Can giving cash, no strings attached, help end poverty? In Malawi, they’re finding out.
| Lilongwe Rural, Malawi
Last May, with no more fanfare than a buzz of inexpensive cellphones, Nelson Mdzuma and Magret Zoliyela found themselves staring at an amount of money they never imagined would be theirs: 935,000 Malawian kwachas, each.
That’s about $550, more than what most people in the village of Chigowo, one of thousands of similar villages that dot the plains of central Malawi, could hope to earn in a year.
Down a dirt road, neighbors were already celebrating identical text messages. Some shouted and danced; others raced to the market immediately to buy maize.
Why We Wrote This
A story focused onMalawi is one of the most persistently poor nations on Earth. One nonprofit is testing an idea: What happens when you give every adult a substantial sum of cash and let them do with it what they see fit?
As village chief, Mr. Mdzuma always carries himself with as much grace as he can muster. That day, however, he felt himself walking differently. “Majestically,” he recalls.
When night fell, the husband and wife knelt on their clay floor. Ms. Zoliyela remembers every word she prayed.
God, you have given us this money. This is money we did not work for. This is your love. Where this money is coming from, we do not know. It is you who knows. Give us wisdom to use this money prudently.
The money deposited into their newly established mobile money accounts is part of an ongoing bold experiment in the world of international development and aid organizations. The concept is simple: The best way to bring people out of poverty is to give them money and let them decide for themselves what they need, no strings attached.
Malawi, a small, landlocked nation in southern Africa, is one of the poorest countries in the world. Nations like the United States, as well as hosts of nongovernmental organizations, have been working here for decades, collectively pouring billions into the country for specific programs to improve health, education, and infrastructure.
Malawi has long been a puzzle, however. In general, the nation with a population of 21 million people has enjoyed a peaceful history since its postcolonial independence in the 1960s. Since 1995, it has been a viable, multiparty democracy.
But little has changed. The number of people living in extreme poverty has only grown, according to the World Bank. Today about 70% of the population still lives in extreme poverty, defined as living on less than $2.15 a day.
For every 3 Malawians able to crawl out of poverty over the last decade, 4 fell in again because of weather shocks, especially drought.
So it’s time for new ideas, many development thinkers say.
“There’s a desire to innovate,” says Isabelle Pelly, director of senior partnerships for GiveDirectly, the nonprofit behind the cash delivered to the villagers in Chigowo.
The concept of cash transfers is not new, especially in parts of Latin America and Africa, where organizations have often used small sums as a cushion against the worst effects of poverty.
But the architects of this idea believe that simply giving people hard cash to spend as they see fit could possibly change the course of the country’s long history of poverty.
If successful, the idea could transform the concept of aid and development – and help millions of Malawians help themselves out of poverty. If it fails, it will be added to a list of well-intentioned yet misguided attempts to fix Malawi from the outside in.
In late 2023, when GiveDirectly staff members first arrived in Chigowo, the entire village gathered around Mr. Mdzuma’s home.
Some villagers were not sure they were hearing the proposal correctly. GiveDirectly would transfer every adult over the age of 18 a sum of $550? Yes, they were told, and they could use it however they pleased. But the nonprofit would not be coming back with more.
To the villagers of Chigowo, it sounded too good to be true. But the offer of free money could not be turned away, and they decided to trust these outsiders in their beige vests and green GiveDirectly caps.
In the months that followed, every resident of the village was enrolled in a door-to-door interview. Anyone who needed a cellphone received one, and GiveDirectly helped those without national IDs sign up for one to register for mobile money.
After months of waiting – as well as one of the worst droughts in recent history – the money arrived in May 2024. Mr. Mdzuma decided he had to wait until his heart was calm before he even thought about spending the cash. It took over a week.
Then he and Ms. Zoliyela got to business. They paid back a loan they had taken out to buy four bags of maize and then bought several more.
They bought a cow for themselves and a calf to give to their daughter in a nearby village that had not been put on GiveDirectly’s list.
And then they watched their own village take on new life around them.
Thatched roofs needing constant repair were replaced by steel sheets that should last over a decade. Sturdy brick houses sprouted up next to cramped, crumbling homes. New shops opened in the market, and plump goats began to graze in the pasture.
Neighbors started riding to and from the fields on bicycles – and even some motorcycles. Some bought oxcarts to haul their harvest. Children who had left school began attending again, their parents able to afford their fees.
