All posts tagged Charity

Money for Nothing: What the Development Sector Could Learn from Cash-Transfer Programmes

Posted by / 20th May 2014 / Categories: Analysis, Polis / Tags: , , / -

Earlier this year Balder Hageraats published an article titled “International Development: Please drop the Charity Act”, criticizing the schizophrenic relationship between donors, NGO´s, and local beneficiaries of development help, and arguing for a more efficient development sector in which needs on the ground take centre-stage. If the sector were to follow such an approach, it could learn a lot from the global South, where various government programmes transfer money directly to the poor, no strings attached. They have led the way in showing that poor individuals already KNOW how to escape poverty: they simply lack the cash.

In Kenya, Having worked as a day labourer for years on end, mr. Omondi one day woke up to receive an sms-text saying he had been given $500 US, no strings attached! He had been one of the recipients selected in a programme where poor families in poor rural villages were given free cash-transfers to help them out of poverty. No conditions, no pay-backs, just free money. Local villagers suspected that the government was somehow behind it, trying to buy votes. People in the development industry were mostly afraid that recipients wouldn’t be able to handle the money wisely, spending it on alcohol and cigarettes. However, none of this happened. Many people in the programme used the money to replace their thatched roofs with metal roofs, which costs a few hundred dollars, but saves money in the long term. The results? People also invested in livestock and small businesses, showing a 48% increase in revenues from animal husbandry, for example. Mr. Omondi bought a motor-cycle to drive people from town to town, making $6 to $9 a day, more than doubling his daily salary, and enabling him to buy a second bike to expand his business.

Most cash-transfers programmes are not one-time lottery tickets however. More and more developing countries, most notably Brazil, Mexico, South-Africa, but also Indonesia, Namibia, Bolivia, Armenia and many others, are setting up long-term programmes that target a substantial but selected portion of the population and gives them a monthly cash transfer between 3$ and 100$ a month. Cash-transfer programmes differ greatly from each other, but are similar in the sense that (1) they benefit a selected group of poor families, (2) that the transfers are monthly and on a long-term basis, and (3) that there are no or few conditions as to how the money is spent. The basic results: It pushes the poorest families out of absolute poverty; it leads to more capital investments, local economic growth, better health, more children going to school, and lower birth rates; all without outside interference. For example, children that benefit from the Oportunidades programme in Mexico (which gives an average of 38$ a month to poor households) are 23% more likely to finish grade 9 than those outside of the programme. The same programme also meant that people eat 8% more calories and a more balanced diet of fruit, vegetables, and meat, leading to fewer illnesses among children and fewer sick-days for adults. In Brazil, the Bolsa Familia (family grant) and Bolsa Escola (school grant) programmes helped in bringing down poverty from 28% in 2001 to 17% in 2008.

Why cash-transfer programmes make sense and are affordable

Just as in developed western societies, various countries in the global South have recognized that everyone in society deserves a minimum amount of economic security. The cash-transfers are a right, not charity. Obviously, the transfers are only for selected groups of people in need, and they don´t serve as a substitute for salary through labour. Depending on the country and the programme, the transfers vary between USD $3 and USD $100 per month per individual or per family.

There are two important counter arguments to the idea behind cash-transfers in developing countries. One, can states afford such kinds of projects? And two, doesn´t handing out free money kill initiative and entrepreneurship, making people lazy and dependent? The answer is that pessimistic expectations with regard to the latter lead people to over-estimate the importance of the former. In other words; cash-transfers lead to local economic growth in the longer term, helping people out of the poverty trap and making the cash-transfer programmes not just relatively cheap, but actually profitable.

Let´s start with the argument that “charity” takes away initiative and entrepreneurship, a theory that micro-credit guru Muhammad Yunus has been fond of pointing out. Cash-transfer programmes in Mexico, South Africa, and Brazil have however shown that the money transferred to poor families is almost never spoilt. Admittedly, the money is not always invested, but rather spent on keeping children in school, or buying more nutritious food. This might not harvest direct financial profits, but certainly helps in long term development; Children in the Mexican Oportunidades programme, for example, are more likely to finish 9th grade, are healthier, and score higher grades. But cash-transfer programmes, just like micro-credits, can also have a multiplier effect for local businesses, because the extra cash allows people to invest in tools or skills and setting up a small enterprise. Poor people tend to invest and consume locally, creating a double benefit for the local economy. Also, cash-transfers don´t necessarily replace micro-credits. As a matter of fact, they can serve to make micro-credits safer and more attractive. Indeed, studies have shown that beneficiaries of cash-transfer programmes are more receptive to taking financial risks.

