Global Economics

Want to Fight Poverty? Just Give the Poor Cash


A taxi driver counts a bundle of Kenyan shilling notes in Mombasa, Kenya

Photograph by Trevor Snapp/Bloomberg

A taxi driver counts a bundle of Kenyan shilling notes in Mombasa, Kenya

A new study by economists at Harvard and from MIT suggests that the best way to fight global poverty (PDF) is simply to give people cash and let them spend it however they want. The study was conducted with Innovations for Poverty Action, with funding from the National Institutes of Health Common Fund.

The research focused on households in rural western Kenya, where nearly two-thirds of people report not having enough food in their house for the next day. An average equivalent of $720 was given randomly to recipients through the mobile banking service M-Pesa.

Food consumption increased 20 percent, with a 42 percent reduction in the number of days children go without food. Recipients were also able to increase their ability to earn income. Revenue from raising livestock rose by 48 percent; total revenue from self-employment rose by 38 percent.

In some cases, the researchers gave money directly to women, and noticed lower levels of spousal abuse, as well as lower levels of stress especially when transfers were sent to women rather than men, according to Johannes Haushofer, the study’s co-author and an economist at MIT.

Of course, this isn’t how most aid is delivered now. The majority of global assistance to the severely poor is given through some sort of “in-kind” transfer of food or livestock or medical care. Though unconditional cash transfer programs are gaining attention and now reach 1 billion people, according to the study.

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Philips is an associate editor for Bloomberg Businessweek in Washington. Follow him on Twitter @matthewaphilips.

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