- America’s global aid agency, USAID, released two position papers last month: one recognizing direct cash as a cost-effective tool to reduce poverty and the other calling for agency-wide standards of cost-effectiveness.
- For the first time, USAID is embracing the large body of cash research and recognizing that cash can reduce poverty in addition to being useful in crises →
- They’re now prioritizing cost-effectiveness and endorsing cash as a highly effective intervention as budgets shrink →
- Over a decade of GiveDirectly’s research and programs contributed to this shift, and we have a plan to maintain momentum with the incoming administration →
For the first time, America’s aid agency now specifically calls for using direct cash to address poverty
In October, USAID released a position paper on Direct Monetary Transfers during an event at Center for Global Development that puts cash at the core of their development toolkit, framing it as an efficient and effective form of “market-based assistance” with both long-term and short-term impacts.
This change did not happen overnight.
USAID has spent more than a decade incorporating cash into its programming, starting with a series of cash-benchmarking studies in Rwanda, DRC, Malawi, and Liberia implemented by GiveDirectly.
USAID’s Bureau of Humanitarian Assistance has also scaled up its use of cash, enabled by changes in Food Aid policy allowing for a mix of in-kind food aid and cash, and contributing to the 23% of humanitarian aid delivered as cash (and vouchers). Two years ago, USAID leadership made a commitment to focus more on cost-effectiveness and established the Office of the Chief Economist to ensure USAID programs use existing evidence with Dean Karlan, a renowned expert in impact evaluation use, at the helm.
Click on each to read excerpts from this new paper:
📈 Cash has a strong evidence base
“Evidence shows that transfers drive sustained impact, with many studies measuring impact one to four years after transfers end. The positive impact cuts across many USAID development objectives, from food security to resilience to household income, health, and more.”
📲 Cash is cost-effective, efficient, and strengthens local markets
“With the growth of mobile money and digital payments infrastructure in many low- and middle-income countries over the last two decades, it has become possible to deliver transfers more efficiently and more transparently…Direct monetary transfers can strengthen local markets. In many contexts, transfers allow recipients to engage more in markets, strengthening existing markets and in some cases creating new ones…Transfers provide economic benefits beyond direct recipients as the funds recirculate within the economy (a “multiplier effect”).”
🛖 Cash helps address poverty, not just humanitarian crises
“Despite compelling evidence that transfers are effective in achieving a variety of development outcomes, [direct monetary transfers] is most commonly applied within USAID as a tool for emergency humanitarian response.”
📝 Cash programs are flexible and can be adapted for different outcomes
“Design matters. Many details in the design and delivery of direct monetary transfers can be adapted to fit an activity’s development goals and target population, amplifying impact for specific populations and nudging recipients toward certain development outcomes.”
Promoting cash is part of USAID’s focus on finding the most cost-effective programs
Alongside the paper on cash, USAID released a position paper on Cost-Effectiveness. At a time when global aid budgets are getting cut, these new standards for cost effectiveness provide a model for spending existing money better.
The paper names cost-effectiveness as a key priority of USAID, alongside “localization” (i.e., empowering local organizations and recipients to play a larger role in their own development).
It sets a new standard by proposing “Good Buy” benchmarks that guide program design towards the most impactful interventions per dollar spent — unsurprisingly, cash frequently emerges as a leading approach.
At the event, Isobel Coleman, former GiveDirectly COO and current Deputy Administrator of USAID gave a clear statement that the agency has, “a moral imperative to use every dollar entrusted to us as wisely and impactfully as possible… We need behavior change by USAID — to upend the status quo, discontinue programs that, even if doing some good, are not the best use of money.”
This recognition that some poorly evidenced USAID programs must come to an end is a welcome change. Based on USAID’s own rigorous evidence on cash transfers, there is a distinct possibility that some will be replaced with cash-based programs.
GiveDirectly’s research and programs were central to this change, which helps us accomplish our mission
Whether you’ve been giving $30 a month since GiveDirectly started or gave your first donation last year, you have played a role in making this happen.
GiveDirectly has run dozens of innovative programs, covered by hundreds of media outlets around the world, and spearheaded two dozen randomized trials — helping transform how unconditional cash is thought about in the aid sector. In fact, three out of the four studies cited by USAID during the announcement event were from GiveDirectly.
But why should GiveDirectly care about how USAID spends their budget?
- 💰 The U.S. government has the single largest aid budget in the world (~$30B/year). We’d like to see significantly more of their budget moving from unproven interventions to cash.
- 🌍 Other wealthy nations take note of the U.S.’s support for direct cash and may redirect some of how they use their $157B/year total in aid spending to cash.
- 💸 Most practically, both the U.S. and other nations will run more projects with GiveDirectly. This year, 32% of our cash transfers came from such aid agencies, up from 2% in 2017.
GiveDirectly will continue to raise as much money as we can, to get cash directly from donors to people living in extreme poverty. We’ll also push to maximize the potential impact of cash by advocating for policy changes and encouraging more institutional donors to act based on evidence.
We’ll keep pushing for much more aid money to end up in the hands of people in poverty
There is still much work to be done to push for more cost-effective approaches, including use of cash. The humanitarian sector set targets for cash, but the development sector has generally been far less ambitious about use of cash in general, and large lump-sum cash in particular
These position papers were released just months before a second Trump Administration begins. While much is still uncertain, there are clear indications they will continue to focus on cost-effectiveness and localization. Max Primorac, a former Trump Administration official in USAID, writes:
“Effective use of funds is essential to maximize care for the world’s neediest people… [USAID] should identify and eliminate outdated and ineffective concepts and focus on funding innovation. A rigorous review is necessary to ensure that current programs and funding streams avoid wasting taxpayer dollars and prioritize what is needed now and what works.” – Project 2025
President-elect Trump has not yet named an Administrator of USAID nor outlined priorities for the agency. However, regardless of what actions a second Trump administration takes, for GiveDirectly, these position papers mark a moment of validation and opportunity. We’re proud of the research and partnerships that contributed to USAID’s policy shift.
Here’s what we’re focusing on to build on this progress:
- 🤝 Working at mission (country) level: Building on our existing relationships, we are offering our support to USAID missions to explore how to apply this new guidance in their contexts.
- 📈 Expanding evidence: Continuing our own rigorous research, often in partnership with others, to ensure cash-based programs remain effective and cost-efficient, and address critical problems
- 🏛️ Engaging with Congress: We recognize the important role Congress plays in governing USAID and are working on bipartisan legislation formally requiring programs to include cost-effectiveness considerations.
- 📑 Influencing global policy: We will continue to advocate for cash as a central solution addressing extreme poverty, working in collaboration with others to influence government and donor policy.
* The three GiveDirectly studies cited in USAID’s launch event were: