Unconditional cash transfer

Based on Wikipedia: Unconditional cash transfer

What If the Best Way to Help Poor People Is Just to Give Them Money?

Here's a question that has puzzled economists, philanthropists, and policymakers for decades: when you want to help someone escape poverty, what's the most effective thing you can do?

You could build them a school. You could train them for a job. You could give them livestock, or seeds, or a small business loan. You could provide healthcare, housing subsidies, or food stamps. Each of these approaches comes with its own infrastructure, its own bureaucracy, its own set of assumptions about what poor people need and how they should use help.

Or you could just hand them cash. No strings attached.

This idea—unconditional cash transfers—sounds almost naive in its simplicity. Surely there must be a catch. Won't people waste the money? Don't we need to ensure they spend it on "the right things"? Isn't this just enabling dependency?

The research says otherwise. And the results are compelling enough that one of the largest foundations in philanthropy, backed by a Facebook co-founder's fortune, has poured more than forty million dollars into the approach.

The Conditional Reflex

To understand why unconditional cash transfers are interesting, you first need to understand what they're not.

Most government welfare programs around the world are conditional. This means recipients must do something to qualify for and continue receiving benefits. In Latin America, programs like Mexico's Progresa (later renamed Oportunidades, and now Prospera) require families to keep their children in school and attend regular health checkups. In the United States, food stamps can only be used for food. Housing vouchers can only be used for housing. Welfare recipients often must prove they're looking for work.

The logic behind conditions seems reasonable. If you're giving people money, shouldn't you ensure it goes toward things that will actually improve their lives? Children need education. Families need healthcare. Surely guiding people toward these outcomes is better than hoping they'll make good choices on their own.

But conditions come with costs. Someone has to verify compliance. Bureaucracies must be built to check school attendance records, confirm medical visits, and audit purchases. These systems are expensive to run. They're also paternalistic—built on the assumption that poor people don't know what's best for themselves, that they need to be nudged or forced into good decisions.

Unconditional cash transfers flip this assumption on its head. They're built on a radically different premise: that poor people understand their own lives better than distant policymakers do, and that given resources, they'll make reasonable choices about how to use them.

The Organization That Made It Real

In Cambridge, Massachusetts, a group of economics graduate students had been watching two trends converge.

First, academic research on cash transfers was accumulating, and the results looked promising. Study after study suggested that when you gave poor people money, they tended to spend it sensibly. They didn't blow it on alcohol or tobacco at higher rates than usual. They invested in their farms, their businesses, their children's education, their health.

Second, mobile money technology was spreading across the developing world. In Kenya, a system called M-Pesa had revolutionized how people moved money around. Using nothing but a basic mobile phone, Kenyans could send cash to family members in distant villages, pay for goods at local shops, and store savings safely without needing a bank account. The infrastructure for cheap, reliable money transfers was suddenly available in places that had never had traditional banking.

These graduate students saw an opportunity. What if you combined the research evidence with the technology to create a charity that did one thing exceptionally well: identify extremely poor people and give them money?

They called it GiveDirectly.

The name captures the philosophy perfectly. No intermediaries. No programs. No training sessions or livestock distributions or loan officers. Just direct transfers from donors to recipients.

How Do You Give Money to People Without Phones?

There was an immediate practical problem. M-Pesa worked brilliantly for people who had mobile phones. But in the poorest communities of Kenya and Uganda, ninety percent of potential recipients didn't own one.

The solution was clever. GiveDirectly didn't need to give everyone a phone. They just needed to give everyone a SIM card—the small chip that carries a phone number and, crucially, can be linked to a mobile money account.

Here's how it worked. A recipient would receive a SIM card that was essentially an entitlement to a sum of money on a particular date. When the transfer day arrived, they'd travel to the nearest economic center in their community—a village shop, perhaps, or a market stall. There, a shared mobile phone would be available. The recipient would insert their SIM card, and the money would flow through.

This elegant workaround meant that the infrastructure of mobile money could reach even the phoneless poor. The shared phone at the economic center became a kind of ATM, accessible to anyone with the right SIM card.

The Skeptics Weigh In

Any approach this simple was bound to attract scrutiny. When GiveDirectly published a rigorous impact evaluation of its program in 2013 (later peer-reviewed and published in 2016), economists paid attention.

David McKenzie, an economist at the World Bank, praised the study's design. The researchers had been transparent about potential conflicts of interest—after all, one of the study's leads was a GiveDirectly co-founder. The methodology was sound.

