A Different Kind of Aid: Hand Out Money
In central Vietnam, the aid organization Oxfam Great Britain did something unusual in the world of international development: it gave poor people money.
From mid-2006, Oxfam GB handed one-time cash grants to 550 poor households in An Loc commune, a rice-growing community in Ha Tinh Province on the central coast of Vietnam.
The money came with no conditions other than that it couldn’t be used for alcohol, drugs or gambling, and that the family had to agree to report over a three-year period how it was spent. Some payments were as much as $375, more than half of the average annual income of a poor household in the village.
The program is a variation of the increasingly popular “conditional cash transfer” programs, in which development organizations provide cash payments conditional upon work, or taking part in a socially beneficial activity such as attending a school or health clinic, or agreeing to spend the money on a specific priority, such as housing or starting a business. By contrast, “unconditional cash transfers” — what Oxfam is trying — are cash payments with no such provisos.
What happened when poor people received nearly half a year’s income with no strings attached?
Oxfam’s reviews of the program found that families had used the money to improve their household food security and overall income, with many investing in cows that generate long-term revenue for the family.
School dropout rates decreased, and gender equity in the village improved, with women sharing control of the money. Most significantly, initial reviews showed the poverty rate decreased by nearly a quarter in two years, from 65.1 percent in 2006 to 40.2 percent in 2008 . Village leaders attributed the decrease directly to the cash handouts.
“We felt that poor people clearly have the right to decide how the money is spent,” said Steve Price-Thomas, the Vietnam country director of Oxfam Great Britain. “What better than to put money in their hands and let them decide what to do with it?”
The project challenges traditional views about development assistance. As an Oxfam study on the program noted: “The standard approach of development projects is for professional experts to lead in identifying suitable livelihoods, rather than empowering individual households to make diverse choices.”
The program also cuts down on administrative and consultancy costs and directly challenges “beliefs in the development community about poor people’s ability to make wise and rational use of cash,” the report says.
Price-Thomas noted that despite the unusual method of distributing the assistance, the program is actually a microcosm of what is happening globally in development assistance.
“This is budget support at the household level,” he said. “The same arguments apply for household budget support as national budget support, which is common.”
Critics of such direct cash payments, however, say they don’t affect the structural causes of poverty, such as deficiencies in education and infrastructure necessary to generate job-creating investments.
Others say that giving away cash is nothing new — it is called “welfare” in the United States and Europe and should be introduced cautiously into developing countries so as not to breed long-term dependency. The most accepted path out of poverty, these critics argue, is work, and giving out free money is a questionable way to generate employment and build a sustainable economy.
Price-Thomas rejects the notion that such cash payments to poor families can be compared to welfare.
“Welfare payments in the U.S. and Europe are long-term, small payments,” he said. “This was a large, one-off transfer, which households knew was coming for months in advance so they could plan for it and avoid the windfall effect.”
He also notes the Oxfam program is not meant to replace existing development initiatives. “In the particular case of this program, the lives of a significant number of households have changed for the better and that change is still apparent three years later,” he says. “That doesn’t mean we should stop worrying about education services and women’s political participation and the many other aspects of development assistance. This is a useful tool, but not the only one.”
It’s unlikely that the billions of dollars in development aid that is spent annually will ever be turned over to the poor without conditions, but the Oxfam program deserves a closer look by traditional development organizations.
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