The GiveWell Blog

UPenn Center for High-Impact Philanthropy

| by Holden

Before giving season ends, we wanted to make sure to put in a good word for the UPenn Center for High-Impact Philanthropy (which we have mentioned before).

We have carefully reviewed the Center’s reports on malaria and U.S. education, both of which overlap heavily with the research we have done. We consistently find their statements to be research- and evidence-based, with citations that make it clear where their reasoning comes from. Their reports are focused on the practical issues of philanthropy and give examples of specific successful nonprofit programs.

We have learned from these reports and we believe they have significant value for donors.

We haven’t yet carefully reviewed their most recent report, on U.S. housing, health and hunger, but if and when we research these causes it will be one of the first sources we consult.

As Peter Singer and William Easterly recently discussed, there is a severe shortage of groups that provide substantive public information about the facts of giving and the research relevant to it. The Singer/Easterly discussion noted GiveWell and Good Intentions are Not Enough (another resource we find helpful) as examples of such groups. We think that the Center belongs on the list as well.

Celebrated charities that we don’t recommend

(updated on: ) | by Holden

Note added April 2024: As we explain on our mistakes page, the tone of this blog post, which was written much earlier in our organizational history, fails to convey our uncertainty about the impact of these programs. It also doesn’t indicate that our research involves forming best guesses based on limited information, and that we are always open to changing our minds. The organizations listed below may be doing good work; we do not have sufficient information to be confident about them, and the information referenced in this post may be out of date. We’ve been researching and funding organizations since 2007 and now devote more than 50,000 hours each year to that research. Based on that research, we recommend a small number of organizations, our top charities, that do a tremendous amount of good.

Normally, we focus on identifying outstanding charities, and minimize the time spent on opaque or otherwise lackluster ones. But lately, we’ve gone into a bit more detail about our take on several of the best-known and most appealing charities out there.

What all of the charities below have in common is that (a) we have major questions and concerns about their activities; (b) the information necessary to see how serious these concerns are does not seem to be available. (In most cases our assessment is based on significant back-and-forth with the charities themselves, though in some cases we are going off their website.)

We think the above charities are fairly representative of “average” charities in international aid. Some tell better stories than others and some have more disclosure than others. But in almost all cases, international aid charities are (a) carrying out complex projects that can fail to do good (or even do harm) in a variety of ways, and (b) not systematically sharing the information that would make it possible to assess how their work is going.

GiveWell is devoted to finding charities in which we can have more confidence. We’ll be discussing our two top-rated charities working internationally in forthcoming posts.

Gifts of livestock (e.g., Heifer International)

(updated on: ) | by Holden

It seems particularly hard to find information about the past impact of “gifts of livestock” programs (such as those promoted by Heifer International). I’ve been thinking about such programs conceptually, though, and I have a lot of trouble understanding the reasoning behind these programs. Two key points:

  • It seems like giving out livestock brings with it all of the problems and challenges of giving out cash.
  • It seems like giving out livestock also brings additional problems and challenges that don’t apply to giving out cash.

Giving out livestock brings the same problems and challenges as giving out cash

We’ve written before about the idea of cash transfers. One potential problem with giving out cash is that the more powerful people in a community may end up dominating (monopolizing?) the benefits. Giving out truly valuable gifts could interfere with power dynamics, incite jealousy, and fail to reach those that donors actually intend to help.

It seems to me that all of these concerns apply in full force to gifts of livestock. I doubt there are many people in the world who would turn down a free cow (I’m not sure I would). Even if one has no ability to take care of the cow, there is always the option of selling it (if one has access to markets) or simply slaughtering it and eating or selling the meat.

I couldn’t feel confident in a charity giving out livestock unless I saw compelling evidence that they were getting livestock to people in need, and not just to anyone (or just to the most powerful people) interested in free livestock.

Giving out livestock brings other problems and challenges as well

  • Are the livestock in good health? Will they meet recipients’ expectations, or will they die or underproduce, potentially causing people to make bad plans and investments?
  • Do the recipients of livestock gifts have the ability, in terms of knowledge and resources, to take care of the livestock well? (Similar problems as in the above bullet point could arise if they don’t.)
  • Do the recipients of livestock intend to take care of the livestock well? Or is there reason to be concerned that gifts of livestock could lead to cruelty to animals?
  • Are there other unforeseen consequences of introducing large numbers of livestock into a community? A few years ago, there were some allegations that “over grazing by goats in arid environments has disastrous effects on the fertility of the land … these ‘gifts’ merely add to the problems of hard-pressed communities because of the drain on limited resources the animal represents.” I haven’t been able to find any facts behind these allegations and I’m not sure what they’re based on.
  • Most importantly, might recipients benefit more from other gifts – and why shouldn’t they make that assessment themselves? Perhaps the story Heifer International tells is correct, and livestock would make a tremendous difference for a family. If that’s the case, then a cash gift could be expected to be spent on livestock. If one of the many concerns above applies – or livestock is not what’s most helpful for any number of reasons we simply haven’t thought of – then a cash gift will be used on something else.

