Giving no-strings-attached money to the world's poorest produces remarkably good results

The Economist details outcomes from Give Directly, an organization that analyzes satellite photos to identify the poorest places in the world and then hands over no-strings-attached cash grants to the people who live there. It's a contrast to other programs, where donations are funneled into school construction or funding planned-out businesses. Give Directly has produced remarkably good results: "In randomly selected poor households in 63 villages that have received the windfalls, they say, the number of children going without food for a day has fallen by over a third and livestock holdings have risen by half. A year after the scheme began, incomes have gone up by a quarter and recipients seem less stressed, according to tests of their cortisol levels."

Still, this is not the only cash giveaway. A trial in Vietnam in 2006 gave one-off handouts to 550 households; two years later, local poverty rates had fallen by 20 percentage points. The scheme was dubbed “cash for coffins” after elderly recipients spent the money on their funeral arrangements to save their children the expense.

A different scheme has been running in northern Uganda for four years. The government gives lump sums of around $10,000 to groups of 20 or so young people who club together to apply. Chris Blattman of Columbia University, New York, who has studied the programme, calls it “wildly successful”. Recipients spent a third of the money learning a trade (such as metalworking or tailoring) and much of the rest on tools and stock. They set up enterprises and work longer hours in their new trades. Average earnings rose by almost 50% in four years.

This scheme has a condition: applicants must submit a business plan. But it highlights the virtues of no-strings grants (UCTs). They work when lack of money is the main problem. The people who do best are those with the least to start with (in Uganda, that especially means poor women). In such conditions, the schemes provide better returns than job-training programmes that mainstream aid agencies favour. Remarkably, they even do better than secondary education, which pushes up wages in poor countries by 10-15% for each extra year of schooling. This may be because recipients know what they need better than donors do—a core advantage of no-strings schemes. They also outscore conditional transfers, because some families eligible for these fail to meet the conditions through no fault of their own (if they live too far from a school, for instance).

Pennies from heaven

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