Donating cash directly to impoverished families benefits the whole community, study shows

Donating cash directly to people in impoverished areas could help more than just the recipients, a new study shows.

Economists looked at 65,000 households in an impoverished, rural area of Kenya, where one group received no aid, and another received a one-time cash grant of $1,000, through a charity called GiveDirectly, reports NPR.

They found that every dollar in cash aid resulted in a $2.60 increase in local economic activity, effectively benefiting the recipients directly, and those in their community indirectly, per NPR. The study, published in November on the National Bureau of Economic Research website, lasted 18 months and found those who received cash directly spent it on essentials, including food.

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Much of that money goes to local businesses, says Edward Miguel, co-author of the study and economist at the University of California, Berkeley. "They sell more. They generate more revenue. And then eventually that gets passed on into labor earnings for their workers," he said.

When creating an influx of cash in a community, the issue of price inflation could arise, but Miguel noted that since the local businesses were low on customers, an uptick in customers didn't require hiring more employees or increasing prices, it simply helped their business. Read more at NPR.