There is a lot of excitement around Unconditional Direct Cash Transfers (UDCT). Has been for a while, actually. The idea is simple: transfer cash to people directly, instead of funding large incumbents who, more often than not, do not reach the intended impact and are vulnerable to corruption. In the long run people mostly take the right decisions with their money and there is a multiplier effect as money actually gets injected in the local economies, creating growth and opportunities there.
In spite of all the excitement, the approach has its critics. I am personally more enthusiastic, although I do see two huge problems with Unconditional Direct Transfers that I think make it very hard to scale.
For one, since it is practically impossible to transfer money to EVERYONE, there is a degree of arbitrariness in the way recipients get chosen. Either that or decisions are made based on advice/ input from problematic sources such as governments or the very same large incumbent aid organizations. This fact makes these programs highly vulnerable to corruption and other unethical practices while also slowing things down and reinforcing the need for expensive aid-specific infrastructure, which at scale defies the purpose of direct transfers. On the receiving side, the arbitrariness of it perpetuates negative feelings around perceptions of unfairness.
The other problem is operational costs, including costs of transfers. It costs money to transfer money, and these costs go up with frequency and scale. They enrich opportunistic businesses that have conveniently ignored the needs of the lower income segments. New Tech solutions – such as Mobile Money – change this equation only slightly, as they remain expensive and, particularly relevant for direct transfers, their exclusive use will necessarily exclude some of the more vulnerable segments on these market who don’t fulfill the minimum requirements or for whatever other reasons do not have access to the technology.
I do however believe we have an opportunity to bypass both these categories of challenges, with a slightly different approach, that would have all the benefits of direct transfers (cash injection, low costs, high local economic impact) while eliminating the risks for arbitrariness or corruption from the operation and making the whole thing very scaleable. Let’s call this approach Event-Triggered Transfers (ETT).
Before I explain Event-Triggered Transfers, let’s go back for a second and analyze how things actually work in practice with a classic Direct Transfer Programme:
Step 1. Every Unconditional Cash Transfer project has one or more donors who advance funds to the Organization. These funds get combined into a pool/ bucket which may or may not be earmarked for a certain community/ country/ region. The Organization will need to set a Field operation in every community where they work, to conduct checks and feedback, coordinate with local authorities and support the implementation.
Step 2. Before it gets to operate, the organization needs to get both the national/ regional authorities involved (“Buy-in”) while it also needs to enlist the help of local authorities at community level to identify the households/ community members that should be on the recipient list. This is very tricky as often personal interests and/ or corruption become variables that can only be addressed by increasing controls (meaning growing the size of the field operation). Also, there is a risk that the field operation itself will have to choose between turning a blind eye to the odd irregularity as a price to continue to operate in that community. This happens every day in traditional development. Just like in traditional development this will lead to a lot of resources having to be invested in “Coordination“, things will slow down and costs will go up.
Step 3. Once the problems above have been solved, the next question is how to perform the actual transfers. It is either having people physically handing out cash to recipients (meaning the field operation needs to grow, which is expensive not to mention risky and impossible to scale) OR, making use of whatever payment methods exist in that market. More realistically, there will be a combination of both. In any case, at this point one needs the partnership of banks/ mobile providers. Negotiating and maintaining these partnerships over time take additional resources which will necessarily increase the size/ complexity of the field operation further.
Step 4. Eventually, the money trickles down to the recipients. Partly through existing mechanisms, partly directly through the efforts of the Organization. Further efforts need to be invested in continuous communication around how & why the money gets distributed and mitigate eventual perception of (in)equity and (un)fairness.
At this point risks and costs are at par with a traditional NGO operation.
Step 5. Finally, the organization collects feedback from the field and puts together a report which they forward to donors. Large donors will get custom(ish) reports. Small donors won’t. Attribution at this point is not possible. We are back in old school development where donors essentially purchase reports rather than impact.
The Smarter Alternative: Event-Triggered Transfers
In this alternative approach, we are using a machine-driven platform that disburses rewards (=cash) in real time triggered by pre-defined events:
Step 1. Let’s start again with the donors. Donors invest in an impact platform that offers the donor the ability to customize investment by defining variables such as Location, Target audience or Impact behaviour. Once these variables are defined (by the donor), the funding goes directly into dedicated accounts related to this specific investment which are machine-managed. The funds get converted into reward points which get disbursed directly and automatically to recipients, every time the variables are validated (i.e. the event occurs). Validation itself is a simple workflow over a cell phone.
As an example, let’s say a donor wants to increase school attendance for girls in a certain community. every time a girl goes to school (event) there is an instant transfer to that girl or her caregiver. Even the transferred amount can be modeled/ customized based on machine-learning.
Step 2. Obviously, there will always be segments of recipients that do not have access to the most basic technology (a simple cellphone). A very small field operation works to reach these people directly/ physically. But rather than building a cost-intensive field operation for this task, we simply commission it to micro-entrepreneurs in the respective communities. They earn commission for reaching out to these segment and – you guessed it! – their commissions are event-triggered.
Once these recipients have access to a simple cell phone (cost: 3$-4$), they do not require efforts to access physically anymore, as they join the main cohort of recipients, which means that the field operation will be reduced over time, rather than grow. At scale this is a big deal.
Step 3. The government (local, regional, national) participates simply by defining the regulatory environment. Business (network operator, banks, etc.) participate organically, as they gain business through this program. There is no friction from committees or coordination efforts.
Finally, and most critically for Donors – they get real-time access to the impact of their funding, and precise attribution. Regardless of the size of their investment. They get to invest in visible impact.
Here at Triggerise we are very excited about the opportunities unlocked by Event-Triggered Transfers. They are at the core of everything that we do and we can’t wait to see what future opportunities await.