Giving Compass' Take:

• Dylan Matthews discusses the impact of GiveDirectly's cash distribution program on rural Kenya that could offer a model for other poor countries.

• Where else can this strategy be applied and how can donors make it a reality?

• Learn more about how we can best alleviate extreme poverty.

For about a decade now, the charity GiveDirectly has been distributing cash straight to poor residents in sub-Saharan Africa, starting in Kenya and expanding later to Uganda, Malawi, Rwanda, Liberia, the Democratic Republic of the Congo, and Morocco.

The organization was founded by economists, and has been studying the impact of its programs from the get-go. But the research has focused narrowly on recipients: Were they better off, the same, or worse off than people not getting cash?

GiveDirectly gave about $1,000 (or $1,871 in purchasing power terms) each to more than 10,500 households, through three transfers over the course of about eight months. The program amounted to about 15 percent of the GDP of the local area.

They found that the cash transfers not only benefited recipients; they benefited people in nearby villages too because recipients spent more money, some of which went to their neighbors’ businesses. Contrary to some fears, there were no meaningful inflation effects, and there were no envy or jealousy effects where people close by who didn’t receive cash felt worse off after the intervention.

Most striking of all, the study estimates a “fiscal multiplier” of 2.6 for this area of Kenya, implying that every $1 invested in fiscal stimulus will grow the local economy by $2.60. That’s somewhat larger than the multiplier estimated in places like the US when in recession.

In particular, the study suggests that basic income programs in poor countries, as considered by the current Indian government, could be more than useful poverty alleviation tools — they could also have real economic benefits. And in countries like Nigeria or Angola with lots of natural resources wealth that can be used to fund a basic income without distorting the economy, the promise is especially great.

Read the full article about the massive stimulus that transformed rural Kenyan economy by Dylan Matthews at Vox.