The United States Agency for International Development (USAID) is participating in randomised controlled trials to compare its traditional approach to that of GiveDirectly, an organisation that gives cash to poor people with no strings attached. USAID spent about $13 billion on projects last year so the results could redirect a lot of money to interventions that are more efficient.
Daniel Handel, Senior Advisor on Aid Effectiveness for USAID, heard about GiveDirectly while on assignment in Rwanda. He was intrigued by the concept and wondered if other approaches to tackle poverty in Rwanda could be compared to unconditional cash transfers to see which intervention does the most good.
To compare their approaches with cash transfers, USAID programs are participating in cash benchmarking studies led by independent economists. Two of the programs being tested in Rwanda are Gikuriro, a project aiming to improve hygiene and sanitation behaviour, and Huguka Dukore, one that is working to create job opportunities for young adults.
Recently released results comparing Gikuriro with cash transfers from GiveDirectly show that, in the short-term, neither intervention helped with nutrition but the cash transfers helped people cut down debt by 76% and increase production assets like livestock and iron roofs.
Apart from effective health interventions like the Against Malaria Foundation, cash transfers seem to be one of the strongest development interventions and one of the most studied. Research shows that when people in poverty receive cash without expectations to pay it back, they spend it on things like iron roofs and not on “temptation goods” like alcohol.
But cash transfers are not a magic bullet. Recent research on cash transfers from Blattman et al 2018 (effects after almost ten years from Youth Opportunities Program in Uganda) and Haushofer and Shapiro 2018 (effects after three years from GiveDirectly) are finding some short-term benefits of cash transfers wear off after a while, including psychological well-being. And that there may even be a negative spillover effect for people who did not receive cash transfers but live near those who did.
Cash transfers have been a popular idea for a few years, now that we have more information available on their mid-line and long-term effects it is essential that we remain inquisitive. By questioning methods and diving deeper into how to do the most good USAID is doing just that and giving us hope in the fight against poverty.