The Wiki Man

A better way to be charitable: just give money

For years after people receive this year-long influx of funds, they earn more, own more, work more and are happier

4 July 2015

9:00 AM

4 July 2015

9:00 AM

Seven years ago I wrote here about a site called I had met the co-founder of this charity when she came to Oxford in 2007 and was intrigued by her idea. Jennifer Jackley had been inspired to start the site by Muhammad Yunus’s work on microlending — the practice of issuing small loans to people in the developing world who would other-wise have no access to credit.

At, rather than giving money, you lend it. You choose people and businesses, mostly in the poorest parts of the world, and advance them a fraction of the amount they want to borrow, typically $25. The loan is then paid back to you monthly, usually over a year. You can withdraw it or, more commonly, lend it to someone else. It is a kind of circulatory charity.

When I wrote about Kiva, I created a small lending team for Spectator readers to join: I checked last week, and after seven years the group has 95 members. But what astounded me was that those 95 people have made a total of 7,000 loans, amounting to $191,000. The cost? Only the modest interest forfeited by not depositing the money in a conventional bank.

Coincidentally, on the same day I learned we had made 7,000 loans via Kiva, a friend emailed me about another idea using technology to re-engineer the aid industry. It’s called, and if you’re the kind of person who hates the idea of your charitable donations funding what James Delingpole calls ‘a bunch of Ruperts with Soas degrees in sustainability, zooming around in Land Cruisers in search of hot French doctors from Médicins sans Frontières to shag, while helping the local economy barely one jot’ — well, you’ll love it.

In short, sends your money via mobile phone to really poor people. That’s it. No Land Cruisers, no degrees in development studies, no distorting the local economy by causing ambitious Kenyans to study sociology for three years in the hope of landing a job with an aid agency. Having identified someone who is inarguably very poor, it sends them large payments every month for a year — totalling $1,000, effectively doubling their income. The money is sent directly using the mobile phone payment systems, which are, fascinatingly, far more advanced in Kenya or Uganda than here.

At this point, you’re probably thinking, ‘But can it really be that simple?’ Well, here’s the odd thing: it seems that direct cash transfer really works. There is very little opportunity to game the system — because there is not much system to game. -Moreover, all the research shows that for years after people receive this year-long influx of funds, they earn more, own more, work more and are substantially happier.

Two things seem to be significant about this. One is that the money is given unconditionally — trusting that individuals rather than outside experts know what’s needed to improve their lives. The second is that the money is paid in large lump sums, but for a limited time. Conventional wisdom suggest that poor people given lump sums simply spend it all in some massive binge. All the evidence so far suggests the opposite is true. Most of us, after all, are both stingier and more far-sighted with windfalls than with our day-to-day salaries. Why should Ugandans be any different?

If it really is so simple, why did we not discover it before? One scary possibility presents itself. Quite simply, because many people like performing jobs that are visibly charitable and altruistic, might they overcomplicate solutions through the unconscious urge to play a heroic role in achieving them?

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  • aspeckofboggart

    I prefer giving money to doing jobs. My neighbours do the reverse, though they are richer. They like to visit and entertain sick folks. It’s a nice enough pastime, I suppose. I read recently Americans are more philanthropic than the Brits. How so? Attach higher weights to ‘performing jobs’.

    • I suggest that Americans are richer because their country, having traditionally fewer and lower taxes and more economic opportunity, allows them to be them so. This in turn means that they can afford to be more generous, not only with their countrymen but with others in need (see for instance the charitable giving from America after the 2004 Indian Ocean tsunami).

      • aspeckofboggart

        According to the article, Americans give less money per capita than the Brits.

        • Well, who knows? Americans are famously untight with their money — unless they are Leftists, in which case they righteously suppose that the state should give on their behalf. Conservatives and Christians give more than any other segment of American society. It should also be noted that America has a vastly larger number of illegal residents and a larger underclass than Britain has, and it has a much larger and less homogeneous population overall: something to keep in mind when judging ‘per capita’.

          When I lived in England, I gave more to what might be called minor charities and to breast cancer research — mainly because someone was always coming by my door shaking a change can under my nose. Since they were often my neighbours, I didn’t like to say No. But the best policy is to say that you have a charity budget and that the money has already been spent. I don’t like other people deciding where my charity goes.

      • Mary Ann

        That’s why so many Americans cannot afford proper health care.

        • Which Americans? Most can. Not that I want to start a discussion on that topic, about which most non-Americans are woefully ignorant and all Leftists are entirely disingenuous.

