Behavioral Ideas Lab, Inc.

“Cash Plus Change”: More Impactful Cash Transfers Using Behavioral Science

Lead Organization

Behavioral Ideas Lab, Inc.

New York, New York, United States

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Project Summary

Cash transfers raise living standards for the world’s poorest and most vulnerable people by relieving financial constraints that prevent savings, investments and consumption. But there are also cognitive constraints that come with poverty: research in behavioral science finds that living in constant ‘scarcity’ of resources makes people ‘tunnel’ on present needs at the expense of ‘future-oriented’ behaviors (like sending children to school). To deliver transformative impact, cash transfers must help beneficiaries decide how to use their money and act on this intention.ideas42 has developed and tested a solution that combines interventions from applied behavioral science. First, we expand beneficiaries’ choice sets using goal-setting, self-affirmation and social norms. Then, we use plan-making, physical partitioning and reminders to help them realize their goals. We will adapt and scale this solution across Sub-Saharan Africa and help governments and international organizations continue to expand it to help millions more exit poverty and vulnerability.

Problem Statement

Worldwide, over 700 million people live on less than USD1.9/day, and nearly 2 billion on under $3.20/day. Social safety nets support approximately 1.9 billion poor or otherwise vulnerable people, and cash transfers (CTs) account for more than half of this spending. CTs help beneficiaries cope with income shocks or supplement consumption. However, to lift people out of a cycle of intergenerational poverty, CTs also need to enable beneficiaries to leverage the funds they receive for human capital development and productive investment. This in turn requires higher-order cognitive tasks, such as planning, remembering goals, etc. Cash temporarily relieves the extreme ‘bandwidth tax’ that typically plagues low-income people. However, CT programs as currently designed often squander this temporary ‘bandwidth bounty’ by either imposing onerous “conditions” or leaving beneficiaries to navigate difficult financial choices without guidance. Both increase stress levels and sap cognitive resources, thus making people more susceptible to common cognitive and decision-making biases that make it difficult to focus on the future and make the decisions necessary to sustainably escape from poverty. However, behavioral science also suggests that the moment of funds disbursement in particular constitutes a powerful leverage point, when marginal, low-cost program alterations aimed at helping people navigate their financial choices with greater deliberation can lead to deeper impact. Yet this opportune moment is currently squandered.

Solution Overview

We propose implementing low-cost behavioral intervention packages in Sub-Saharan Africa countries to support cash transfer beneficiaries’ aspirations, financial decision-making, goal-setting and follow-through, thus helping them use their funds intentionally and magnifying cash transfers' impact. ideas42’s work has proven that marginal behavioral interventions incorporated into cash transfer programs lead to improvements in outcomes such as early childhood development and productive investments. In a pilot in Madagascar, our intervention increased cash-for-work beneficiaries’ likelihood of saving money by 40%, with a total cost of only ~$2 per person. In Madagascar, Kenya, Tanzania and Ghana we will scale existing and successful pilot versions of a suite of psychological interventions -- goal-setting, plan-making, social norms, positive psychology and mental accounting -- delivered at the time of cash disbursement, to reach over 6 million cash transfer beneficiaries. In fifteen additional countries in Sub-Saharan Africa, we will support governments to tailor, develop and scale localized versions of this solution.A secondary purpose of the project will be to promote sustained impact from development programs by facilitating the enduring use of behavioral science in their design and implementation. In all countries of operation, we will therefore build local capacity to design, test and scale behavioral interventions in public programs through the production and dissemination of toolkits and other materials that support the wider adoption of behavioral science by governments. At the end of the project, governments and other practitioners will be capable of designing and testing behavioral interventions for a range of public priorities.

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Project Funders

  • Global Innovation Fund 2017 - 2020
  • Wellspring Philanthropic Advisors (general support for livelihoods portfolio) 2018 - 2020
  • Wellspring Philanthropic Advisors (specific to Madagascar projects) 2019 - 2020

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