The fact that cash-transfer programmes are cost-effective in the long term takes away a big obstacle for governments as to who is going to pay. There are however other comprehensible concerns. Firstly, cash-transfer programmes are not a silver bullet to solving poverty; they can help people out of absolute poverty and intergenerational poverty, and they contribute to strengthening local economies and promoting social mobility, but only few make it to middle class. Also, the bigger the amount of cash per family, the less families you can select, and vice versa. In order to be able to afford a substantial programme, a government needs a solid tax-base or windfalls from resource-exports.

Why the development sector should jump on the bandwagon

But the money could also come directly from the international development sector. If governments in the global South can demonstrate that there is no need for paternalistic nudges, conditionality, or moral guidance, why couldn´t the development sector follow suit? There are many reasons to suggest that it should.

Firstly, cash-transfer programmes simply have a pretty convincing track-record when it comes to helping people out of poverty. In other words, it simply works. Cash-transfers are right-based rather than charity based, they are pragmatic in the sense that by nature they empower beneficiaries, and they are cheaper because each invested dollar has the potential of turning into two dollars. Many countries that currently benefit from ´traditional´ forms of cooperation could hugely benefit from switching to a more direct approach.

The development sector could jump on the bandwagon in two ways. The simplest way is by pitching in directly where governments lack public money to pay for cash-transfer programmes. But the development sector has an at least equally important role to play when it comes to actively stimulating development through the provision training, research, expertise and other services. ONLY giving money helps people in climbing out of the poverty trap, but they do still need a hand to pull themselves up. The development sector has all the necessary qualities to be this hand stretching out. Sadly, the hand that the development sector is currently stretching out is that of NGOs stretching their hands upwards to donors.

If the development sector were to learn from the logic behind cash-transfer programmes, they would fund locally identified needs directly. Donors could allow funds to flow more easily and directly to local communities (through local connectors), empowering those on the ground and connecting local needs to global resources.

This article is part of the Polis Project, a ReSeT programme focused on connecting local needs to global resources.



International Development: Please Drop the Charity Act

Posted by / 5th February 2014 / Categories: Analysis, Polis / Tags: , , , / -

International development cooperation is typically regarded as politically optional policy. It is the type of public expenditure that makes politicians and voters feel good about themselves during the fat years, but one that can be cut the moment that high national unemployment or budget deficits require sacrificial lambs. It is no surprise therefore, that in countries hardest hit by the economic downturn, such as Spain and Italy, the international cooperation sector is desperate. And, just like any other organism in this world, the sector is showing its true priorities: not the survival of local populations- the supposed beneficiaries- but the sector’s own survival. The survival of the structures, employees and offices in Madrid or Rome, and of job opportunities of expatriates all around the world.

Such a quest for survival is a natural process for any organism that is threatened, and human networks, organisations and economic sectors all across the world mimic these Darwinian instincts. The problem is that the development sector pretends to be something else, something morally better. It pretends to be a source of righteous charitable acts, one in which individuals selflessly dedicate their time to the betterment of humanity. Unlike other economic sectors, or so the pretence goes, development cooperation exists for poor African children, for remote Indian villages or human rights in general. It does not exist for economic profit, but for the greater good. It justifies donor drives, asking ordinary people to contribute to making the world a better place.

This is highly disingenuous. The development sector is just like any other, with its own strengths and weaknesses. It does not deserve any special ethical consideration, neither internally nor from the outside world. If it is to survive, the sector needs to drop the whole charity act and face up to reality: international development cooperation is a service sector, similar to other service sectors in a global, capitalist system, and currently with clients and systemic pressures often completely separate from local “beneficiary” populations.

The demand for international cooperation

There is a true, natural need for international development cooperation in today’s world. Technological and financial resources are bountiful in some places, yet scarce in others. There is a genuine desire among societies worldwide to share parts of their economic wealth, and to balance the immoral income disparities that are formed through amoral systems. Moreover, from a state perspective development cooperation can, and should, be a win-win situation. After all, it is called “cooperation” instead of the supposedly antiquated “aid”. Governments can influence global and local politics through economic support and push forward their agendas through peaceful means.

It is a testament to the state of denial the sector is in that even acknowledging such a simple fact often causes protests and accusations of neo-colonialism or worse. But whenever the terms of reference of a development project mentions “democracy”, “gender equality” or “income equality”, the donor is pushing a particular, non-universal agenda that uses economic support as leverage. Even “universal” human rights are non-universal in practice and take many different shapes and mutations depending on the local circumstances and the donor’s agenda. Without knowing details, the concept is similar to pushing through a for-profit economic agenda; both promote individual, subjective sets of interests with complex origins and consequences.

