Foreign aid: why direct giving works

Direct giving

Foreign aid: why direct giving works

Critics foreign aid spending have recently postulated that taxpayer money is being lavished on ineffective development initiatives. We disagree - find out why.
Jonny Harper

At the start of 2017, The Daily Mail launched a fresh attack on the UK Government’s foreign aid spending. The newspaper claims that taxpayer money is being lavished on ineffective development initiatives, and filling the coffers of corrupt regimes around the world.

One article in this campaign, entitled ‘Queue here for UK's £1bn foreign aid cashpoint’, caught the attention of readers more than any other. The piece specifically targets direct UK donations to low-income families abroad via cash transfers or pre-loaded debit cards, and features a picture of people in Pakistan queuing to use an ATM machine. In such programmes, participants are able to use the money however they like, with no strings attached.

Critics have called the scheme a ‘scandal’, claiming that direct giving is wasteful, ineffective and open to corruption. One senior Conservative MP described the initiative as ‘exporting the dole’, demanding an urgent Government investigation.

It’s easy to see why this approach touches a nerve for many people. Trusting a person in need to spend your hard-earned cash wisely can seem like a real leap of faith compared to giving to an established charity.

We see evidence of this on our streets every day. Should I give a fiver to the rough sleeper I see daily, or would I do better to give to a homeless charity instead? Can I trust them not to spend the money on alcohol and drugs, or would it be safer to buy them food or a night in a shelter?

On a wider level, the public also want to know how their donations to major charities will be spent before giving. nfpSynergy research shows that the two most widely-held reasons for wanting to give to a particular charity are clarity on how donations are spent (56%) and understanding the impact of the charity (47%).

A growing body of evidence suggests, however, that giving directly to low-income individuals and families is an extremely effective way of increasing their quality of life and helping them to find their way out of poverty.

American charity Give Directly is an excellent example of how well this approach can work. Give Directly uses a mobile payments system to directly transfer money to the extreme poor in East Africa – and has been outstandingly successful so far.

GiveWell, an organization which ranks charities based on their impact and cost-effectiveness, names Give Directly as one of its seven ‘top charities’. According to a randomized control trial, Give Directly’s recipients experience significant increases in their short-term consumption, use their money to increase their incomes and assets in the long-term, and spend no more than they did previously on tobacco and alcohol. What’s more, GiveWell reports that cash is ‘well-targeted and consistently reaches its intended targets’ – allaying concerns of waste and corruption.

Empirical evidence aside, there’s also a strong moral case for direct cash donations to those in need. The approach shows respect for the global poor (a group that are normally afforded very little of this) by allowing them to decide what they want and need, and trusting them not to waste the cash or spend it on drugs and alcohol. It also gives them flexibility and agency, which are normally in short supply due to their financial situation.

There are many developmental problems that can’t be solved in this way, and foreign aid should continue to support programmes such as disease eradication and infrastructure building. But it’s clear that direct giving can also make a huge difference in solving global poverty, and to dismiss it as ‘exporting the dole’ is as misleading as it is cruel.  

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