Monday, November 4, 2013

Pennies from heaven

Giving money directly to poor people works surprisingly well. But it cannot deal with the deeper causes of poverty.  Article from The Economist (link here).

SOME unlikely things combined to change Gabriel Otieno Anoche’s life. A satellite passing over east Africa took pictures of his roof. Some keen-eyed people in the Philippines, monitoring the satellite data remotely, spotted the roof’s lack of luminosity, showing that Mr Anoche lived under thatch (not tin). In western Kenya, that is an indicator of poverty. Then Google and Facebook contributed money to Give Directly, a charity which hands out no-strings-attached cash to the poorest people it can find.

The 25-year-old carpenter knew nothing of this until he came home one day to find that strangers had given his wife a mobile phone linked to a bank account. Next came a $1,000 windfall, which they were free to spend on whatever they liked.

The idea sounds as extraordinary as throwing money out of helicopters. But this programme, and others like it, are part of a shift in thinking about how best to use aid to help the poorest. For decades, it was thought that the poor needed almost everything done for them and that experts knew best what this was. Few people would trust anyone to spend $1,000 responsibly. Instead, governments, charities and development banks built schools and hospitals, roads and ports, irrigation pipes and electric cables. And they set up big bureaucracies to run it all.

From around 2000, a different idea started to catch on: governments gave poor households small stipends to spend as they wished—on condition that their children went to school or visited a doctor regularly. These so-called “conditional cash transfers” (CCTs) appeared first in Latin America and then spread around the world. They did not replace traditional aid, but had distinctive priorities, such as supporting individual household budgets and helping women (most payments went to mothers). They were also cheap to run...

Read the full article here.

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