Uplifting people from extreme poverty: the next step in our journey with GiveDirectly

We have a simple yet ambitious two-step plan at Canva: Step One is to build one of the world’s most valuable companies, and Step Two is to do the most good we can. As part of “doing the most good we can do,” it feels horrible to be living on a planet where hundreds of millions of people live in extreme poverty and are deprived of their fundamental human rights, like food, shelter, safety, clean water, education, and health care.

We've known for a long time that uplifting people permanently from extreme poverty was a goal we wanted to contribute towards tackling, but we didn’t know the best way to help that could be both effective and scalable.

After a lot of research, conversations with experts, and, most importantly, conversations with those in extreme poverty, we became convinced that one of the most effective ways to contribute is to give money directly to people living in extreme poverty. We believed that this could have a very positive immediate impact on individuals and can also compound to have a long-term positive uplift for communities.

This led us to the incredible team at GiveDirectly, who have been pioneering this space since 2008, and in 2021 we set to work on the first phase of our partnership, which saw us donate $10 million providing cash transfers to 12,800 people living in extreme poverty in villages across rural Malawi.

Today we're excited to announce the next step in our goal to help end extreme poverty, with the launch of our second phase backed by a further $20 million cash transfer program for people living in extreme poverty in Malawi.

We’ve had many questions throughout our journey so far and benefited from the perspectives of Esnatt, who grew up in Malawi and runs GiveDirectly operations on the ground there; as well as those who have conducted extensive research in the field: Michael, a PhD in development economics, who worked at the United Nations and then founded and built GiveDirectly; and Rory, GiveDirectly President who previously ran the UK’s Department for International Development. We wanted to give the same opportunity to ask questions to our team, so here are their questions and our responses!

1. What is extreme poverty?

Michael: Extreme poverty is a severe deprivation of basic needs like food, water, sanitation, health, shelter, education, and information. According to the World Bank, it’s living on less than $2.15 a day, adjusted for purchasing power parity – meaning each day someone in extreme poverty consumes less than what $2.15 would buy you in the United States. Currently, 659 million people live in extreme poverty:

Esnatt: Many of GiveDirectly recipients earn less than $1 per day from manual agricultural labour on small plots. This leads to malnourished children, limited access to education, and insufficient healthcare funds for the sick and elderly. It’s typical for entire families to live in single-roomed, clay-brick homes with straw roofs and dirt floors.

2. Why did you choose Malawi?

Danny: Two reasons. Firstly, GiveDirectly has been working in Malawi since 2019 and has built support with the national government, which is critical to delivering programs at scale. Secondly, far too many people live in extreme poverty here. 71% of people live below the extreme poverty line of $2.15 a day in Malawi, and contrary to global trends, the extreme poverty rate in Malawi has increased since 1997.

3. How much money does each recipient receive?

Michael: We’ll be giving $550 to each adult. The question of how much to give is a difficult one: the higher the amount, the fewer people we can reach with a fixed budget. Our goal was to give enough to allow a large fraction of people to lift themselves over the poverty line while reaching the most people. Given the evidence we have from other projects on how transformative a $1,000 lump sum per household (~$500 / adult) could be, we decided to anchor to that.

4. What do people spend the money on?

Melanie: Learning about the ways the money has been spent is incredibly humbling and insightful. It’s without a doubt the best money we’ve ever spent. We’ve heard so many touching stories about the diverse ways that people have spent their money:

• At 23, Mike finally finished school after a six-year delay due to his inability to afford the $20 school fees. After receiving money transfers, he paid his fees, graduated, and bought six piglets to fund his dream of studying electrical engineering at university.
• Bertha paid for her daughter’s surgery, so she could walk. "My child was born with bowed legs. I realised that this wasn't normal rickets. She could not walk. I then wanted to take my child to the hospital for surgery, but I didn't have any money. Thanks to GiveDirectly, my child has now been treated, and I have hope that she will soon be able to walk properly."
  

Here are some more comments from recipients in their own words:

The album linked here contains the stories of 28 recipients and their families, just 0.2% of the people the first phase of the program is reaching.

5. Why did you choose cash over other kinds of aid?

Melanie: We’ve always wanted to be part of the solution rather than the problem. We’ve spent many years learning about different solutions. The more we learned, the more complex the space became. In every village, every person has differing needs.

