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Humans · Economy

Taking a stab at universal basic income in Africa

April 26th, 2017
in:Humans, Economy
by:Bob Koigi
located in:Kenya, Rwanda, Uganda
tags:GiveDirectly, universal basic income

In what is redefining aid and modern day altruism, a new model is working directly with poor families in providing universal basic income to every adult that covers their basic cost of living.

It has been hailed as the most effective in reaching the intended recipients at a time when traditional aid has been deemed opaque and passing through many hands without reaching the needy, thereby frustrating donors.

The model is being championed by GiveDirectly, a US not for profit organization. In East Africa where the approach has recorded impressive entry, over 65,000 families have in total received approximately $65 million since the programme started.

Each family receives on average $1000 distributed in staggered payments. They use the cash for various needs including starting small businesses, buying food, paying school fees for children and payment of dowry.

Fairplanet spoke to Caroline Teti, the GiveDirectly External Relations Director in Kenya about the essence of the model, its success and the myths it has had to dispel.

Fairplanet: Is Give Directly a sustainable model to ending poverty?

Caroline Teti: Cash transfers are not a panacea, but hundreds of scientific studies show that they are one of the most cost-effective ways of helping families in poverty. So, at the simplest level, cash can help extremely poor families lift themselves out of poverty by investing in their own future. More broadly, cash can shift the conversation on international aid, by becoming a “benchmark” for aid and pushing donors and institutions to ask: “with each donated dollar, am I doing more good for the poor than the poor could themselves?”

What criteria do you use to determine where the money will be channelled?

We aim to serve people living on less than $1 per day, and to do that we use an elaborate criteria to identify families in extreme poverty. First, we use national census data to find areas with a high prevalence of rural poverty. Then, within those villages, we use a range of criteria that vary by location, but take into account proxy indicators for poverty like whether a family’s home has mud walls or a thatched roof. This is slightly different than our basic income experiment, where once we identify the village in question, we will enroll every single adult in the selected village.

Closely related to this, do you give a standard amount or does it vary, and if it does, what metrics determines the value to be distributed among beneficiaries?

Our standard cash transfer does not vary and is sized to be around $1,000 given out in three lump-sum payments: one smaller “token” payment and then two larger payments. We apply this “standard” transfer in our programs in Kenya, Uganda, and Rwanda.

In our basic income experiment, we have a different model that aims to guarantee a family an income over a long period of time, as opposed to several very large payments. For this model, we send about $22 per month, each month.

How do you ensure that the money goes to the intended households and there is no room for theft?

We have a multi-stage enrolment processes, which includes several in-person checks at the recipient’s home, as well as a follow-up team that calls recipients after each transfer. Besides this, we also have independent audit teams, who double check that the money will end up with the intended households. In recent campaigns, fewer than 0.5% of families experienced bribery and fewer than 1% of families experienced theft.

Does your model encourage laziness among the poor who only sit and wait for handouts?

No, cash transfers do not encourage laziness. One meta-study by economists at MIT looked at this question in seven randomized controlled trials from six countries around the world and they found, “no systematic evidence that cash transfer programs discourage work.”

It will, however, be interesting to compare the effects of large, lump transfers, versus the guaranteed monthly transfers of our basic income project, on whether recipients work more or less. Recent anecdotal evidence, shows that even with guaranteed monthly payments, basic income recipients continue to work, or even work harder, though we look forward to seeing the qualitative results in the next couple of years.

What has your reach been since you started? Give us the numbers; how many lives have you impacted, how much money have you collected so far?

To date we have raised over $140 million, and have been quickly scaling up our operations in Kenya, Uganda, and Rwanda. In total, we have sent and committed over $65 million to over 65,000 families in East Africa.

As one of the highest-rated charities in the world, talk to us about Europeans attempts at basic income? Has the model worked there?

