In an Eastern Rwandan village, a widow, her children, and grandchildren received six monthly $100 cash transfers. The family first bought some food. Then they purchased four goats and two chickens. When the goats had kids, they sold them.
Now they say they have eggs and meat to eat; they sleep on a mattress rather than the floor.
Where are we going? To whether aid programs should give people cash.
Rwanda’s Cash Transfers
A typical aid program gives people chickens, fertilizer, job training. The donors determine how the money will be spent. We know these projects make many of us feel good. But do they do good? Researchers in Rwanda are trying to find out by comparing the impact of a training program to cash grants with similar goals.
The Rwanda study started during 2017 when 40,000 participants began 30 weeks of training. For 10 weeks, they learned about “workforce readiness.” The second 10 weeks were about entrepreneurship and the third, technical training.
The cash side of the experiment was designed in three ways. In one version, the cash amount was the equivalent of the training program. In another, it exceeded the cost of the training program. And a third was a hybrid; it combined cash with training.
While the results are still emerging, for now, the cash group fared better. The cost equivalent cash group earned more monthly income. The increase in their productive assets and their household livestock wealth bypassed where the training group wound up. Still, the data is interim. Scholars will be looking at years of results.
Stockton’s Cash Transfers
Asking about cash gifts, our answers can also come from the U.S.
A nonprofit organization selected Stockton, California for unconditional cash transfers because almost one fifth of the city’s 311,000 (or so) residents live in poverty. From a neighborhood with a median income below $46,000, they selected 125 people and a control group of 200. The basic idea was to give each person a monthly debit card deposit of $500.
The $3 million project was funded by $1 million from one nonprofit and $2 million that other donors and organizations provided. Then, because of the pandemic, extra funding has extended the end date from this summer to the beginning of 2021. The start date was the beginning of 2019.
So far, researchers have cited a practical and intangible impact. Food topped the list for spending and then items from stores selling clothing and home goods. After that, recipients paid for utilities, cars, doctors, and recreation. One girl got a prom dress. A woman (and her dog Poopee–I love the name) could afford an apartment after a fire destroyed their home. People enjoyed more time with their children and better sleep.
Our Bottom Line: The Upside of Cash
Cash giveaways use a simpler model than education and goods giving programs. To give a cow, for example, you need to find the recipients, allocate the donations and then deliver the animal. One West Bengal, India program spent $331 to give a $166 cow.
Cash can also serve as a benchmark. People on Wall Street benchmark all the time. They though use market indices. To decide if they are faring well, they tell clients how the percent increase (or decrease) in the S&P 500 compares to their own investment portfolios. The Dow Industrial Average is one of many other possibilities.
Similarly, cash comparisons can illustrate if a development program is effective. According to a 2018 NY Times article, in approximately 106 countries, through thousands of projects, we spent $13 billion. Hundreds of for-profit and non-profit groups have contracts with the U.S.A.I.D. to provide goods and training.
Returning to Rwanda and Stockton, a cash benchmark will tell us if we are doing good…not just feeling good.
My sources and more: Vox is always a handy source for some interesting journalism. When I saw their headline on cash grants, it grabbed my attention. I suggest taking a look at two articles, here and here. From there, if you still want more about development aid, this NY Times article briefly said it all. Similarly, The New Yorker had the up-to-date story of Stockton. Then, for the history and current facts on cash transfers, do go to The Atlantic.
Please note that parts of the section on Stockton was previously published in a past econlife post.