“It feels good to live here now,” says Mr. Mdzuma from a plastic chair on his front porch, his house painted a fresh white.
Giving cash as a form of humility
Many who work with GiveDirectly see its cash model as a form of humility. They also believe it upends the conventional role of a development “expert.”
“We don’t necessarily know what’s best,” says Grace Jackson, the organization’s country director for Malawi. Those living in poverty, she says, “should be able to make those decisions for themselves.”
The nonprofit’s focus on personal empowerment and cash with no strings attached has helped it explode in popularity in the charitable world over the past decade.
In 2009, four Harvard and MIT graduate students wanted to start an NGO that could circumvent some of the known problems in international development. Too much aid intended to help people, they believed, was either disappearing along the way or simply not working.
So instead of building hospitals or training farmers, they decided they would send money directly to the world’s poorest households.
Early results were promising, and philanthropists were impressed. Google gave GiveDirectly a $2.4 million grant to expand to other countries in 2012. By 2021, the development organization was named the fastest-growing nonprofit in the world, with donors including Elon Musk, Jack Dorsey, and the Ikea Foundation.
The organization has sent over $900 million in direct cash payments to about 1.6 million people who live in some two dozen poverty-ridden nations around the world. It tracks the impact of its efforts with the help of economists.
Staff members say the result is an organization that has the excitement and agility of a startup, compared with what they see as the old-school development agencies.
“There’s a level of ambition ... that’s actually data driven and evidence-based,” says Ms. Pelly at GiveDirectly’s office in Nairobi, Kenya.
In 2017, the organization started the world’s largest and longest universal basic income experiment in rural Kenya. Some villages began receiving either a short-term or long-term monthly sum of $22.50, while others got $500 all at once.
Early results suggested the one-time lump sum was more likely to turn lives around. It allowed recipients to invest in starting businesses they could not otherwise afford.
So that is what GiveDirectly decided to do in Malawi, calculating that $550 would be enough to, hypothetically, close the poverty gap. So far, it has sent direct payments to more than 71,000 people – or every adult in the entire subdistrict of Khongoni.
“This is a different ballgame,” says Dan Stein, chief economist for IDinsight, an analytics company that advises development organizations. “We know that cash has these great immediate effects on people’s lives,” he says.
“Whether it pulls you out of poverty long-term is still a little bit of a question mark.”
Malawi’s leaders, too, say they are ready for a new model of development. Yearly income per capita was just $464 last year, according to the International Monetary Fund. Foreign aid makes up one-fifth of gross national income and two-fifths of the national budget, making Malawi one of the most aid-dependent nations in the world.
“We are tired of being recipients of aid and resources that do not last and do not change the status quo,” says Simplex Chithyola Banda, minister of finance and economic affairs.
The issue became more urgent when U.S. President Donald Trump froze U.S. Agency for International Development funds in January. Countries like Malawi were left scrambling. The nation has received $350 million annually from USAID.
Yet some in Malawi saw the massive cuts as a blessing in disguise.
“These 60 years of depending on donor aid haven’t helped us,” says Thom Khanje, a spokesperson for the National Planning Commission, which wrote the latest economic blueprint for the country, Malawi 2063. Its stated goal is aiming for the nation “to be an inclusively wealthy and self-reliant industrialized upper-middle-income country.”
Along with homegrown economic production, it also calls for a “hate for hand-outs.”
“Maybe we need this kind of shock to wake us up from the slumber,” says Mr. Khanje. He tries to get his fellow Malawians to remember a time before the colonial era, when their forebears got by without any outside support. “It may have been in a primitive way, but we were self-sufficient,” he says.
GiveDirectly is careful to distinguish itself from the other aid organizations, whose plaques line the streets of Lilongwe, Malawi’s capital. The nonprofit views its cash transfers not as handouts perpetuating a cycle of dependency, but as starting capital that recipients can use to invest in a new life.
“If everything else that has been done so far has not worked, perhaps it’s time for something different,” says Yvonne
Murindiwa, a GiveDirectly program director in Lilongwe.
A common belief is that giving people cash makes them lazy, she adds. “The effect is actually the opposite.”
“I have achieved part of my dream.”
In the months leading up to transfer day, Peter Kamensa and his family spent every evening debating what they would do when the cash arrived.
Among himself, his two wives, and three of his nine children above age 18, the family had $3,300 to consider how to spend.
