US-based charity GiveDirectly has been implementing a groundbreaking experiment in Kenya since 2017, providing a “universal basic income” to thousands of villagers. The initiative involves delivering a cash grant of approximately $50 to each recipient every month for a period of 12 years.
Recently, an independent research team released the results from the first two years of the experiment, shedding light on the effectiveness of this approach. The findings reveal that giving cash aid in a lump sum had significant advantages over distributing it in monthly installments.
Among the key observations, individuals who received the lump sum were more inclined to start their own businesses. Additionally, they were found to earn 80% more in net revenue compared to those who received monthly installments. This suggests that providing a lump sum enables recipients to make longer-term investments and create more sustainable sources of income.
Surprisingly, even individuals who did not receive a lump sum participated in rotating savings clubs to invest their monthly income. In fact, they contributed more to the clubs than those who did not receive any aid at all. This suggests that the universal nature of the aid, reaching every adult in the village, has had a significant impact on community involvement and the growth of businesses.
One concern often raised regarding cash grants is the potential for inflation due to increased spending. However, the research team found that this was not the case. The extra spending resulting from the cash grants was distributed across various products and services, preventing concentrated impacts on specific sectors.
While these findings are promising, questions remain regarding the lasting benefits of lump-sum payments and the durability of businesses started by recipients. It is crucial to analyze the long-term effects of the cash grants to determine whether they can truly uplift individuals and communities out of poverty.
GiveDirectly’s initiative has proven to be an innovative and potentially transformative approach to poverty eradication. By providing a universal basic income and encouraging entrepreneurship, the charity has positively impacted the lives of thousands of Kenyan villagers. As more data becomes available, researchers and policymakers can gain a deeper understanding of the long-term implications of such interventions and explore ways to further enhance their effectiveness.
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