    Why is it better for a charity to decide people’s needs for them? This question isn’t entirely rhetorical – there could be a good reason – but it seems that the burden of proof on a statement like “A cow is better for you than anything else you could buy with what the cow costs” should be on the charity.

Bottom line

I have trouble understanding the idea of livestock gifts, from the perspective of maximizing positive impact.

I understand that they make a good ad campaign, possibly because they draw people’s attention to the possibility of using a one-time gift to permanently escape from poverty (even though a cash gift can just as easily lead to a story like this, and could also lead to a lot of other positive stories that we simply haven’t considered).

It’s a scary thought, but it seems possible to me that these programs exist entirely because of how they can be marketed to donors, instead of for any reasons relating to maximizing good accomplished. What am I missing?

Where we stand on microfinance charity

(updated on: ) | by Holden

We’ve thought and written a lot about microfinance lately. As of now, here’s where we stand.

What microfinance is and isn’t

First, it’s important to recognize that most of what you’ve heard about microfinance is false. It isn’t primarily about funding business expansion.. It isn’t a “proven solution” to poverty. And it doesn’t leverage your donation far more than other options.

Rather, we think of microfinance as a way to help people with low, volatile incomes manage their financial lives, an idea that is well argued in the recent Portfolios of the Poor study. This study implies that microfinance is really about providing one more option for borrowing rather than the only way to borrow, and that the borrowing is continual rather than “one crucial loan to escape poverty” – more like a credit card than a business investment. (This would explain why “graduation” from microlending programs appears rare).

What to look for

Does microfinance do good? It depends on a lot of things.

  • If loans are constantly and heavily subsidized, they can be thought of as similar to giving out cash, in which case our primary concern is that benefits reach the right people.
  • On the other hand, if loans are not subsidized, a microfinance institution’s profits could be taken as a sign that it has paying customers. This in turn could be a sign that it is providing empowerment.

With the latter goal (which seems to be the more common one), there is a big question about what role donations can and should play. We have expressed serious concerns about mixing donations with for-profit enterprises, with the possible result that donations end up padding profits (concept; example). In addition, we worry that there are too many donations blindly chasing the microfinance “story,” with the result that donations end up disappearing into nebulous activities.

There is also a question about the extent to which loans are truly providing empowerment. There is evidence that borrowing is bad for at least some borrowers.

We have developed a set of critical questions both about microlending and microsavings, to get at the question of whether an institution is helping people. We’ve looked hard for organizations that can answer our questions.

What we’ve found

In trying to answer the above questions, we’ve become fairly pessimistic about the area of charitable microfinance in general.

Bottom line

All in all, we would guess that microfinance as a whole has done a great deal of good, but has also probably done some harm. We are more pessimistic specifically about microfinance donations in the current environment. For the reasons outlined above, we believe that giving to an “average” or “typical” microfinance charity – or giving with an illusory “peer to peer” relationship as the extent of your due diligence – is a fairly bad bet. At the very least, it will deliver far less good, and far more potential harm, than the typical microfinance narrative suggests.

Yet we still find the basic idea of providing financial services to people with low and volatile incomes very appealing as a way to help people … if it is done in a way that stresses social impact and uses donations responsibly.

We believe that microsavings is a particularly promising area, although we haven’t found a microsavings charity we can be confident in.

We believe that the Small Enterprise Foundation is a microlending institution that is truly and appropriately focused on achieving positive social impact. We’ll be writing more about it.

VillageReach’s answer to the “room for more funding” question: Scenario analysis

(updated on: ) | by Holden

We’ve just updated our review of our top-rated organization, VillageReach. (Our July 2009 version is still available for posterity.) The big picture remains the same – we feel this organization has a stronger case for cost-effective impact than any other charity we’ve seen – but there have been changes in VillageReach’s financial situation and plans, as well as substantial new information on its answer to the “room for more funding” question.

Ultimately, VillageReach has answered this question in what we consider the “ideal” way: by specifically outlining its projected activities, and outputs, at different levels of projected revenue.

  • VillageReach’s top priority for unrestricted donations is to reactivate its pilot logistics project in Cabo Delgado (the Mozambique province where the project was carried out) and part of Niassa (a neighboring province).
  • It currently has enough funding to expand into one or the other (Cabo Delgado or part of Niassa).
  • About $400,000 in additional funding would close the full gap needed to expand into both over the next year. An additional $1.2 million in needed funds are projected over the full 3 years.
  • Beyond that point, VillageReach has committed to expand into additional provinces at a cost of about $1 million per year.
  • Thus, if VillageReach brings in over $1.5 million in unrestricted donations, we will expect to see it planning further expansion of its logistics program in Mozambique. If it brings in over $2.5 million over the next year, we will likely suspend our recommendation on the basis that it has as much funding as it can productively use.

