When you first hear from an organization that’s asking for money to fight poverty, how do you respond? If you’re like me, it’s usually with a healthy dose of skepticism: how would my money be used?

Would it go to financing the nonprofit’s advertising costs, or administrative costs, or maybe even… to financing staff birthday parties?

The fact that there’s been some buzz recently about GiveDirectly—an organization that distributes donors’ cash gifts directly to people in need—is evidence that these questions have indeed been on a lot of people’s minds.

GiveDirectly’s answer is unusual: just give the money to people in need, and trust them to do something worthwhile with it.

A Kenyan recipient of a GiveDirectly donation
(photo via GiveDirectly.org)

To be fair, the idea isn’t really new—governments and NGOs have been distributing money directly for years. What is new is that the development of phone-based banking has made it possible to send money from anywhere instantly and with fewer middlemen—a concept that could be attractive to donors who dislike the overhead of more traditional organizations.

GiveDirectly, founded in 2008 and recently featured on NPR, finds people living in extreme poverty in Kenya, and sends them the equivalent of up to 1,000 USD by phone. The recipients can spend the money however they like—no prescriptions, no strings attached.

How is this laissez-faire approach going over in the new era of accountability? First of all, it’s not quite as hands-off as it sounds. GiveDirectly has conducted follow-up interviews with some of its donation recipients to find out how they used the money.

Many said they used it for one-time items that would contribute to their future economic well-being, like money-saving home improvements or business startup costs. So there is some continuing relationship, and some results are being measured.

But effectiveness is as important to donors as accountability, if not more. GiveDirectly’s website cites nearly thirty academic studies on the effectiveness of direct giving which help to dash a common suspicion about the model: namely, that people will spend the cash on frivolous or even harmful things like alcohol or drugs.

These studies found no evidence of that.

Even so, not everyone is sold. Aside from potential misuse of the money, some fear that giving cash introduces a risk of dependency that doesn’t exist with other kinds of development assistance, like infrastructure improvements.

However, proponents of direct giving could argue in return that giving money is at least better than giving material goods, as the local economy is stimulated when people have more cash to spend (when goods are given, local merchants don’t stand to profit).

There’s another, less obvious benefit to going the direct-giving route: discovering how people choose to help themselves, given the resources, can provide great data to help NGOs better understand how to meet their community’s unique needs—instead of imposing what they or their or donors might think is needed—and to refocus their efforts in that direction.

For example, GiveDirectly’s data show that a vast majority of recipients spent the money they received on a new, durable metal roof to replace their old grass roof. They’ll save on maintenance costs for years, allowing them to put more money toward educating their families, starting or growing businesses, and general well-being.

Larger NGOs could now enter the picture to help many more people by replacing many more roofs. It’s possible to arrive at the same conclusion through surveys, analysis, or other means, but there’s an attractive elegance to inviting people to literally show potential supporters what kind of help they could really use.

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What do you think of GiveDirectly’s approach? Do you believe the direct giving model could—or should—work on a larger scale? Share your thoughts in the comments.