Alleviating Poverty By Giving the Poor Cash. What's Wrong With This Picture?

For all the world's much-vaunted desire to alleviate poverty -- and the never-ending quest to figure out how -- donors still shy away from perhaps the most straight-forward solution out there: give poor people money.

Okay, so maybe that's not surprising. It's not a very decorative act, giving away cold, hard cash. And as we've so often heard, the root causes of poverty can't be solved by a short-term infusion: you need to build systems, structures, capacity -- etc. It'd be the humanitarian equivalent of tossing it down a well, right? You wouldn't know what people would do with it.

Except we do -- or at least Oxfam Great Britain thinks it has a pretty good idea. Back in 2006, Oxfam GB disbursed one-time cash grants to over 500 poor families in An Loc, a rice-growing community based in Ha Tinh Province, Vietnam. The payments weren't large -- just $375 -- but were still more than half the average annual income of a poor family in the village.

In order to get the money, families agreed to a few basic conditions: they'd report over three years on how they'd spent it, for one. And they wouldn't use the cash on drugs, alcohol or gambling. Other than that, it was an effective blank check. So what happened?

Oxfam's review found that families invested in household food security -- notably cows, which can produce funds for a family over the long term. School dropout rates fell, and gender equality improved. What's more, the village's poverty rate dropped by nearly a quarter, down to 40%, in just two years -- a staggering figure. According to Floyd Whaley, who describes the experiment in this week's International Herald Tribune, villagers said that change stemmed directly from cash hand-outs.

Sure, no one wants to build a welfare state. But all Oxfam did was give a one-time injection of cash. And as blasphemous as this program was in some ways -- no intermediaries, no bureaucracies or government-backed agencies to serve as buffers -- it doesn't really seem that radical to me. Obviously, plenty of caveats apply: a one-off experiment in Vietnam doesn't mean its results are at all generalizable. Different communities would require localized strategies for and evaluations of effectiveness. It wouldn't be anything close to a cure-all. But it also just might work.

After all, the humanitarian community is well-practiced in the art of giving away money with only a thin notion of how it will be translated on the ground. Why not give away funds to the people who have the greatest incentive to use them well?

Photo Credit: House of Sims