Moral evaluation can only happen in practice, when specifics are identifiable and outcomes can be assessed. For example, a faith-based organization may have a genuine focus on redistributing income to the poor without ulterior motives. A priest or a nun living among local populations for decades is likely to be an example of that. However, as anyone who has ever visited large African cities knows, many faith-based organisations are simply present in developing countries as part of a continuous battle to convert souls and swell income. Similarly, post 9/11, the US government invested significant resources in development projects throughout sub-Saharan Africa. Much of that money had a positive impact on local populations, but the overall objective was the destructive War on Terror, not development in itself.

The development sector itself is just as guilty of ulterior motives, especially when it comes to its own success, growth and survival. Many donation drives exist primarily to keep NGOs or foundations afloat, and not because of specific concerns about local populations. These two things are not necessarily incompatible, but the difference does need to be recognised. In all such cases, ethics can only be evaluated at a practical, specific level. Conceptually, development cooperation is driven by amoral clients.

If the two types of clients of the development service sector are those with either a genuine interest in income redistribution or in using development as a tool to advance other agendas, what about local populations? This is one of the areas in which the sector is most confused: beneficiaries of development cooperation are those working in the sector, and their clients, i.e. donors. Direct beneficiaries are not local populations, despite claims to the contrary. The fact that local populations can, and often do, benefit does not take away from the basic client-supplier relationship that exists between donors and the sector.

The client-supplier relationship is key. The client in our capitalist world will always be those providing the finances. Parallel to that there is an honorary type of client, the “local beneficiaries”, who mysteriously appear in documents all across the development industry but never seem to change provider or ask for a refund. They hardly ever complain, do not demand higher quality products, and do not ask for input-outcome effectiveness. When a development project fails they do not sue anyone, and they hardly ever start Facebook campaigns denouncing their contractors. Why not? Because they are neither clients nor do they necessarily benefit. The direct beneficiaries are donors (clients) and the development sector itself, and local populations are used to keep that relationship flowing.

Naturally, when marketing itself, the sector never talks about the sources of funding. It always points to positive impact on those that they call beneficiaries. And indeed: objectives in terms of reference do not tend to state “promoting a self-congratulatory Western agenda of keeping the system afloat”. But that is what it does come down to.

From a local population perspective, the best kinds of donors are those that create mechanisms for local populations to steer the dynamics and be in control. But most of the time, the sector and the system focus on satisfying the donor, not the local population. Project evaluation reports are normally written for donors, not for locals. This is all too common: What matters to the system is that the donor believes that the money has been spent according to plan. The supposed beneficiaries should simply be happy being used in order to achieve that plan.

Development cooperation is not ethically above other layers in society. It does, however, have a greater ethical responsibility because it works within an environment of power asymmetry. Typically local populations have neither the legal nor the financial means to defend their interests; they depend on the professionalism of the development actors and the goodwill of donors when it comes to development projects. By acting as if local populations are actually the sector’s clients, development cooperation only adds insult to injury. It creates a perverse charade in which locals have to be grateful even when they are often not the true beneficiaries. To make matters worse, all too often donors simply do not take their own client role seriously, instead focusing on whether administrative conditions are met: Logical Framework established? Check. Money spent? Check. Evaluator satisfied? Check. Feeling good about ourselves? Check.

This leaves most influence and responsibility in the hands of service providers- i.e. the development sector- who are in deep denial about their own purpose. Anyone working in the sector knows that in the end, satisfying administrative conditions is the easiest way to guarantee future funding. And thus the sector is swamped with bureaucratic checks and balances to secure its own survival. The actual outcomes of the work is a secondary issue. Such perverse tendencies are reinforced by the idea that the sector has a charitable basis, something which oddly means that firing people, incentivising people or even simply assessing people’s outputs is frowned upon.

Too often development sector employees claim that they “could be earning double their current wage in the private sector” but they stay because of a drive to make the world a better place. Needless to say, this is not necessarily conducive to a healthy working relationship between employer and employee. It creates a strange, difficult relationship with respect to purpose and consequently with finances. Money is an issue that is not easily discussed, and people are not allowed to think of their work as financially or motivationally driven. Development sector employees are uncomfortable with the fact that they themselves benefit from their position, and employers are loathe to take action when employee performance is subpar; after all, they are all there for charitable purposes. In other words, cooperation actors all too often feel that the justification of their work comes from their very nature, their existence, rather than from their outcomes. Funding for ineffective fundraising campaigns, central structures, networks and administrative dynamics often go unquestioned. Or rather are periodically questioned but, after long processes of introspection and self-evaluation, remain unchanged.

