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When Residents of Entire Villages Get $22 a Month—for 12 Years

When Residents of Entire Villages Get $22 a Month—for 12 Years

By Neil Parmar

Via iStock

Via iStock

There’s a village of just over 100 residents situated several kilometers from Lake Victoria in Western Kenya. Most people there work as subsistence farmers or fishers, though their village itself sits in a dry region where crops struggle to grow. While all of the villagers live in poverty compared to more economically developed countries, there is also relative inequality among them: the wealthiest family has a tractor and greenhouse; the poorest family sleeps in a one-room home.

But starting last fall, as part of a pre-study pilot, every villager there over the age of 18—regardless of their net worth—began receiving around US$22 each month, meant to meet very basic needs such as food and shelter. GiveDirectly, the nonprofit behind the experiment, wanted to know such things as: Would conflict bubble up in the community? Might the funds divide spouses? And how would purchasing or investment patterns change?

Answering questions like these have long fueled so-called conditional cash transfer programs, where families are only given money if they invest the funds in specific areas. In Mexico, more than 5.5 million families have received cash transfers for health and education purposes since the 1990s, and more than 50 countries have replicated that model, according to the World Bank. In Brazil, one program—considered the world's largest of its kind at one point—has been associated with a significant reduction in infant mortality rates across the country.

Now, in Western Kenya, that test village of a little more than 100 residents is providing a preview to a new study that formally launches this fall and is considered the most ambitious universal basic income experiment in history. Unlike many cash transfer programs, this one won’t have any conditions on how people can spend their money. It aims to include 26,000 people—not just families or poorer individuals—across hundreds of villages that will all receive payments via their mobile phones. Most notably, some individuals will get money for up to 12 years. “The de facto thinking is, sure, people won’t stop working if it’s just six months, but if it’s for the rest of their lives they might sit on the couch,” says Joe Huston, chief financial officer of GiveDirectly. “If you have that long-term security, though, does that elevate risk-tasking?”

The extra income may help study participants take important steps toward wealth building that otherwise might be deemed too risky of an investment for villagers living hand to mouth. Farmers may use the money to plant a lucrative crop that requires a longer maturation period before it’s ready for harvest. Young people might take certain professional risks, helping them avoid hardships faced by others in the past. For example, some research that followed Malawi women who received cash transfers found they got both married and pregnant later in life, reporting lower rates of herpes and HIV as well. Yet most results from basic income tests have been limited to shorter-term studies, where there’s strong evidence that cash transfers do not discourage work. There’s less evidence on the long-term impact of cash transfers, and that's what GiveDirectly will study. If the goal is spurring entrepreneurship, “maybe one-time returns are better,” says Huston. “But if your goal is food security—ensuring that people don’t fall below a certain [poverty] line—then maybe long-term basic income is better.”

The Omidyar Network, which was started by eBay founder Pierre Omidyar, has invested a reported $493,000 into helping GiveDirectly fund the recurring monthly payments. An independent team has already been going door-to-door in Western Kenya with a three-hour questionnaire, a survey that will be repeated every couple of years. These canvassers plan to examine how people who are given cash transfers end up spending their time, how their consumption patterns change over time, and whether their earnings evolve. Another important area to explore is how the introduction of new funds might change day-to-day negotiations between couples. Interviewers will also be looking for subtler changes, such as people’s aspirations, says Huston.

So far, only informal conversations have been held at the test village in Western Kenya. Some have shared personal plans about how part of the money will go toward taking a loved one to a doctor, while others have discussed very thorough business plans. Despite being given the same amount of money each month, “people want different things,” says Huston.

When villagers were asked whether they thought it was fair that everyone received the same amount of money, given some relative inequality already existed within the community, they didn’t seem bothered by it, says Huston. And a side-benefit of the universal approach is “there’s less stigma of receiving, and also [there’s] the opportunity that people can put the money toward shared goals or shared ideas of how they want to spend the money,” says Huston. “We’ve seen a number of savings groups crop up in the village. We’ve also seen pooling of smaller amounts of money, and talk of improving village-wide projects. We’ll see if that plays out or not.”

Currently, GiveDirectly is focused on scaling its studies within Kenya and Uganda. But in the future, the organization says it hopes “to expand to other geographies where there are large numbers of extremely poor people and where we can further test our model and generate new knowledge about cash transfers.”

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