Cash Transfers, Part 2
Updated: May 2, 2022
Re: Why Cash Transfers are a Great Option for Foundation Year End Giving
Recently, I've had a few conversations about our 2016 blog post about why foundations should consider organizations administering direct cash transfers to the poor in their giving. As I have revisited the post, I've realized that an update on our thinking about cash transfers is in good order (spoiler, we still think cash transfers are a great tool). Below are a few examples of the way our thinking has evolved or filled out.
The Challenge with Cash Comparisons--Intangibles
Some things are difficult to monetize. For example, what’s the ROI on decreasing depression, or on advocacy in which there are big wins, but many parties are contributing, etc.? GiveDirectly shares in this struggle as their cash transfers have been found to affect intangibles like emotional and mental health as well. Just because something is intangible or difficult to monetize, doesn't mean that it's not "at least as good as cash". (Of course, I'm aware that there are tools that try to quantify such intangibles, like the quality adjusted life year index, but I haven't put the research in to determine whether I can embrace those tools.)
How Cash can be Thought-Guiding
Asking whether an intervention is at least as effective as cash gets a lot of organizations thrown out; you cut quickly to the chase that way. Whether it’s an organization to treat depression or an organization to increase income, you can usually at least tell whether they’ve seriously asked this question--or similar ones--of themselves and their own work. It separates the bleeding heart organizations who maybe aren’t being critical enough of their own “solution” to problems and helps you identify organizations who can either answer in the affirmative, or who at least grapple with this question in a way that really improves their work and impact, even if a simple yes or no (per the intangible challenge) might be impossible to pin down.
An Organizational Development at RTNF...:
There may be foundations who end the year and need to donate a lot of money quickly (per IRS requirements), but I’m finding that we personally are going in the other direction. Where we used to have too few great organizations to donate to, asking this question (better than cash?) has guided our thinking in such great ways, we have found our way to what we feel is a world-class applicant pool--one that we are more and more inclined to fund. This means we have less leftover for GD each year, which is interesting. GD guided our thinking, got us asking tough questions, which in turn has lead us to more and more wonderful organizations. We still partner with GD, but it is now in a more thoughtful way (not just passively with our “leftover” funding). For foundations lacking the capacity to do extensive diligence, we still think cash transfers are a great option to donate the end of year balances.
Cash scales quickly
While we’ve found other organizations to fund, some of which we think demonstrate are at least as effective as handing over cash, we still think there is good reason to partner with organizations providing direct cash transfers to the poor. First of all, there is still much more to learn about cash transfers, but also, it’s a very scalable way to address poverty. Others in our grant portfolio, while scalable, take more time to scale to ensure continued program quality (building staff, infrastructure, and even growing the number of participants can take time). On the other hand, cash is quick to scale, and since I am inclined to think that social problems and poverty increase faster than our investments appreciate, I think we should give as much as we can today.
In conclusion, it's important for RTNF, as a grantmaker, to keep asking our applicants "Is your program offering at least as much value to the beneficiary as cash would?", but we have to realize that sometimes it can't be answered because some outcomes are intangible or impossible to really monetize. Still, we love to partner with organizations who are asking these kinds of critical questions, as it leads to new insights, revealed assumptions, and indeed, greater social impact.