Eventually the six adults agreed to pool their transfers to open a hardware store. Mr. Kamensa had heard neighbors planning to buy bicycles and motorbikes, and he sensed a business opportunity.
When the GiveDirectly money arrived, Mr. Kamensa rented a storefront off the dusty highway in Kasiya, a village that must be passed to reach more remote places like Chigowo.
On a rainy Saturday, customers drop by in a slow but steady trickle, asking for a front axle, a screwdriver, grease – items they would not have needed before GiveDirectly came to this area, when there were few wheeled vehicles to repair.
In the seven months since the shop opened, Mr. Kamensa has earned a profit of 4 million kwachas, or over $2,300. “I have achieved part of my dream,” he says. “I am independent.”
The other part will take more time: using that income to put all of his kids through high school.
Across the subdistrict of Khongoni, villages have seen a similar boost. Three months after the money arrived, the number of solar panels tripled and steel roofs doubled, according to GiveDirectly surveys.
Households with small businesses have increased by 50%, and the number of people earning more than $1 a day has doubled. The organization also found that 9 out of 10 recipients were living above the extreme poverty line after receiving the cash, compared with only 2 out of 10 before.
These results mirror short-term studies of direct cash payments from other parts of the world. Improvements in income, nutrition, health, school attendance, and overall well-being usually follow an influx of unconditional cash.
In Kenya, starting in 2014, GiveDirectly gave one-time cash transfers of $1,000 to more than 10,500 poor households in over 650 villages, chosen at random. The cash infusion represented 15% of local economic activity. By 2017, researchers found that for every $1 given, the total economic impact in local areas was $2.50.
Fewer studies, however, have considered the long-term impact of such payments. Which is why researchers are watching the Malawi experiment closely.
“How strong is it, and how long can it last?” asks Mr. Stein, the IDinsight economist. “Can it really cause these grand, long-term step changes in an economy versus a bump that very slowly goes back to the norm over time?”
In 2008, the government of Uganda offered one-time cash grants of $400 to thousands of young Ugandans to help them learn skilled trades.
Four years later, employment levels of these young Ugandans were 17% higher than their peers, and they earned 38% more. When researchers came back after nine years, however, these gains had largely dissipated.
In a study from Ethiopia, some young people were given $300 and a few days of business training, while others were given factory jobs and some received nothing. Those who received cash were initially earning a third more than the other groups. But after five years, these differences disappeared.
Many of the problems that countries like Malawi face require government coordination. Cash grants cannot build roads or hospitals, install the infrastructure needed for industries to emerge, or fix systemic corruption.
Some economists point out that in theory, as people become economically empowered, they can push for these kinds of improvements in infrastructure, and eventually contribute to a tax base that could fund them.
The promises and perils of giving free cash
In the village of Mtsindo, a few miles down a muddy road from Mr. Kamensa’s hardware store in Kasiya, Marlen Fanta and Moses Nyamulani laugh when they open the door to the mud hut that used to be their home.
The young couple had lived here with their two children. Now two goats bray inside. It also houses a new outhouse.
The ramshackle structure stands just a few steps from their new home, a brick house where they sleep for the first time ever in a separate room from their children.
Rain pounds the steel sheets overhead. The maize flour Ms. Fanta is grinding in a corner would not have survived the downpour in their former home. And they no longer need to spend close to $100 a year replacing and repairing a thatched roof.
“We never imagined we could live like this,” says Ms. Fanta.
Initially, GiveDirectly selected the poorest families in villages for cash transfers. Now it gives cash to everyone – a strategy that minimizes conflicts between neighbors.
Still, less than a year after the sudden cash infusion, economic activity has slowed, villagers say.
Joyce Lemon runs a tearoom in Tsindowakuda, another small village in the area. On a recent morning this past January, she’s pouring a cup of sweet black tea for a single customer, while her son, Zikiel, kneads dough for scones in a plastic tub.
The local market is just waking up. Men are already playing bao, a traditional board game, sitting around tables outside as vendors lay out plastic sheets to protect dried fish from the rain.
Ms. Lemon says customers crammed around her long wooden table last year after the money arrived. She used to sell a full batch of scones in a day. Now it takes three days. “The money ran out,” she says. “Those who had no plans, they squandered it.”
A widow with five children, Ms. Lemon urged her two of her three adult sons to think about their futures after they received their cash. But she says they were more interested in buying clothes.