We wanted to find a solution that would balance our goals of having a long-term impact, empowering the recipients to use the money on what was most needed for them, and having the ability to scale over the years to come. As we learned more about GiveDirectly, their approach really resonated with us and was in support of all of these goals.

Michael: We started GiveDirectly to place choice and capital directly in the hands of those that knew best: the recipients.

My co-founders and I learned that many efforts were less effective than hoped. Cash transfer programs existed, but there was no option to give directly to those in extreme poverty, so we decided to build one in 2008. Giving cash transfers could shift the sector to being immediately more recipient-centric and offered the potential of unparalleled scale with long-lasting effects.

Danny: As we dug into the data and visited these communities, we learned that these transfers don’t just help recipients, but they have an even bigger impact on the local communities. A recent study found that for every $1,000 distributed to a person living in poverty, the local GDP grew by $2,600 – a 2.6x multiplier.

6. How are people choosing to receive their money? Is it all done digitally, or are there in-person centres?

Esnatt: We use simple and fair criteria to identify recipients. We locate extremely poor villages through national surveys; we also enroll households door-to-door (saturation tests) and explore short surveys (proxy means tests) in person. We have also tested MobileAid, a new system that employs machine learning and satellite data to rapidly and remotely register people in poverty into our program at scale. If recipients don’t own a phone, we provide one.

While enrollment and identification can be either digital or in-person, payment is always digital. We provide basic mobile phones to recipients during enrollment and help them get set up. The cash is sent to a recipient’s mobile money account, which can be accessed through text messages and withdrawn for cash at any mobile money stall now commonplace across sub-Saharan Africa.

7. How do you ensure those in need receive the funds?

Esnatt: The regions in which we work are incredibly poor – almost everyone lives below the extreme poverty line. In the region where Canva’s first program is being delivered, 85% of the population is in extreme poverty (and the remaining 15% aren’t far above it).

Our process involves sending field staff to personally enrol all adults in the villages identified. We prioritise vulnerable individuals (elderly, unwell, illiterate). Each recipient is then registered to a unique SIM card linked to a mobile money account where cash is delivered with an electronic receipt.

8. What other costs are involved? If you give $100, how much does each recipient get?

Esnatt: Recipients receive 80% after exchange fees, mobile and banking fees, on-ground costs, personnel expenses, and program evaluation costs. The percentage may vary depending on project size, with larger projects approaching 90%.

Danny: The $20 million program we’re announcing today is forecasted to give recipients 87% of every dollar, made possible by the scale of a bigger program and targeting innovations we’ve learned through our first program.

9. What's the procedure for people without banks? Have we explored forms of money that could play a role in adversarial scenarios?

Danny: GiveDirectly primarily uses mobile money, which enhances transparency and helps recipients become banked to receive transfers. The field team visits multiple times to help recipients through the process, including getting national IDs, setting up their mobile phones, and much more. Recipients in a village also help each other with using mobile money and digital literacy.

To prevent abuse, GiveDirectly also follows up with recipients through phone calls to verify that the recipient can access the money and is receiving the money themselves.

10. Could envy result in harm within and between communities we fund and those we don't?

Esnatt: We take safeguarding recipients very seriously. We have an internal team of auditors and community officers who assess our operations for exposure to harm, abuse, and fraud. They visit villages in the months after payments are made to check for adverse events and are independent of field operations teams to limit potential collusion between fraudulent staff and to protect the audit team’s safety.

Moreover, we typically enroll all households in a village which reduces community ill-will. Mobile money also allows a secure delivery of cash because instead of physical cash, you can go to access the money or even send money directly to a seller without having to withdraw it.

11. Have there been cases of fund abuse? If yes, what happens? Are there measures to prevent it?

Michael: What people consider spending “abuse” is subjective, and as such, our direct giving philosophy advocates for the empowerment of people to make decisions for themselves about what they feel is the most impactful use of funds – be it to start a business, send their children to school, or buy a mattress.

While this approach does not involve making judgments on usage, we continue to rigorously evaluate the impact of our programs with more than a dozen randomized trials to date. The evidence is clear: recipients use the capital in diverse and positive ways that improve wellbeing. Moreover, concerns about cash being wasted on temptation goods like gambling or alcohol are unfounded, with dozens of studies confirming otherwise.

