Researching microfinance for the past four years, I have read and heard the adage about teaching people how to fish countless times. The essence of microfinance is that providing business capital is a form of sustainable philanthropy instead of a handout. If you have 18 minutes, I highly recommend this TED talk by Jessica Jackley, a founder of Kiva, talking about the power of microloans versus charitable giving. To sum up, charitable giving is about "us" giving to "them" out of guilt; microloans is about creating equal relationships and instilling a sense of pride, not shame.
But, the one thing that microfinance has not offered a lot of is proof of long-term economic value versus traditional philanthropy. Is it better to just give a poor person money versus giving them a microloan or a cow or school tuition? It seems like a "handout" just can't possibly be better, but studies are sparse and have problems. Why? Because most find it unethical to put poor people into randomly chosen groups and give one group a microloan and the other group none. Or one group a loan and the other a straight gift. Or school fees, or whatever. These types of human experiments make people feel very uncomfortable, so we don't have a lot of data that teaching people to fish is better than anything else.
So now comes a charity called GiveDirectly. The premise is that you give to GiveDirectly, and they give it (via cell phone) to the poorest people they can find in Kenya. And, they give a sizeable sum -- $1000 or $200 per household member to a household that lives under $1 a day. GiveDirectly argues this is efficient -- no money is spent on administration costs of microloan repayment or support, or agricultural training or monitoring. No money is spent on glossy brochures or websites or catalogs. GiveDirectly also argues that giving money with no strings attached is empowering -- recipients choose how to use the money; how much to save, how much to spend and what to spend the money on. Of course, this system flies in the face of the conventional wisdom of philanthropy today, and it is getting a lot of press. Here is a Morning Edition story on GiveDirectly, a NYT article by the same reporter, and another NPR story where GiveDirectly criticizes Heifer International and microfinance organizations for not doing studies to prove their "teach them to fish" theories. GiveDirectly is doing those experiments. Interestingly, when asked about studies, Elizabeth Bintliff of Heifer replied "It's just not that linear. It's not an equation. It's an ecosystem. That's the only way I can describe it." She then suggested she would send Melissa Cornish, the reporter, studies that support Heifer International's system, but later said that she could not make those studies public.
At that point, my eleven year-old said, "I agree with GiveDirectly." I'm not sure, but I am interested to see the results of the experiments.
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