“I was over the moon,” recalls Zikiel, his white knockoff Nikes creased from use since he bought them last year. But at age 18, he was not sure exactly what to do with the money. Having left school at 13, he chose to buy a bicycle and a tiny plot of land to farm, and gave his mother money to buy an extra goat for herself. The rest of the $550 disappeared quickly, he says.
Most evidence suggests recipients of cash tend not to spend it frivolously. Even if they did, according to the Keynesian school of economic thought, such cash infusions are not necessarily a bad thing.
“It’s not like the people selling the beer are going to dig a hole in the ground and bury the money,” says Boniface Dulani, a political scientist at the University of Malawi. “If there is more money in the economy, it’s always a good thing.”
This economic philosophy is propelling similar programs in the West, too. Starting July 1, 2023, all babies born into low-income families in Connecticut will receive $3,200 invested by the government, growing to between $11,000 and $24,000 by age 18 for education, training, housing, or retirement. California is offering foster children $4,500 upon adulthood. Some politicians in Spain have proposed €20,000 ($21,743) for every young adult.
But when it comes to money, problems can arise. In the Democratic Republic of Congo, GiveDirectly staff allegedly took an estimated $900,000 intended for recipients by stealing SIM cards registered with the cash.
There is also concern that cash transfers could divert government resources away from the communities they are trying to help. In a place like Malawi, government officials are of the mind that every $550 drop counts.
“It might not be enough,” says Mr. Chithyola Banda, the minister of finance. “But it is a substantial amount to see people moving from Step A to Step B – from the status of being destitute and having nothing to a status of having something.”
The “haves” and “have nots” when giving cash aid
Lezinati Kajedula was not able to take part in the cries of joy last year when the $550 arrived.
Her village of Khombe lies just outside the subdistrict of Khongoni, where GiveDirectly was giving cash to every adult. She’s had to fend for herself; her daughter, who is just beginning school; and a newborn son.
Like most of the adults in Khombe, the 22-year-old had grown used to her own gnawing hunger. But she could not bear to see it in her children.
As friends and relatives in villages a 15-minute walk away put new roofs on their homes and fed meat to their children, she begged a nearby farmer for work. Every cent she earned went toward buying sugarcane to resell at the market. For more than three painstaking months, she saved enough to get her business started – a load of bricks, several bundles of thatch, a bag of black tea leaves.
By last November, she had built her own tearoom. On a good day, she earns $5. It is not enough, she says, but at least her son and daughter are eating.
Around her, the rest of the village is trying to take steps forward, too. Every month, each household contributes 1,000 kwachas, or 58 cents, to provide a schoolroom for the youngest children. Men from the village have built four walls and a blackboard, but it still needs a steel roof.
Village chief Thom Mtalimanja reasons that if their kids could be better prepared for school, they might have a better chance of pulling their families out of their current conditions. Of the village’s 350 households, he says, 300 of them eat no more than once a day.
Here at the border between subdistricts, where haves and have-nots live so close to each other, onlookers have raised ethical concerns about the “experiments” conducted by Western development organizations on poor individuals in the Global South.
The answer, too, can be sterile, if not glib. Randomized controlled trials are the closest thing economists have to scientific experiments. They need them to study the effects on people who receive cash and compare them with others who don’t.
GiveDirectly staff points out this happens in any development project. If a new school or hospital is built in one area, there is always another region that did not receive one. The organization hopes to one day reach every district in the country.
“We don’t know why they were selected and not us,” says Chief Mtalimanja. “We know that there is a God in heaven, and one day our turn will arrive.”
When that day comes, he says, they will use the money even more wisely than their neighbors, whose mistakes and challenges they have watched over the past year.
Back in Chigowo, life has settled down, eight months after money fell upon villagers’ heads as if from heaven. They still dry their maize on reed mats and grind the kernels into flour for their families.
Mr. Mdzuma and Ms. Zoliyela’s lives have undoubtedly improved. But this is still an impoverished region, and the money they received is long gone.
Ms. Zoliyela’s back is beginning to stoop. She still wakes up at 5 a.m. every day to till her land.
“If I stop, what would I be eating?” she says. “Who is going to take care of me?”
Golden Matonga contributed to this report.
EDITOR'S NOTE: This story has been updated to clarify the title of the economist Dan Stein.
