Most organizations providing aid to people living in poverty have strings attached to that aid -- it's only for food, only for housing, only for solar panels. But what if those aid organizations gave money to the world's poor without conditions, letting them decide from themselves what is most important?
Economists at Harvard University and MIT tested out the idea [PDF] in a new study, and the results were fascinating.
For a year, between 2011 and 2012, a randomized controlled trial provided unconditional cash transfers to rural households in Western Kenya, where households generally live on a dollar a day, through the popular mobile money system M-Pesa.
The results? Not only did cash transfers help people who received them increase their assets by 58 percent over the control group mean, but it reduced a variety of poverty indicators. There was a 20 percent increase in food consumption; revenue from livestock and small businesses increased 48 percent and 38 percent respectively; and recipients showed improved psychological well-being. The households that received money with no-strings attached also spent their money on a wide range of goods and services, from food to healthcare. But one area where spending didn't increase was alcohol, tobacco, and gambling.
The cash transfers weren't a poverty cure-all. The cash transfers had no impact on health or education over time, but there was some evidence to suggest that the cash transfers helped reduce domestic violence and increase female empowerment.
There are about one billion people who live in extreme poverty, on $1.25 or less per day, around the world.
Photo: Flickr/Kerri Lee Smith