As the Covid-19 pandemic pushed an estimated 150 million more people into extreme poverty globally, according to the World Bank, governments ramped up their social protection efforts, particularly in the form of cash transfers, contributing to increasing evidence that unconditional, direct cash transfers are an effective means towards alleviating poverty.
In light of this, the role that cash transfers might play in addressing Africa’s poverty crisis over the next few decades, and what this means for philanthropic efforts, deserves deeper consideration.
Extreme poverty in Africa, which was similar to the world average in the early 1980s, was 6.8 times higher than the world average by 2015. Institute for Security Studies figures indicate that the pandemic swelled the numbers of people living in extreme poverty, bringing the current estimated total of Africans living on less than US$1.90 per day to 475 million people.
At this rate, Africa has little hope of meeting the Sustainable Development Goal of ending poverty in all its forms for 97% of the population by 2030.
The continent faces a myriad of additional burdens in the decades to come in the form of environmental and climate change threats, food insecurity, price volatility, high unemployment, a heavy disease burden and significant population growth, with the population estimated to reach 2.5 billion by 2050.
These vulnerabilities have increasingly led governments and donors in Africa to consider how social protection, particularly cash transfer programmes, might help to alleviate some of the continent’s challenges.
“Extreme poverty in Africa, which was similar to the world average in the early 1980s, was 6.8 times higher than the world average by 2015.”
While getting money to recipients may once have been difficult, Africa’s rapid adoption of financial technology has ensured that the future of African banking is mobile, with the continent accounting for 70% of the world’s US$1 trillion mobile money value, according to global mobile network operators non-profit GSMA. Mobile money allows rural and remote populations to access government and donor programmes, even in the absence of bank accounts.
The pandemic pushed many countries to improve their mobile money systems and it was the more readily adaptable governments that were able to react better to crisis. Togo, for example, built and launched a digital mass payment platform in less than two weeks to successfully distribute emergency financial support to half a million people using mobile phone technology. Beneficiaries could enrol and receive payments within two minutes using basic mobile phones and without internet.
Transforming lives through cash giving
Less than 2% of donor spending spending is currently delivered in the form of cash. However, as the evidence in favour of cash transfers mounts, private donor organisations such as GiveDirectly are putting this theory into practice, while rigorously documenting the efficacy of their programmes.
GiveDirectly operates from the principle that people living in poverty deserve the dignity to choose for themselves what they need to improve their lives. Cash transfers allow individuals to invest as they see fit and according to their individual needs.
As such, GiveDirectly specialises in delivering digital cash transfers directly to those in extreme poverty as well as people impacted by sudden onset crises, such as the Turkish earthquake or climate change events. Since 2009, the organisation has delivered over US$650 million directly into the hands of over 1.4 million people through operations in the Democratic Republic of Congo (DRC), Kenya, Liberia, Malawi, Mozambique, Morocco, Nigeria, Rwanda, Turkey, Uganda, USA and Yemen.
“Less than 2% of donor spending is currently delivered in the form of cash.”
Its flagship large transfer programme delivers a one-time transfer of about US$1 000 directly to households living in extreme poverty. The amount is calculated as the average household expenditure for a year for households in poverty in the countries where the programme operates. Since its inception, the programme has paid out more than US$220 million to 350 000 households in rural Kenya, Liberia, Malawi, Rwanda and Uganda, with current research demonstrating a sustained increase in recipients’ assets over time.
Since 2017, the organisation has also led the world’s largest and longest-term study of the effects of a universal basic income through its programmes in parts of Kenya, Malawi and Liberia. Monthly cash transfers of a value specifically designed to lift the recipients above the local poverty line are delivered to every eligible adult in the targeted region. The 12-year, US$30 million project has distributed cash to 20 000 individuals across 197 villages.
“Cash transfers appear to be outperforming traditional giving as well as skills and capacity-building programmes in alleviating poverty.”
The organisation’s findings are backing up widespread research reviews which, contrary to traditional critiques of cash transfers, are showing negative expenditure on temptation goods and greater application of the money to improving household income-generating activities, rather than reduced work effort.
GiveDirectly’s research found that recipients use the cash in creative and impactful ways to pay for, among other things, medicine, livestock, school fees, water, solar, tin roofs, irrigation, motorcycles, income-generating businesses and other items that make meaningful long-term differences to their lives.
Cash transfers appear to be outperforming traditional giving as well as skills and capacity-building programmes in alleviating poverty, while costing less to implement and ensuring that more donor money reaches the people who need it.
GiveDirectly CEO Rory Stewart, speaking in a UN podcast, encouraged donor organisations to challenge the motivations for their approach to giving and to consider cash transfers as a dignified and meaningful way to contribute to poverty reduction.
Read more about social and community development:
- Read the Overview of CSI spend in social and community development in 2023.
- Read last year’s stats at the Overview of CSI spend in social and community development in 2022.
Source: The original version of this article was published in the Trialogue Business in Society Handbook 2023 (26th edition).