But McKenzie raised two important concerns.

The first was about self-reporting. When you ask people how much they're eating, how much they're spending, whether their lives have improved—you're relying on their subjective accounts. People might exaggerate improvements to please researchers. They might misremember. They might tell you what they think you want to hear. This is a problem for any study measuring consumption and wellbeing, but it still limits how much confidence you can place in the results.

The second concern was statistical. To understand whether cash transfers work, researchers divided recipients into different groups—some received larger transfers, some smaller; some got lump sums, others got monthly payments. Each subdivision made it harder to detect clear differences between groups. With smaller sample sizes in each category, the statistical power to identify real effects diminished.

Chris Blattman, a development economist known for his work on randomized controlled trials, added his own reservations. He worried about the observer-expectancy effect—a subtle form of bias where researchers' expectations unconsciously influence how subjects respond. If recipients sensed that the researchers hoped to find positive effects, they might shade their answers accordingly.

More substantively, Blattman noted that the study didn't show clear positive effects on long-term outcomes. Recipients weren't spending significantly more on health or education. The transfers seemed to help people in the short term, but would the benefits persist?

The Evidence Grows

Subsequent research addressed some of these concerns.

A follow-up study examined what happened not just to recipients, but to their neighbors and communities. This matters because cash transfers could, in theory, hurt non-recipients. If you give money to some households and not others, prices might rise locally, making everyone who didn't get a transfer worse off. Alternatively, transfers might benefit non-recipients by increasing overall economic activity in the area.

The follow-up found net positive spillovers at the community level. Recipients' neighbors weren't being hurt; if anything, the transfers seemed to lift the local economy.

Another study moved beyond self-reported outcomes to look at objective health measures. Researchers tracked body weight and other physical indicators. The findings were encouraging: unconditional cash transfers appeared to improve actual health outcomes, not just people's perceptions of their health.

Cash in Crisis

While GiveDirectly focuses on long-term poverty reduction, unconditional cash transfers have also found a role in humanitarian emergencies.

The CALP Network (formerly the Cash Learning Partnership) brings together organizations working on what practitioners call cash and voucher assistance in humanitarian contexts. Their members include the United Nations, the Red Cross and Red Crescent movement, international aid organizations, and researchers studying how cash transfers perform when disaster strikes.

The logic is intuitive. After a typhoon devastates a region, what do affected families need most? The answer varies enormously. Some have lost their homes. Some have lost their livelihoods. Some need immediate food; others need medicine; others need tools to begin rebuilding. Traditional aid organizations try to predict these needs and ship in supplies—food packages, tents, blankets, water purification tablets.

But prediction is hard. Aid shipments often include things people don't need while lacking things they desperately do. Cash sidesteps this problem. Give people money, and they can buy what they actually need. Local markets revive. Recipients retain dignity and agency.

Consider some examples from recent emergencies.

In the Democratic Republic of the Congo, UNICEF ran what became the largest humanitarian unconditional cash transfer partnership in the country. Called the Alternative Responses for Communities in Crisis Programme, it provided cash to families caught in one of the world's most protracted and complex humanitarian crises.

In Niger, following a severe food crisis, unconditional cash transfers helped displaced households both reduce immediate food insecurity and fund their eventual return home.

In the Philippines, after Typhoon Ketsana struck the provinces of Rizal and Laguna, unconditional cash helped families through both relief and recovery phases.

The Digital Dividend

Humanitarian cash programs have increasingly gone digital, using mobile money systems similar to the M-Pesa platform that enabled GiveDirectly's early work.

Researchers have studied these electronic transfer projects in countries including Ethiopia, Zimbabwe, and Bangladesh, examining a fascinating secondary question: when you give people access to mobile money through emergency cash transfers, do they continue using digital financial services afterward?

The answer matters because financial inclusion—having access to savings accounts, credit, and reliable money transfer services—is itself a tool for escaping poverty. If humanitarian cash transfers can serve as an on-ramp to ongoing financial services, the benefits might extend far beyond the immediate crisis.

The research found mixed results. Some recipients did continue using mobile money for savings, purchases, and transfers. Others reverted to cash-only transactions. The factors influencing uptake included local infrastructure, trust in the technology, and whether recipients had ongoing needs that digital services could meet.

Lessons From Three Countries

Beyond emergency contexts, several countries have run unconditional cash transfer programs long enough to yield meaningful data.