Of course it does not help that most clients and donors are government agencies, themselves not particularly effective in outcome focussed thinking. Nor does it help that a lot of money is to be made by those who know how to play the system. In the shadows of those working pro bono or at minimal remuneration, thousands of consultants, transnational organization employees and governmental diplomats earn more than they could ever receive in other sectors. As an example, the European Union typically pays between 600 and 800 Euros a day for technical assistance and project evaluations by external experts. These are not necessarily elite specialists, but directly benefit from a culture in which money often goes unquestioned, and which is obsessed with systemic and administrative pressures rather than with input-outcome effectiveness.

The irony is that if the development sector were to embrace its true identity of being service providers rather than a charity, it would benefit everyone involved. The sector would become more outcome focussed, with clearer purpose and drive, by simply acknowledging the self-evident basics: they provide a service to clients, and those clients are sources of funding. Currently they include the old lady in the street who gave her last euro to charity, as well as governments with budgets of millions to promote geopolitical interests, but typically not local populations.

Shifting the balance towards local clients

Only if the donor is willing to cede control to local beneficiaries- effectively making them the clients- would the sector’s client-supplier relationship change. Unfortunately, and for obvious reasons, development organisations are not particularly keen on that. Nonetheless, responsible donors need to go down this path. After general objectives and amounts of funding are established- preferably because of local demand- the donor needs to withdraw from the process and let the execution, evaluation and any follow-ups occur through true beneficiary-supplier dynamics. Ideally, this would lead to donors not being in touch with the development sector itself, and instead support local populations in enforcing accountability of development services rendered. An additional advantage would be that donors need to show their colours more clearly: if they have ulterior motives such as geopolitical or industrial agendas, these will need to be negotiated with local populations and cannot be hidden under a generic term such as “international cooperation”. Sadly, that is also the reason why so many donors will never change their current ways.

Interestingly, this change in systemic relationships would allow the sector’s organisations and employees to be much clearer about their own responsibilities. They would be less burdened by administrative hassle and could much more easily monitor their methods and outcomes. In essence, they would compete with other similar organisations to gain favours of beneficiaries, and shift the burden of administration to donors and their local counterparts. By throwing real dynamics out in the open, light can shine on best and worst practices in ways impossible under the current cloak of delusion.

Similarly, governments would need to make a choice. In a demand-driven cooperation sector- rather than the current supply-driven dynamics- governments and international agencies would need to be clearer about whether they are client or donor. If they are donors, they need to negotiate with local populations. If they are clients- for example interested in strengthening ties with local industries or promoting Western values- they will work with development organisations or other suppliers of services who, in their name, could negotiate with local populations. Funnily enough, the idea of NGOs negotiating on behalf of governments will shock many, but it is what the development cooperation is already all about in today’s world. The problem is that no one labels it as such. Naming and institutionalising this already existing dynamic would create a natural transparency, clarifying purpose, that is so obviously lacking right now.

The sector is in deep trouble, being threatened by economic austerity, political populism and valid long-standing concerns about its purpose and effectiveness; its Janus faced identity is now uglier than ever. Scrambling for funds to stay afloat, the general public is being asked to fund survival of large chunks of the sector through donation drives, street campaigns and internet-based crowd funding, but without any significant information about input-outcome effectiveness. This is especially true in a country such as Spain, in which international cooperation was until recently funded through a well-meaning but rudderless public purse. The relatively young sector is unaccustomed to surviving without government funding and is now, after draconian budget cuts, in full-scale panic mode. The kneejerk reaction has been to scramble for funds anywhere possible. Hopefully the longer-term outcome of the current crisis will be one in which the sector evolves into mature, accountable and professional service providers with critical as well as ethical donors who cede responsibility and evaluation to local populations.

Such change would also make working in development cooperation a happier, more satisfying prospect. Potentially the sector can be an amazing employer: one in which people are in touch with global dynamics affecting practical and real social change; one in which highly skilled professionals are paid competitive wages while being inspired by the impact that they have and working together with local experts and leaders to achieve common goals. In order to get there, the sector first needs to recognise that it has a problem unrelated to lack of funds. It needs to acknowledge who it works for, and with what purpose. Only then can true cooperation towards cultural, financial and social wealth for clients, employees and local populations prosper.