A nonprofit, GiveDirectly, has been experimenting with simply transferring a single sum of money to families in extreme poverty in certain villages in countries in Sub-Saharan Africa. The amounts of money are very large compared to the families' usual income, in the recent study around $1000 USD. The recent study looked at a village on the banks of Lake Victoria in Kenya and the recipients were everyone in the village whose house had a thatched roof (an indication of poverty since richer families have metal roofs). The results were less hunger, more investment in farming and small business, more ownership of livestock and increase in overall happiness. The effects also extended to people in the village who did not get money, probably because of increased spending and economic growth. It even extended to villages nearby which felt the economic stimulus.
It might have had negative effects, but it didn't seem to. It could have made the people who didn't get the money jealous or unhappy, it could have caused significant inflation. The money transfers were evaluated closely and longitudinally, over years by economists who were involved. The money was given in a few installments over a single year, but the effects appeared to last for at least several years. The article says that one of the longstanding effects was to increase the number of workers actually working which rings true after spending time in some poor villages in developing countries. In many of these places a big source of distress is that there is nothing for able bodied people to do to make money. When there is more money, there is more demand for everything and sidelined potential workers go to work. This has far reaching effects. I met college graduates and skilled workers who were operating motorcycle taxis, waiting at street corners in competition for very few customers. In an economically healthier community these folks would have had real jobs.
One thing that makes it possible to transfer money to poor people is digital banking, specifically M-pesa, the first company to do this. M-pesa started in 2007, but built on something people were already doing. In small communities banking has not been accessible to poor people. First there are no actual bank buildings, second most banks aren't interested in accounts that are very small and in any case would charge unaffordable fees. But since the advent of cell phones, which caught on very quickly in the developing world, people have found that they could transfer value/money to people in remote places buy using cash to buy cell phone minutes and then transferring those. You can buy cell phone minutes with grubby bills or small coins at corner kiosks and enter those into any account. Students at the University of Kenya developed software to make this even easier and M-pesa was launched. It is now also possible to pay utility bills and buy things directly using M-pesa. This is how money is transferred to the families in this program.
This program is a delightful change is the model of foreign aid in which the rich savior decides what the poor recipient needs. In this model we take staff, equipment and supplies to the poor recipient, only to find out that maybe it's not what's needed. Also, implementation of whatever great idea the rich savior had is difficult due to local customs and governments that would like to extract value on its way to the intended destination. Not to say that this model is dead or should go away, since good does come of it, just that it may be possible to do it a different way. A way that might be cheaper overall and not necessarily impose values on the recipient.
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