South Africa's Old Age Pension Scheme provides monthly payments to women over sixty and men over sixty-five who pass a means test—essentially, who can prove they're poor enough to qualify. Despite being targeted at the elderly, the program has had ripple effects throughout recipient households, affecting nutrition and schooling for grandchildren who live with pension-receiving grandparents.

Ecuador's Bono de Desarrollo Humano (Human Development Bonus) began as a conditional program but has been studied for its unconditional elements. Research has tracked how recipients use the funds and whether the money improves outcomes for children in beneficiary families.

South Africa also runs an unconditional child grant, providing regular payments to low-income families with children. This program has been particularly well-studied, with researchers examining effects on child health, nutrition, and educational outcomes.

Cash as a Benchmark

Perhaps the most provocative argument to emerge from the unconditional cash transfer movement isn't about the transfers themselves. It's about how we evaluate everything else.

Jeremy Shapiro, one of GiveDirectly's co-founders and the lead researcher on their impact evaluation, has proposed using cash transfers as a benchmark against which other development interventions should be measured.

The logic is straightforward. Suppose an organization wants to reduce poverty by distributing livestock to rural families. The program costs one hundred dollars per family. The question Shapiro asks is: would those families be better off if you just gave them the hundred dollars instead?

Cash transfers are simple. They're scalable. Their costs are transparent—nearly all the money goes directly to recipients. This makes them an ideal baseline. Any more complex intervention should have to prove it delivers more value than simply handing over the equivalent cash.

This benchmark approach has been endorsed by Innovations for Poverty Action, a major research organization in development economics, and by GiveWell, the charity evaluator that has championed GiveDirectly since 2012.

It's a demanding standard. Many beloved development programs might fail it. That vocational training initiative, that microfinance scheme, that agricultural extension service—would recipients have been better off with cash? The question is uncomfortable precisely because it forces honest accounting.

The Health Verdict

In 2017, a team of researchers from Cornell University, Harvard University, and the Universities of Bremen and Otago undertook the first comprehensive systematic review of how unconditional cash transfers affect health.

A systematic review differs from a single study. Instead of running one experiment, researchers gather all the existing high-quality studies on a topic and synthesize their findings. The Cochrane Collaboration, which coordinated this review, is considered the gold standard for such work in medicine and public health.

The team analyzed twenty-one studies, including sixteen randomized controlled trials—the most rigorous form of evidence available.

Their findings were nuanced but largely positive.

Unconditional cash transfers didn't seem to increase the use of health services. Recipients weren't going to doctors or clinics more often. But here's the surprising part: they were getting sick less. The review found a large and clinically meaningful reduction—roughly twenty-seven percent—in the likelihood of being sick among transfer recipients.

How can you be healthier without using more healthcare? The answer likely lies in prevention. Cash enables better nutrition, cleaner water, improved housing, reduced stress. These factors prevent illness before it starts, which is different from treating illness once it occurs.

The review also found that unconditional cash transfers improved food security and dietary diversity. Families ate more and ate better. Children in recipient households were more likely to attend school. Families spent more on health-related expenses when they did need care.

An update to this landmark review in 2022, drawing on a larger body of evidence accumulated in the intervening years, confirmed these findings. It also found sufficient evidence that unconditional cash transfers reduce the likelihood of living in extreme poverty—a seemingly obvious point, but one that needed rigorous confirmation.

The Bigger Picture

Unconditional cash transfers aren't a silver bullet. They don't solve every problem. In places without functioning markets, cash is useless—you can't buy food that doesn't exist. In contexts of extreme instability or violence, cash might make recipients targets. And cash alone won't fix structural problems like inadequate schools, corrupt governments, or absent infrastructure.

But as one tool among many, unconditional cash has proven surprisingly robust. It respects recipients' autonomy. It's cheap to administer. It adapts to local conditions because recipients themselves make the decisions. And increasingly, the evidence suggests it works.

The basic insight is almost embarrassingly simple: poor people are poor because they lack money. Give them money, and at least that problem is solved. What they do with it—how they invest in their families, their health, their futures—turns out to be largely sensible. The paternalistic assumption that the poor can't be trusted with resources doesn't survive contact with the data.

Whether unconditional cash transfers become a major force in global poverty reduction remains to be seen. They face political obstacles—voters often prefer programs that feel more active, more directed, more controlling. But for those willing to follow the evidence, the case for simply giving money away has become remarkably strong.

Sometimes the best way to help is to get out of the way.