Some time ago, I had a conversation with a friend about charitable giving. She said that one of the reasons she was giving locally rather than globally was that she felt more in control about where the money goes. And it seems she's not the only one – after all, less than five percent of donations from the US go overseas. Numbers from other Western countries are better, but not much.
This means that most of the money that is donated in affluent Western countries never reaches those who need it most: the extreme poor in less affluent regions of the world.
Now, as human beings, we're hardwired to feel closer to what's happening around us rather than things that happen far away. We feel the impact differently, and most people who live in extreme poverty are relatively far way from us. That makes it harder for us to connect emotionally. It's also possible that we feel that people in our own country are more similar to us than those who live elsewhere, and that this makes us more comfortable because we think that they're going to use the money more along the lines of how we think they should use it.
And then of course there's the point my friend touched upon: If the money stays locally or at least inside our own country, we feel we have more control over what happens with it. It stays close by, giving us the illusion of control; whereas if it goes overseas, we often feel like the money just disappears and we never actually see any direct impact directly around us.
So do you really have more control if you give locally? Evidence would suggest otherwise. Not only can and do we have scandals about mismanaged funds in our own countries – the recent concerns about the Wounded Warrior Project being just one example. At the same time, higher living standards and wages also increase the cost of implementing programs. This means that less money goes towards the actual cause you're supporting.
In addition, there are over one million charities in the United States alone, so without doing your research on which ones use the money the way you want them to, you basically have no idea where your money is really going. No matter how good a charity looks on the surface, you'll always need to do your research to see how they're really spending their money.
So what can we do to counter-balance our natural biases and tame our inner control freak?
What can charities do?
Arguably the best and most sustainable way of attracting and maintaining donors is for organizations to be transparent about what they do with the money, and to be efficient in how they use it. The end result is a high level of accountability, both on a rational and an emotional level. Donors know exactly where their money goes.
Photo Credit: GiveDirectly
One nonprofit that uses this approach to transparency is GiveDirectly. GiveDirectly distributes funds directly to the extreme poor via cash transfer, with no strings attached. The organization works from the assumption that the global poor knows best what they need and how to make the best progress towards a better future. Is that approach naïve? Far from it. GiveDirectly's work is grounded in rigorous evidence and randomized control trials--the gold standard for evaluating an intervention's effectiveness.
At this point, GiveDirectly is going from strength to strength, expanding their donor and recipient base, gaining the support of big corporations like Google and investing in research on even better programs and delivery. In 2015, charity evaluator GiveWell named GiveDirectly as one of the four most effective charities to give to for the fourth year in a row.
What can you do?
GiveDirectly is a model nonprofit. But donors also play an important a role in ensuring charity effectiveness. We can all do our part to make sure our donations go where they will do the most good. We should also encourage others who might be reluctant to give to overseas causes gain insights into the effects of different giving behaviors.
- The first thing you can do is support transparent and efficient charities like the ones vetted and recommended by The Life You Can Save. This saves you the trouble of looking into the finances of each organization you're interested in supporting – unless of course you want to!
- Secondly, no matter who you support, avoid the purposing trap: Some charities give donors the choice to indicate which program they want their money to go to. Especially in disaster relief, which traditionally attracts large amounts of donations, this can bind massive funds that charities then can't use for anything else. It's infinitely better to leave it up to the organizations where they decide the money is needed the most, even if you may find that difficult at first.
- Remember that giving to a charity that is close to your heart is important, but keep your eyes open. Don't forget to look at the facts and do your research.
- Last but not least, raise awareness about these issues wherever appropriate. Many people have simply never heard that efficiency in poverty relief can be measured reliably, that most donations from affluent countries stay in those same countries rather than alleviating extreme poverty or that such a thing as the purposing trap even exists.
What are your experiences around wanting to control where your money goes? Which organizations have you decided to give to? Do you have pointers on how to better raise awareness of these issues? Feel free to comment below!