In order to combat fraud, we have put in place robust and comprehensive protocols; including an audit team, verification phone calls, surveys, and a call centre to proactively reduce any financial loss. Last year, fraud losses were 1.1%, compared to 0.23% the year prior. This is drastically lower than the UK National Fraud Authority's reports which suggest that as much as 7% of UK charities' turnover is lost to fraud every year. We're constantly seeking to improve our strategies to ensure the money goes to those who need it most; you can find out more about our fraud prevention strategies here.

12. There’s been a lot of effort to “fix” poverty in Africa. Are there examples of countries once in extreme poverty that are now self-sustaining?

Rory: In the last few decades, billions of dollars of aid have been allocated to Africa, with only limited success in lifting large populations out of poverty. However, rigorous evaluation of aid programs only took off within the last 10 or so years, and it's only recently that we've developed clear metrics on effectiveness. In Malawi alone, more than $17 billion of development assistance over the last fifteen years has resulted in almost no reduction in the proportion of people living in extreme poverty.

Modern evidence suggests the most powerful potential application of large philanthropic donations is in ensuring the extremely poor are fully included in the development of a country. And the evidence we’re seeing suggests that cash is one of the most effective tools for addressing this problem.

13. Is it better to give now or invest and give even more later? How do we approach this?

Danny: Recipients tend to invest a portion of the money themselves, and many studies show cash transfer recipients derive high annual returns from the money; which is significantly more than general market returns. The other benefit is that the earlier we give cash, the sooner we can help take people out of poverty and the sooner the money starts circulating in the local economies.

14. Does GiveDirectly see any risk in the money being “extracted” by larger, non-local entities? What's happening to maximize the long-lasting impact of the money?

Danny: From our field visits, there's actually very little “international entity” presence in Malawi villages – so the money stays locally.

Esnatt: Recipients typically spend their transfers on long-lasting activities, including improving or building homes, purchasing livestock, setting up businesses, and educating children. The largest study of onward spending found that people living in villages neighbouring recipient villages benefitted from programs almost as much as recipients, as the cash flowed around the local economy, which then creates a long-lasting impact.

15. How do you make sure money you give is flowing out, and goods and services are flowing into communities? If people are spending the money in their own community, how do they avoid inflation as a result of a currency infusion?

Danny: Great question. Inflation is something GiveDirectly has been monitoring and an important research focus area of our new program.

One recent study on GiveDirectly's Kenya program found that average price inflation was surprisingly minimal at 0.1%. This may be due to under-utilisation in the economy, that is workers and shops operating far below full capacity so additional money is not leading to inflation in these conditions. Moreover, cash transfers not only increase demand but also supply, with recipients investing in items such as fishing rods to create more output and decrease price pressure.

The evidence so far is that cash transfers definitely help recipients in real terms and aren’t being eaten away by inflation, and we look forward to exploring this area further and sharing all our learnings with the community.

16. What’s next?

Our ultimate goal is to help end extreme global poverty.

We started with an initial project to refine the targeting and operating model in Malawi and learn along the way. With our first project (Phase One), we enrolled 12,823 recipients in rural Malawi whose transfers have begun and will be completed in January. Our next objective (Phase Two) is to reach everyone in a sub-district, or approximately 61,000 recipients; these operations started today with the first enrollments and are partly funded by our $20M grant, which will cover 31,600 recipients.

We’ll then be looking to scale this program further with the goal of permanently uplifting an entire region or even country, and hope to find many people to walk this journey together with over the months, years, and decades to come.

Finally, thank you

To us, a truly ‘crazy big goal’ is one that feels big and impossible, where you feel small and inadequate before it, that you know will take the hard work and talents of many – but it’s so worthwhile you can’t not contribute to it, and one way or another you want to find a way to achieve it, even if it takes decades. Uplifting people from extreme poverty is certainly one such goal, and while the end goal is very daunting, each step, each phase of the project has such profound and immediate impact, it’s the best money we can imagine ever spending.

None of the work we're doing as part of Step Two would be possible without the ongoing contributions of our talented team at Canva and our community of millions of Canva users across the globe. We hope you can feel pride in the progress we’ve made and your important role in helping us to take strides towards this goal.

We’re incredibly excited about what we can do together as we continue toward both Step One and Step Two. Thank you for your support and for being part of our community.

– Mel