient of the cash will incite jealousy or even get robbed (see the comment by Tom Womack on Marginal Revolution’s post on the subject). Perhaps highly unpredictable cash transfers creates another kind of bad incentive, encouraging people to focus on trying to manipulate their luck (for example, via superstition).

I’m ready to discuss, but not ready to execute on, an activity that I don’t see being carried out by anyone who clearly knows what they’re doing, has seen the effects up close over years, has seen unexpected consequences and learned how to deal with them, etc.

Option 3: give to local nonprofits.

This option is pretty far from the original idea of handing cash to the poor, but it’s the one that appeals to me most of the three. It seems that there are vast numbers of relatively small nonprofits here, focused on working directly and tangibly with a small group of people rather than on trying to run large-scale bureaucratic operations. Most of the people we’ve met have at least one such nonprofit they recommend, and the recommendations overlap to produce several nonprofits that I would bet pretty strongly are spending money responsibly and being as helpful as they know how to be with people they know fairly well. This seems to me to be a pretty reasonable alternative/equivalent to handing out cash.

My biggest concern with these organizations is room for more funding, an issue that has been raised even by the people recommending the organizations. The advantage of an organization’s staying small is that the people running the organization stay very directly connected to their work and its results; the disadvantage is that they aren’t built to scale, and it’s unclear how much good an outsider like myself can really do with an extra one-time donation.

What are your thoughts? Would you take any of these options or just save the money for my annual gift?

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:

1. Determine how much “money” it wanted to inject into a community in the form of vouchers.
2. 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.
3. 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).
4. 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.
5. 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?

We recently argued that Smile Train has “more dollars than doctors” for its core program. In that light, yesterday’s Virginian-Pilot article (which quotes me) is interesting:

• The main story is that Smile Train has been trying to make substantial and unrestricted grants to another major cleft surgery charity, Operation Smile. This despite the fact that Smile Train has in the past raised concerns about Operation Smile (”intentionally fabricated tens of thousand of surgeries… distorted its financial reporting… squandered millions of dollars… provided shoddy medical care….”)
• The story quotes Smile Train’s President as appearing to explicitly support the “more dollars than doctors” idea: “Smile Train focused on funding operations by doctors in the countries in need … Mullaney concedes, though, that in some countries, such as Somalia and Haiti, the need outstrips the number of surgeons available to do the work.”

It’s hard to make sense of Smile Train’s wish to make unrestricted grants to Operation Smile, except by accepting that Smile Train is out of room for more funding in its core program.

Possibly, Smile Train’s concerns about Operation Smile have been addressed. Arguably, the decision to grant extra funds to other organizations is admirable (we don’t know whether other charities respond to the same situation by simply piling up assets). But it certainly seems difficult to argue that Smile Train’s donors should think of themselves as funding more of the “$250 per surgery” core program.

Franck Wiebe, guest-blogging at Aid Watch, proposes:

in the interest of aid effectiveness and as a starting point, donors could agree not to fund projects unless they can be demonstrated to be at least as good as a cash transfer. Is that too much to ask of aid?

In concept, we think it’s a great idea (and we proposed something similar for evaluations of U.S. charities). However, one major issue for individual donors is simply that we know of no charity that focuses on delivering cash directly to low-income people.

Women for Women and Village Enterprise Fund both are putting about 1/3 of their total expenses toward grants to individuals, a figure as high as we’ve seen anywhere.

If you have no practical vehicle for making cash gifts, it may unfortunately make sense to give to a charity that can’t demonstrate that it’s “beating cash” in terms of impact. This is another case where an individual donor is constrained by the choice of vehicles, not just the choice of programs.