Certainly, there are some impacts of cash transfers that will depend on context – what’s true in Siaya County might not be true in San Francisco. We still haven’t seen the results of studies in Europe or North America, but we look forward to comparing their results to ours and seeing how the different context shapes the impacts.

According to a recent blog post by one of your Kenya based officials, some of the would be beneficiaries to your scheme are refusing to take cash with refusal rates in certain towns like the lakeside town of Homabay having risen to as high as 40 per cent. Why is that?

It’s important to put this into context — many other organizations experience high opt-out rates for their programs. As my colleague Will wrote, “For example, Manuela Angelucci and Orazio Attanasio found that Oportunidades, a conditional cash transfer program in Mexico, had take up rates of roughly 50%. Oriana Bandiera et al. report that a BRAC training program targeted at adolescent girls in Uganda expected participation rates of roughly 20%.” That said, many of the potential recipients were very understandably wary of outsiders offering free money, and we continue to run a range of different outreach programs, like appearing on local radio stations and speaking with local officials, to familiarize the community with GiveDirectly.

Is there scepticism by beneficiaries to your programme and how are you countering it?

Though there is some scepticism as I mentioned, we generally have very high opt-in rates to our program. For instance, in Siaya County Kenya, where we operated from 2011 through early 2016, 95% of eligible recipients opted in, and in Uganda and Rwanda, more than 96% of recipients opted in.

What are some of the greatest examples you can quote on the success of the project?

One of the most fascinating aspects of our program is the sheer diversity of experiences. Because of this, we don’t like cherry-picking success stories, we prefer to show a range of stories. That’s why we encourage you to check out GDLive, where you can scroll through a real-time feed of recipient responses to questions about their lives and how they spent their transfers.

That said, some of my favourite stories are the ones that challenge assumptions. For instance, we often hear the saying, „Give a man to fish, feed him for a day, teach him to fish and feed him for a lifetime“? One recipient, Nancy, already knew how to fish, but she didn’t have the means to buy equipment for her fishing business. She spent her first transfer on ropes and is now earning more income. She didn’t need anyone to teach her how to fish – she already knew how – she just need to the capital to expand her business.

One school of thought has it that the poor cannot be trusted with money and that it is better to give them concrete things like food, school supplies, e.t.c. What is your reaction to this and has the program had any issues with misuse of money by the poor?

First, evidence shows that cash transfers are extremely effective. A study conducted by independent researchers shows that recipients of our transfers spend wisely, with a range of positive outcomes. For instance, for every $1000 cash grant, incomes increase by $270 and families spend $330 more on nutrition. Sending “in-kind” goods, like food and supplies is often more expensive. That said, we encourage more head-to-head research: for instance, let’s test whether sending food or sending recipients the cost of the food has better outcomes on the health.

So far what would be the greatest hurdles you have faced with the project?

As you stated earlier, there are still many who believe that poor families can’t be trusted. I think as the evidence continues to mount, we will continue to get better at convincing potential donors that those living in poverty are not lazy or deficient, they are just like us, except they have less money.

What is the ultimate goal of this project in the long run?

The basic income project, is a truly exciting opportunity because it coincides with debates happening on this project all over the globe. Our experiment could add to these debates with hard data, and provide insight in whether and to what extent basic income works. Put simple, as we’ve written before: “at a minimum we’ll help thousands of the poorest families on the planet significantly improve their lives. At best, we can help find a path to ending extreme poverty in our generation.”

Article written by:
Bob Koigi
Author
Current Map: Our coverage
The model is being championed by GiveDirectly, a US not for profit organization. In East Africa where the approach has recorded impressive entry, over 65,000 families have in total received approximately $65 million since the programme started.
We aim to serve people living on less than $1 per day, and to do that we use an elaborate criteria to identify families in extreme poverty.
We have independent audit teams, who double check that the money will end up with the intended households. In recent campaigns, fewer than 0.5% of families experienced bribery and fewer than 1% of families experienced theft.

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