Project Evaluation

Unconditional Cash Transfers in Kenya

While cash transfers have long been a subject of interest as a tool to fight poverty, the overall impact of large transfers of cash, given without conditions, to poor households had yet to be measured. This study evaluated a cash transfer program administered by the NGO GiveDirectly, which gave an average of US$513 to poor families in rural Kenya. The transfers led to significant increases in income, assets, psychological well-being and female empowerment. Variations in the format and size of the transfers led to differences in outcomes.
Detailed results can be found in the policy brief, available here and at the researcher's site, here.
Policy Issue:
Programs designed to alleviate poverty often focus on delivering goods or services (e.g. productive assets, training, bed nets, etc.) or capital conditional on certain behaviors to poor households. While these types of programs may be effective in achieving specific goals, they do not provide poor households with the choice and flexibility of allocating resources to meet the needs they find most pressing. An alternative approach to delivering support in-kind is to simply give money to poor households. However, this approach is sometimes received with skepticism, as there is no guarantee that money will be spent to achieve the specific impacts that donors desire. This evaluation studied what happened when poor families were given cash without any stipulations.
Context of the Evaluation:
This study took place in Kenya, a country at the forefront of the mobile money revolution. Since the launch of M-PESA, a mobile-phone based transfer service, in 2007, Kenya has become the country with most extensive retail payment network[1]. GiveDirectly is a non-profit organization that leverages the low costs of mobile money to deliver cash transfers to poor households, reducing the cost of delivery to only 10 percent of each donated dollar. Beneficiaries receive donated money on SIM cards and can visit a local M-PESA agent to exchange the mobile credit for cash. Residents in the area of Rarieda, where the study took place, generally live on an average of approximately US$1 per day, and 64 percent of those surveyed said they did not have enough food in their house for the next day.
Description of the Intervention:
Households were eligible for the unconditional cash transfer program if they had roofs constructed from non-solid materials (mud, grass, etc). Study villages in the Rarieda district of Kenya were randomly assigned to a treatment or pure comparison group. GiveDirectly identified 1,000 eligible households in treatment villages. Within treatment villages, 500 eligible households were then randomly assigned to receive unconditional cash transfers. These households were compared to 500 control households in the same villages, which did not receive transfers. In addition, the 500 control households were compared with 500 households in pure comparison villages to identify any spillover effects of the intervention. Study households in treatment villages received a baseline survey before randomization, while pure control households where surveyed only at endline.
Transfers were randomly assigned to go to women or men, and further randomized to be in the form of a single lump sum transfer of 25,200 KSH (about US$287), or monthly transfers for nine months with the same total value. A third treatment arm was selected to receive a large sum, with 137 households each given an additional KES 70,000 (about US$798) in seven monthly installments of KES 10,000 each. 
Money was transferred to beneficiaries using Safaricom’s M-PESA mobile payment system—sending money from the GiveDirectly account to the recipients’ SIM cards. Recipients were required to register with M-PESA, and received a text message when the funds were transferred. They could then visit a local M-PESA agent to transfer mobile credit to the agent’s phone in exchange for cash. Most households in the sample were within a 30-45 minute walking distance to an M-PESA agent. Households were given SIM cards to allow them to redeem money, and the opportunity to purchase a mobile phone if they did not have one, with the cost deducted from their transfer. 
A follow-up survey one year after the first transfers collected data on income sources, investment, consumption, food security, school enrollment of children, and mental and physical health. These surveys were complemented by the collection of salivary cortisol levels to measure the impact of unconditional cash transfers on stress.
Results and Policy Lessons:
Assets and income: Assets and holdings for those who received transfers were 58 percent (US$279, in purchasing power parity, or PPP) higher, primarily in home improvements (such as metal roofs, which are far less costly to maintain), and livestock holdings. The transfers increased income for recipients by 33 percent (US$15 PPP), coming from sources such as livestock and non-agricultural businesses. There is little evidence that cash transfers change the primary source of income for recipients, but they do increase expenditures in non-agricultural enterprises by US$10 PPP per month, with revenues US$11 PPP higher. 
Consumption: Monthly consumption for recipients of the transfers was 23 percent higher (US$36 PPP), spread across nearly all categories measured: food, medical and educational expenses, home improvements, and social expenses such as weddings and funerals. The exceptions were temptation goods: there was no increased spending on alcohol or tobacco. The largest increase was in food consumption, which was 19 percent (US$20 PPP) higher.
Food security: Food security index scores were .25 standard deviations lower for transfer recipients. Specifically, they were 30 percent less likely to have gone to bed hungry in the preceding week, 20 percent more likely to have enough food in the house for the next day, and the number of days children went without food was 42 percent lower.
Health and education: Spending on health education increased for transfer recipients, but from relatively low levels. There were no observed increases in health or education outcomes.
Psychological and neurobiological measures: Overall there was a .20 SD increase in psychological well-being index, stemming from a .18 SD increase in happiness scores, a .15 SD increase in life satisfaction, a .14 SD reduction in stress, and a .99 SD reduction on a depression questionnaire. Levels of cortisol, a stress hormone as measured in saliva samples did not differ across the groups overall, but large transfers and transfers to women lowered levels for both men and women significantly. 
Female empowerment: Positive spillover effects for female empowerment were observed, with an increase of .23 SD on an index of several measures not only for the treatment households, but for all households in the village, suggesting that the transfers can improve the standing of women in general.
Types of transfers: With the exception of well-being outcomes mentioned above, there were no differences observed comparing transfers made to women versus men in the household. Monthly transfers were associated with a .26 SD increase in food security relative to lump sum payments, while lump sum payments were associated with higher asset values. Large transfers led to approximately twice the value of assets as small transfers, as well as higher scores on psychological well-being and female empowerment measures.
More information can be found in the full policy brief, available here and at the researcher's site, here.

[1] Klein, Michael, and Colin Mayer. May 2011. “Mobile Banking and Financial Inclusion: The regulatory lessons” World Bank Policy Research Working Paper 5664.
Copyright 2014 Innovations for Poverty Action. All rights reserved.