How Microloans and Direct Giving are Modernizing Poverty Alleviation

It can be hard to imagine what true poverty looks like. In developed countries, we think of people who are on food stamps to survive, or perhaps have to live on the streets. Yet in some areas of the world, true poverty means going an entire week without eating any food, or not having access to a bathroom at all.

Extreme poverty exists all over the world. People die for lack of shelter and food, and get by on as little as sixty-five cents a day. Many people living on this amount don't have enough money to eat, let alone to find a way to better themselves. Without a helping hand, they have no way to break the cycle and climb out of their poverty. They are locked into extreme poverty forever.

 Source:  GiveDirectly

Source: GiveDirectly

It is this reason that charities such as Give Directly are creating a way to provide microloans and direct giving to people in extreme poverty. Participants in this experimental program are given roughly $1,000 over multiple payments. The money through this particular program are given with no strings attached, and the people who get it can do what ever they want with it.

Most people immediately better their lives with the money. If money is gifted to them in a large amount, the money is typically used to provide a stable source of income for them. They might use the money to purchase a cow to sell milk from, or to buy a motorcycle to transport other people around on for pay. The new source of income is long term and permanent, and often means the ability to eat and support themselves far into the future.

 Source:  GiveDirectly

Source: GiveDirectly

Smaller payments are typically used on nutrition. One woman expressed her gratitude at being able to eat regularly, instead of going several days without food at a time. Despite being given the money with no strings attached, it was used responsibly by almost every person who received the funds. Give Directly shares what the people do with the money on their website, and you can see how the money was spent on a feed that is constantly updated.

Give Directly mentions on their website that their direct giving is also meant to be a testing ground for a universal basic income. The idea, that all people everywhere should be provided enough money to survive off of regardless of whether they can work, has been bandied about for quite some time. The idea can be traced back as early as the 1500s, as a possible way of deterring theft. The idea has come back at regular intervals since then, all the way up to today when the Finnish government is currently testing basic income on 2,000 unemployed citizens.

There is no doubt from the data that unconditional money is a big boost to those living in extreme poverty, but even when unconditional money isn't available, micro-loans can be a great help too. Micro-loans are loans as low as $10 or as much as $500.

The credit allows people in extreme poverty the chance to create income for themselves. Mohammad Yunus first started the practice as early as the 1970s, by offering women in a village in India small cash loans. Through the loans, the women were able to go into business for themselves, and create a stable income.

These small loans are a great help to those in extreme poverty, because they often don't have access to loans at all. In some countries, there is almost no access to secure banking whatsoever. This means no safe place to keep savings, as well as no reliable financial institutions willing to give out loans. As many as 2.5 billion people live this way, and that can make bettering themselves extremely hard.

Micro loans can be a big help to people in these areas. Similar to the problems addressed by Give Directly, micro loans can provide those in extreme poverty with the ability to go into business. By being able to afford a big purchase, such as a dairy animal, chickens for eggs, seeds for planting, or a vehicle to drive people around in, they can change their lives for the better.

Financial access is a key part of climbing out of poverty. It's a common saying that it takes money to make money, and also that it is expensive to be poor. A little extra cash flow, regardless of how it comes in, can have a huge impact on the standards of living for those in extreme poverty.

Whether the method is in the form of a gift, a loan, or a basic income, more money can bring instant relief to those with little hope of bettering themselves. While any company can turn a positive situation into a negative situation, the truth is that bettering the financial situations of the poor will never happen unless we invest in them. A financial gift or even a loan can make the difference in the lives of billions of people, if we only try.

To donate to GiveDirectly, visit their website.