People can do more with lump sum of money than payments, experiment in Kenya suggests

ARI SHAPIRO, HOST:

An unprecedented experiment has been going on for years in Kenya, and this week we've gotten the first results. A U.S.-based charity called GiveDirectly has been providing thousands of villagers what's called a universal basic income. It's a cash grant every month for 12 years, and the villagers can spend the money however they would like. Researchers wanted to see whether those no-strings grants would improve people's lives. NPR global health and development correspondent Nurith Aizenman is here to share what the research is showing. Hi, Nurith.

NURITH AIZENMAN, BYLINE: Hi, Ari.

SHAPIRO: You've covered this experiment from the very beginning. So before we get to the findings, tell us what this has looked like as you've watched it play out.

AIZENMAN: Yeah. Almost seven years ago, I traveled to Kenya to report on the kickoff in one of the villages. Here's some tape of men and women at a community meeting when everyone's phones started to ping. It was an alert to notify them that their monthly grant had just been sent to their mobile bank accounts.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED PERSON #2: (Singing in non-English language).

UNIDENTIFIED GROUP: (Singing in non-English language).

AIZENMAN: And, you know, that joy and bursting into song that you're hearing is a reflection of just how much people in these communities have been struggling. The year before this experiment started, 85% of recipients reported experiencing hunger. Also worth noting - the amount of these grants is very small - about $50 a month, just enough to cover food and other basics.

SHAPIRO: That tape was from seven years ago, you said, or almost seven years ago. So why are we just now getting information on the impact of this project?

AIZENMAN: Right. From the start, an independent team of economists has been studying this rollout. It's taking some time, and now they've made public their findings covering the first two years. Specifically, they compare the impact on the recipients to a control group, who didn't get any money, and also to two other categories - people who got that same monthly income, except instead of with the promise of 12 years, for just two years, and then a final group that got that same two years' worth of income but in one lump sum payment.

SHAPIRO: So let's get to the results. What did the researchers learn?

AIZENMAN: Yeah. Well, compared to people who got no money, everyone who got cash was better off when it came to measures of well-being like consumption of protein, spending money on schooling. And that fits with findings from previous studies of no-strings cash aid, namely that poor people don't waste the money. But the big news here is that people who got their money in a lump sum were way more likely to start a business - a little shop, a motorbike taxi service - than people who got the same amount but parceled out over two years.

SHAPIRO: So the top-line finding seems to be that giving the money all at once is better than the increments over time.

AIZENMAN: Yes, for the people who only got it for two years. But the people who knew they'd keep getting those monthly installments for 10 more years - they also started lots more businesses because they found a way to turn their monthly payments into a lump sum by using these rotating savings clubs.

SHAPIRO: What are those?

AIZENMAN: Basically every month, everyone in the club pools their money, and then they take turns getting the entire payout from that pot. The researchers and also economists I checked in with who were not involved with the study say it offers some really groundbreaking evidence that many people who are trapped in poverty are trapped because they don't have access to the large chunks of capital they would need to make the kind of investments that would increase their income. Here's one of the researchers, MIT economist Tavneet Suri. She says the next several years are going to be crucial to study.

TAVNEET SURI: We need to see if these effects last. Does it just disappear, or was this enough to keep them going forever?

AIZENMAN: Because if so, a long-term income program might not be necessary. Maybe just giving people cash aid in one lump sum could be enough to change their lives.

SHAPIRO: That's Nurith Aizenman on the latest research. Thank you.

AIZENMAN: You're welcome, Ari. Transcript provided by NPR, Copyright NPR.