Worth Every Cent

To Help the Poor, Give Them Cash

Villagers pose with their identity cards as they stand in line to open a bank account so that they can receive cash grants in a village at Ajmer in the desert Indian state of Rajasthan, January, 2013.   Stringer / Reuters

In a Foreign Affairs article last year, we wrote what we hoped would be a provocative argument: “Cash grants to the poor are as good as or better than many traditional forms of aid when it comes to reducing poverty.” Cash grants are cheaper to administer and effective at giving recipients what they want, rather than what experts think they need

That argument seems less radical by the day. Experimental impact evaluations continue to show strong results for cash grants large or small. In August, David McKenzie of the World Bank reported results from a study of grants of $50,000 on average to entrepreneurs in Nigeria that showed large positive impacts on business creation, survival, profits, sales, and employment, including an increase of more than 20 percent in the likelihood of a firm having more than ten employees. Also this year, Chris Blattman and Stefan Dercon, the chief economist at the United Kingdom’s Department for International Development, found that $300 grants to young men and women in Ethiopia led them to start small enterprises, raised their incomes by one-third, and lowered by half the likelihood of them taking sweatshop jobs harmful to their health. With more research the scale of these impacts will become clearer. But for now the bottom line is clear: more cash is needed.

As the body of empirical evidence supporting the value of cash transfers has grown, calls for increased use of such grants have also multiplied—to the point that some are calling cash a fad. In an assessment of cash transfers, World Bank President Jim Kim has said that “the results have been astounding.” The United Kingdom’s Department for International Development convened a panel, in which two of us participated, to study the use of cash in humanitarian contexts. The panel's top recommendation: “Give more unconditional cash transfers.” Another was to “systematically analyze and benchmark other humanitarian responses against cash.” In fact, the 2015 Conservative Party Manifesto itself includes a commitment to “help people in the UK

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