(Full details available at our discussion of VillageReach’s future activities.)

We know that these numbers are projections, and subject to significant change and error. But what’s valuable about them is that they’re specific enough, and concrete enough, that VillageReach can be held accountable. Based on how much revenue it brings in, we know which activities we can expect it to carry out. This is a truly meaningful projection of the “impact of your donation.” It’s a picture of organization priorities, which can be checked over time (“we will do X if we get $Y”), instead of a discussion of how “your” funds are allocated, which we ultimately can’t see a way to verify in the face of concerns about fungibility.

It’s interesting to me how much work it took to get to this point. When we originally asked VillageReach for “funding gap analysis,” it provided a picture of the minimum amount of funding it would need to continue activities (the October funding gap memo (PDF)). It seems to us that funders often ask the question “Is your organization stable? Are there other funders contributing here?” but rarely ask the question “What is the maximum amount of funding you can productively absorb?”

But we don’t ultimately see why analysis like this should be so rare. The final product here is simple. It’s a matter of being clear about organizational plans and priorities – it doesn’t involve nearly the same kind of complexity and expense as, for example, gauging the impact of past activities.

We feel that it’s feasible for almost any charity to provide substantive, useful, relatively simple information answering “How will future donations be used?” The reason few charities provide it seems to be that few donors push for it.

Incentives for microfinance charities

(updated on: ) | by Holden

I’m very concerned about the incentives for microfinance charities. As I see it, these are the things that they are “rewarded” for:

We feel strongly that there are many more questions a microfinance institution must answer to give an idea of whether it is helping people, and worth donating to. And in theory, many others feel this as well. But looking around MixMarket shows how much more attention the “scale and profits” indicators are getting as of today.

  • The frontpage cites “1,678 total MFIs reporting data” (and we have collected the data, which is overwhelmingly complete on the financial indicators front, for the 268 members of U.S. networks). Yet only 66 institutions have filed social performance reports.
  • The independent ratings found on MixMarket also seem overwhelmingly focused on issues of scale and potential profitability, as opposed to social impact (for a representative example, see the Microrate documents at WISDOM’s profile).

The bottom line? It looks to us like all of the pressure that these institutions face is to maximize scale and profits, without much eye to making sure that they’re improving clients’ lives. And that could explain some eye-popping quotes from publicly available surveys of microfinance dropouts (full documents available at that link; emphasis ours below).

  • “At the end of the meeting the research team watched the process of one group being pressured to complete payment. They were told that they should not leave the meeting until the money was paid. There was heated discussion among them, with members telling each other to contribute, and denying that they themselves had the money with which to contribute. There was Ush. 8,000 missing. Finally a man from another five person group provided the missing money. He told the team that he would probably get the money back from the defaulter (who was not present) and that the defaulter would ‘probably buy him a soda’.” (Uganda report pg 13)
  • “The research team also found one instance where one MFI had started operations in a poor area, issued loans, experienced quite widespread problems with loan repayment and decided to withdraw the programme in its entirety. This resulted in many people’s savings being attached to repay the outstanding loans of others, and the MFI left behind a fair degree of chaos and bad feeling.” (Uganda report pg 13)
  • “the treasurer said that the group’s monthly repayment (Tsh. 300,000) that was to be deposited in SEDA account had been stolen. Two days later the treasurer got very sick; he was bewitched by some of the group members. However after seeing a witchdoctor he recovered. We took him to the Ward Executive Officer; who forced him to repay the money in instalments. He did repay the money but then he was forced to leave Arusha town completely. If he had continued to stay they would have killed him through witchcraft. I lost Tsh. 4,000 through the ROSCA.” (Tanzania report pg 10)
  • “Most MFI’s in Kenya have a very strong emphasis on credit but some are getting into the position where clients are virtually forced to take loans. This is partly because of the MFI’s needs to pump out loans to achieve operational sustainability and partly due to a belief that loans are good for small entrepreneurs – even if they don’t want them!” (Kenya report pg 7)
  • “One of the key determinants of drop-out, often lost in the category ‘failure to repay loan’ by these studies, is the insistence by field staff that clients take loans. Irrespective of what official Head Office policy says, there is a clear understanding among most field staff that they should push out loans – often with little care for whether the clients need or can use them… Matin (1998) also notes, ‘MFI lending technology is insensitive to variations in household conditions. Most MFIs put all households on a treadmill of continuously increasing loan size and insist on a fixed repayment schedule.’” (Bangladesh report pgs 3-4)