  • Quinquagesima

    Question: who decides which particular poor people receive the money, and how do they decide? My worry is that the Ruperts will still get in there at that level. There’s a Christian charity called Acts 435, where you choose to give money to specific UK-based individuals with a specific need. The recipients are not identified personally, but there’s enough information about them and their circumstances that you know what you’re giving to, and the money goes directly to that particular person.

    • rorysutherland

      They send people who use a variety of simple heuristics to identify the very poor: housing which is entirely free of brick, concrete or corrugated iron – ie just mud and straw – or which has no door (I imagine it is quite difficult to accumulate possessions if you don’t have a door). No Ruperts needed for this, I suspect.

      • rorysutherland
      • Quinquagesima

        Thank you; I’ll give it a go. (I followed your tip re Kiva, and that has been fun.)

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    • Mary Ann

      So some will get loaded and some will have nothing!

    • post_x_it

      What’s wrong with the scroungers’ section at the back of Private Eye? Definitely no middle men involved there.

  • Gilbert White

    The best method of distribution was the Norwegian method circa 1986. Bare breasted Norwegian ladies would walk the mealy fields with boxes of US. dollars distributing right and left to needy Zimbabweans. We can still feel the results of these today in Mugabes wobbly African Utopia.

  • WFB56

    A brilliant comment, ” Quite simply, because many people like performing jobs that are visibly charitable and altruistic, might they overcomplicate solutions through the unconscious urge to play a heroic role in achieving them?”

  • davidshort10

    I once suggested to the UN that instead of providing sacks of food to feed an African nation at civil war and distributing them via expensive air transport from the World Food Programme that we should just distribute the equivalent in money instead. This was not a popular notion. The market would have ensured the food arrived but a lot of self-important non-jobs would have been lost.

  • davidshort10

    The Mpesa system of mobile phone money transfer is truly impressive. So much so that the Kenyan government tried to take it over.

  • John Andrews

    Giving your time is better than giving money. Running a charity should not be a career choice.

  • I love the idea fo this.

    A debate recently in South Africa was around the #CEOSleepout: Big businesses pay R100 000 (£5 300) for their CEO to sleep in the streets for a night, with all the money going to homeless boys and girls shelters.

    People took issue with this as a publicity stunt, but the end result saw R25 000 000(£1 300 000) raised for the homes.

    I believe that the charitable donation needs to be paid for somehow. In the case of GiveDirectly, the payment is the warmth and happiness that one feels. In the #CEOSLeepout, the payment is having your name on the board saying “Rory did something good here!” I think people often miss that point.

  • Marketthinker

    It seems to me that all this fuss about the ‘glass floor’ as discussed in the report is a bit historic, looking at people who actually left school around 25 years ago. Is Alan Milburn, the Chairman of the group that produced this report suggesting that none of the Education, Education, Education reforms that his master Tony introduced since this cohort graduated have had any effect on the generation that followed?
    When this lot, born in 1970, graduated only 5% of eligible students had a degree, now 50% do so that doesn’t work any more as a route to success. It seems to me incidentally that the obvious route taken by the middle class parents of rather ordinary offspring is not to try and put them in the city, sorry but Tim nice but dim stopped getting into the city around Big Bang, shortly after this lot graduated. Their generation of well off but not terribly bright are far more likely to be an estate agent, headhunter or in PR.
    Nowadays parents push their lower ability children to the so called third sector. The rapidly (ever) growing ‘blob’ of quangos, NGO,s various layers of local and central government along with pseudo charities and lobby groups are seemingly entirely populated at the ‘management level’ with middle class lobbyists of moderate intelligence, none of whom has ever had to work in the private sector creating something that anybody else wanted to buy. As a result, rather like the BBC they have no concept of how a free market works – money is acquired by using ‘the system’. They lobby government, then they heckle, they hector and they bully the rest of us, while all the time feathering their own nest from Other People’s Money. They create nothing and seek to redistribute the wealth created by others to suit their own agenda. Their glass floor is a glass ceiling for the rest of us – ‘experience’ in the 3rd sector, Common Purpose, membership of the right ‘tribes’ guarantees the managerialist gravy train in the public sector. Thus did Tony Blair, Alan Milburn et al, none of whom has had a real job in their lives, leave us with a generation of clueless clones to follow them.

    • Marketthinker

      sorry that was supposed to go on Fraser Nelson’s blog!