Philanthropy as an institution has long taken the heat for perpetuating unequal power dynamics. Some might argue that the very nature of the giver-receiver relationship makes it impossible to extricate either party from such dynamics. Others insist that long-held beliefs, assumptions, and practices within the field of philanthropy are to blame. But the pandemic and the police killing of George Floyd have led to a reckoning, leading many to question the entrenched systems which keep some people and organizations at the bottom of the power equation. On a societal level, there has been a widespread shift in the philanthropic sector’s focus towards fostering racial equity. Philanthropy’s response has also been inward looking, as many funders have ceded power to grantees and the communities they serve by tinkering with new approaches such as unrestricted grants and direct cash transfers. Regarding the latter, a recent report by Deloitte’s Monitor Institute titled What’s Next for Philanthropy in the 2020s predicts that more funders will “begin experimenting with using direct cash transfers to individuals as a way of putting dollars and decisions directly under the control of families and community members themselves.”
How do direct cash transfers challenge traditional funder practices?
Traditionally, foundations have only supported organizations carrying out specific programs, oftentimes imposing onerous requirements to access funding, both in terms of the application process and subsequent reporting requirements. Critics such as Eshban Kwesiga and Ese Emerhi argue that these requirements only serve to sow mistrust. “This is a classist attitude rooted in the idea that poor people cannot be trusted, and it creates an uncomfortable reality where competition for funding and donor attention breeds divisions amongst local organizations. This behaviour, akin to the divide and rule strategy used in the colonial days, has done little to advance change or any real development over the past 70 years.”
One way funders have addressed these issues is by offering general support to nonprofits and letting them decide how best to use the funds.
But why not take this a step further? If providing general operating support opens an avenue for funders to cede power to nonprofits, offering cash assistance to individuals is yet another pathway to balancing the power equation with beneficiary communities. Providing this type of support is predicated on trust—trust that individuals in need are the best stewards of funds meant to improve their circumstances.
So, how exactly do cash transfers work?
In short, it depends on the funder’s approach. During the pandemic, many funders offered this type of support either directly through their own COVID relief programs, or by funneling money to needy individuals through nonprofits on the ground.
At the pandemic’s outset, numerous COVID relief programs targeted individuals struggling to pay their bills due to job loss or illness. Individuals could apply for cash assistance by completing a brief online form or sending an email. While this process was frictionless for most, some vulnerable populations, such as illegal immigrants, refrained from applying due to concerns about their personal data. Thus, many funders depended on nonprofit organizations to distribute cash.
One foundation that relied heavily on partner organizations was the Greater Washington Community Foundation. An Urban Institute report titled Direct Cash Transfer as a Vehicle for Speed, Inclusivity, and Equity looks at how the Foundation and its partners in Washington, DC, utilized direct cash assistance to support individuals who had been left out of federal relief programs, to the tune of $26 million distributed to 60,000 people through awards ranging from $50 to $2,500.
Distributing multimillions in funds required a high level of trust between the Foundation and its partners. Partner organizations assisted in allocating cash awards to Latino, immigrant, Black, and low-income populations. As they already had well-established ties to these communities, partner organizations played an indispensable role as an intermediary, both in terms of communicating needs to funders and in terms of identifying and securing the trust of cash recipients, many of whom were wary of no-strings-attached awards. In turn, the Foundation supported its partners by managing funds, providing technical assistance, and researching the financial mechanisms by which cash transfers could be made, such as by bank transfer or debit card.
Direct cash assistance can also be a tool in non-emergency situations. One organization that has been experimenting with this for years is GiveDirectly. Since 2009, GiveDirectly has helped get over $400 million into the pockets of those in need, primarily in Africa.
How do they collect and distribute funds? Individual donors can visit the GiveDirectly website and make either a general donation or a program-specific one. In addition to its COVID-relief programs in Africa and the U.S., GiveDirectly currently offers programs to provide basic income and to support refugees in Africa. The basic income program awards cash payments of $30 per month to every adult in a particular village, while the refugee program primarily provides one-time cash transfers to conflict affected refugees living in refugee camps or a host community. Donors can also select “any cash transfers” to contribute towards large, one-time awards to African individuals living in poverty.
Cash transfers are mainly made through electronic payment services, and require only a SIM card to participate, which is provided by GiveDirectly to households without one.
GiveDirectly plays an active role in identifying aid recipients, most of whom live in extreme poverty. They do this by utilizing national poverty data to identify needy villages, and by partnering with nonprofits, community-based organizations, and apps to locate eligible individuals.
How successful are these approaches?
Through their unique approach, the Greater Washington Community Foundation and its partners were able to assist vulnerable populations left out of the federal government’s economic stimulus and expanded unemployment benefits. In addition to ensuring inclusion for these overlooked groups, direct cash transfers facilitated the quick and equitable transfer of funds. The partnership model they created fell outside the realm of traditional grantor/grantee relationships and ensured that every participating organization had an essential role to play in the success of the program.
What about the experience of those receiving direct cash assistance? Although only three beneficiaries were interviewed for the report, they said that the payments had helped to alleviate pandemic-related financial and emotional pressures, especially in terms of covering essential needs. In the words of one beneficiary, “When they told me that the funds were coming, I acted fast and was able to buy medicine, food, and water. Practically, what I needed it most for was for my monthly cancer treatment.” Another recipient reported that she was saving the money she received to pay for upcoming bills, adding, “If this second grant doesn’t come through, I will be out on the street. I am counting on them to survive.”
GiveDirectly’s model directly challenges age-old assumptions about giving cash to individuals in poverty. As they state on their website, “…no, people don’t just blow it on booze.” So how have recipients benefited from these cash transfers? GiveDirectly’s own studies have identified wide-ranging benefits for recipients, including reductions in debts, and increases in savings, assets, food security, education, and well-being. Typical expenditures included farm animals (chickens, goats, and cows), home improvements (tin roofs and solar lights), school fees, and capital investments aimed at launching a business.
Donors can also monitor the progress of individuals receiving cash assistance in the GDLive Newsfeed, where recipients share their stories. In a list of recent comments from individuals in Africa who had received an initial payment of around $500, one recipient said, “I knew that with this money at my disposal, I would finally fulfill my goal of completing the construction of a more decent and permanent house for my family.” Another recipient, who had been sleeping on the floor, wrote, “Now, we are sleeping on a nice bed with some good bedding, we have some clothes to change, and we are able to afford daily meals.” Yet others expressed joy at being able to purchase a dairy cow or send their children to school. And many more commented that they were still planning on how to best use their cash transfer.
Will direct cash transfers be the next big thing in philanthropy?
It’s too early to tell if existing funders will adopt cash assistance as a permanent feature of their grantmaking, or whether new ones will follow GiveDirectly’s unique model. However, the overall trends toward greater equity in society and in funder relationships more specifically make it likely this approach will increase in popularity. There are also hundreds of studies which show that direct cash transfers are not only effective in improving people’s lives across multiple measures of well-being, but that recipients tend to use these funds responsibly. Now it’s just a matter of putting the money into people’s pockets and watching the creative ways in which they use it to better their circumstances.