A growing number of foreign aid organizations have been coming around to the novel idea that the well-off could best help the world’s poor simply by giving them money. Don’t build roads or fund public health campaigns or proffer job skills — just give people cash. The idea has been floated, among other places, in the aptly titled book Just Give Money to the Poor, which Miller-McCune reviewed last summer.
As far as how to go about doing that, though, a parallel seismic shift in the reality on the ground in the world’s poorest countries could enable aid organizations to scale up the idea — to game-changing effect.
“We should be very, very excited about the fact that the majority of the people we care about that we’re trying to reach now have a mobile phone — we can think fundamentally differently about how we reach them,” said Priya Jaisinghani, a senior adviser to the United States Agency for International Development. “What we’re seeing is that with this simple device, you can think about banking without the bank, you can think about education without the school, you can even think about health care services without the public health system.”
That cell phone could facilitate cash transfers directly from donor organizations to the world’s poor, bypassing corrupt bureaucrats who skim off shockingly large sums and replacing armored-car cash distribution points that are costly and inefficient to run.
Jaisinghani was speaking at a New America Foundation event ambitiously mulling the question, “Can Technology Save Foreign Aid?” Apparently, there is an app for that.
Jamie Zimmerman, the director of New America’s Global Assets Project, and Henry Jackelen, a United Nations Development Programme official, unveiled a paper outlining exactly what such a cell-phone-assisted cash transfer program would look like.
Zimmerman says the development world is poised for such a system thanks to the momentum of three converging trends. Smaller-scale “conditional cash transfer” programs — which require, for example, female heads of household to immunize their children or enroll them in school as a condition of receiving money — have been proving successful in Africa and Latin America. The microfinance field has shifted from an exclusive focus on giving the poor credit to helping them build savings. And technology has advanced to the point where legions of the world’s poorest, who may be able to afford little else, now own a cell phone.
“You put these things together, and I think you have a really powerful recipe for massively providing the poor with opportunities to save and build their assets,” Zimmerman said. “You have three trends, and from there, you can get at solving what’s a very old problem, and that’s the problem of the inefficiency and ineffectiveness of [official development assistance].”
Foreign aid is a notoriously inefficient beast, but some of the figures Zimmerman and Jackelen cite are still shocking. The amount of Western aid that actually makes it to the impoverished individual household level is estimated to be as low as 10 percent in some countries. A corruption audit of the Global Fund to Fights AIDS recently discovered that 67 percent of funds in Mauritania — and 36 percent in Mali and 30 percent in Djibouti — were misspent or unaccounted for.
Miller-McCune’s Washington correspondent Emily Badger follows the ideas informing, explaining and influencing government, from the local think tank circuit to academic research that shapes D.C. policy from afar.
Donor governments and organizations, meanwhile, have long measured the impact of aid in money spent not outcomes achieved. Electronic cash transfers, however, would eliminate both the price of corruption and many of the transaction costs of getting paper money to the poor, stretching aid dollars much further at a time when few governments are interesting in giving more. One domestic Brazilian aid program, for instance, cut its administrative costs from nearly 15 percent to less than 3 percent of money dispersed by switching to an electronic transfer system.
The primary beauty of cell phones — Zimmerman and Jackelen cite projections that 1.7 billion people in the world will have one by 2012 — is that they allow the poor to receive money without a bank account. Aid could be transferred through a credit that’s recognized — alongside a biometric ID — at retail locations or post offices. Such systems are in place in poor countries where 140 million people are already receiving cash transfers from their own governments. Of that population, just a quarter receives that money into a full-fledged bank account.
The idea still has technical challenges and some geopolitical ones, too. It’s hard to imagine Hamid Karzai, for instance, allowing foreign aid organizations to wire money straight to his citizens without going through the Afghan government first.
“We’re not arguing that this should replace all other forms of aid or that this is any sort of panacea to poverty reduction,” Zimmerman said. “What we’re arguing is that there’s an increasing acknowledgement that aid in its current form has a lot of problems and that we need to think creatively about new ways to actually reach the poorest of the poor.”
The proposal equally requires a real shift in thinking on the part of donor organizations accustomed to treating the poor as if they need help figuring out how to spend their money.
“Could we trust a model where we’re not having aid go through these highly regulated programs where it’s a bunch of contractors coming in, giving the service, building the school, but we actually let go, and we say ‘have the money, you do it’?” Jaisinghani asked. “It’s quite revolutionary to think about letting go — just give them the money.”
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