Suppose you want to donate $100 to help the poor in Africa. People there, of course, have many different aspirations—starting businesses, educating children, achieving food security, among others. Your $100 can’t cover everything. Traditionally, donors and charities decide what to prioritize, meaning the poor get what practitioners deem best. But there’s another way: Give money directly to the poor and let them choose what goals to pursue.
Research shows that the poor are good at managing this money themselves. They typically save or invest 50 percent to 80 percent, work at least as much as before, don’t squander funds on alcohol, and put money toward their children’s nutrition and health.
This evidence has made direct cash transfers enormously popular with governments—as many as a billion people in developing countries already receive public cash assistance—yet charities have been slow to adopt the method. The potential, however, is vast. Electronic cash transfers are more efficient and transparent than any other mode of giving, and the branchless banking technology they use is exploding across the developing world. In Kenya alone, 14 million people can receive donations on their cell phones, and the cost of a transfer from the U.S. is just 3 percent.
In the end, giving away $100 can be surprisingly simple: Let the poor themselves decide.