ICTworks

That’s the basic question asked by GiveDirectly in their overall business model to give unconditional cash transfers to poor Kenyans via M-Pesa. Based on a large evidence base, they believed it would have a net positive effect – maybe larger than other development program activities like training or capacity building.

While we still don’t know if direct cash transfers are better than other activities, the results from an extensive Randomized Control Trial on cash transfers shows a definite improvement in people’s lives. Overall, recipients tended to spend monthly transfers on consumption items like food (and increase food security), while those reviving lump sum transfers invested in high cost assets like cattle and iron roofs.

Interestingly for the gender folks, when women received the cash there was a greater reduction in worries and a greater increase in self-esteem compared to when men received transfer and all households in the village experienced an increase in female empowerment, regardless of which family received the cash transfer.

But don’t take my word for it, read the study yourself – its well worth it – and then check out more documentation on direct cash transfers.

For those who like to skip ahead, here are the report highlights:

Results summary

• • Transfers allow poor households to build assets. Recipients increased asset holdings by PPP USD 279, representing a 58% increase over the control group mean, and 39% of the average amount transferred. These increases occurred primarily through home improvements and increased livestock holdings: households receiving transfers are 23 percentage points more likely to have an iron roof as opposed to a grass-thatch roof, and livestock holdings increase by 51% (PPP USD 85).

• • Transfers increase consumption. Recipients spend cash transfers on a very broad variety of goods and services, including food, healthcare, education, and social or family events such as weddings and funerals. We observe particularly strong increases in spending on food, medical, and social expenses.

• • Transfers reduce hunger. With an increase in food consumption by 20%, we observe significant reductions in hunger and food insecurity, e.g. a 30% reduction in the likelihood of the respondent having gone to bed hungry in the preceding week, and a 42% reduction in the number of days children go without food.

• • Transfers do not increase spending on alcohol and tobacco. We find no evidence of increased expenditure on temptation goods such as alcohol, tobacco and gambling.

• • Transfers increase investment in and revenue from livestock and small businesses. Revenue from animal husbandry increases by 48% (PPP USD 2 per month), and total revenue from self-employment increases by PPP USD 11 per month (38%) as a result of the transfers. Existing evidence on the effect of cash transfers on income comes from programs that were specifically targeted at existing or new non-agricultural businesses, often with the explicit or implicit expectation that these transfers should be invested in the enterprise (De Mel, McKenzie, and Woodruff 2008; Fafchamps et al. 2011; Blattman, Fiala, and Martinez 2013); the results from this study suggest that these results may extend to a broader population.

• • Transfers increase psychological well-being of recipients and their families. Un-conditional cash transfers lead to a 0.18 SD increase in happiness, a 0.15 SD increase in life satisfaction, and a 0.14 SD reduction in stress, all measured by psychological questionnaires. Large transfers lead to a reduction in levels of the stress hormone cortisol.

• • Transfers affect many, but not all, indicators of poverty. We find little to no impact on health or education over the time horizon considered in the data. We find suggestive evidence that cash transfers reduce domestic violence and increase female empowerment in both recipient households and other households in the same village.

• Specific design features of cash transfer programs differentially affect impacts and imply policy trade-offs. Monthly transfers have stronger effects on food security than lump-sum transfers, while lump-sum transfers show larger effects than monthly transfers on particular types of assets such as metal roofs. Large transfers produce larger treatment effects than small transfers on most outcomes, but with decreasing marginal returns. We do not observe significant differences in outcomes when making transfers to the female vs. the male in the household. Together, these results suggest that when policy-makers consider different design choices for cash transfers, they may come to different conclusions depending on how they weight different potential outcomes relative to one another.

Yeah, like I said, read the report. Its fascinating.