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May 7, 2013

Unconditional cash grants: another philanthropic double standard?

I came across an interesting article in the Utah newspaper Deseret News.  It is titled “No strings attached: How one nonprofit is helping the poor by giving them cash.”

The website has started soliciting funds to make unconditional/unrestricted cash gifts to poor individuals in Kenya.  “GiveDirectly accepts online donations from the public through its website. Funds are transferred from donors to GiveDirectly’s U.S. bank account. From there GiveDirectly transfers the money to its M-Pesa account, a popular mobile banking operation in Kenya, the only country where the program is currently operational. When GiveDirectly money arrives in its M-Pesa account, the organization transfers the money into the accounts of people it has pre-selected to participate in the UTC program. The recipients receive a text message notifying them that the transfer has been made. To collect their cash, recipients just show the message to M-Pesa vendors, who typically operate in local convenience stores.”

It has attracted many large donors, including Google, apparently based on its low overhead of 8 percent that covers bank transfer fees, M-Pesa tariffs and the cost of paying people on the ground in Kenya to identify participants.

Are we encountering another double standard?  Grants to nonprofits in the U.S. are predominantly restricted and generally do not fully cover overhead expenses.  Why?  Presumably because U.S. nonprofits cannot be trusted to spend the money effectively and efficiently?  Furthermore, cash grants to welfare recipients are continually scrutinized on the skeptical assumption that the money will be “wasted.”  Food stamps are specifically restricted to specified purchases so as to avoid “irresponsible spending.”

It is true that economists have always argued that providing cash and letting recipients spend money on what they get the most benefit from is economically efficient.  And the research of supports this ( though the data on how their recipients spend their money is limited, a more complete report is due by June).

Yet our society struggles with applying this principle to our own citizens. gives $1,000 to  individuals in a country where claims people would otherwise live on 65 cents per day. That means the gift quadruples what they would otherwise spend in one year.  Would the U.S. consider making unrestricted cash grants to welfare recipients equal to four times the poverty level?

So we trust the Kenyan poor but the American poor are not trustworthy?  Another reason why we need to refocus social enterprise on our local communities:  we are romanticizing the emerging market countries.  Are we afraid to consider that maybe the American poor are poor because we neglect them in education, training, and social integration and not because they are “unworthy”?

Read more about the conflicting standards of U.S. philanthropy in Chapter 6 of More Than Just Money.  Interested in learning more about social enterprise and its role in  nonprofit sustainability?  Watch this video.