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A Somali refugee stands inside a tent with her baby in Dollo Ado, Ethiopia.
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Finance & Innovation

Canadian Government Gives World's Poor Millions in Cash to Fight Extreme Poverty


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Right now, more than 1 billion people live in extreme poverty around the world. Foreign aid from countries like Canada works to lift them out of poverty through education, health services, and more. You can take action on this right now.

Canada is trying out a new approach to delivering foreign aid — by providing cash to people most in need in developing countries, according to information obtained by CBC.

CBC spoke with two anonymous senior officials with Global Affairs Canada who confirmed the government has been providing cash directly to people in over 35 countries.

“Direct cash transfers have become a key element of humanitarian response and development in the last two to three years," one senior aid official told CBC. "It is much more efficient to deliver assistance this way. There is no middleman to decide what the needs are. In humanitarian projects, it is being considered the default approach now."

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Canada’s current international assistance spending — which is often referred to as foreign aid — sits at $5.6 billion.

The officials did not confirm how much of that goes directly to cash transfers, which are often part of other aid programs.

For instance, a program run by Oxfam that is partly supported financially by Canada, allowed for direct cash transfers in a refugee camp in Ethiopia this year, CBC reported.

One of the recipients was Nyatlak Nyiet, a refugee from South Sudan who had given birth in the camp. Before receiving the unconditional transfers, she earned only a small income from selling firewood at a market.

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“It was not possible for me to breastfeed. I had only [a] small [amount of] milk, so the baby kept crying,” Nyiet told Oxfam researchers in June (in an interview that was then shared with CBC).

Nyiet was approved to receive about $30 per month, according to Oxfam Canada. That money helped her buy food and clothes, as well as chickens.

The benefit of this approach is that it eliminates the need for foreign aid consultants, shipping fees, and general bureaucratic procedures.

Another argument for it is that the beneficiaries know what they need — most notably so for women, according to CBC.

But critics argue that this approach might not work in the long term.

"This type of a thing is good as a kickstart, almost like a jump, but not as a ladder to fundamentally lift people out of poverty," Aniket Bhushan, a Carleton University professor who heads up a research group on aid policy, told CBC. "The real question is sustainability: What happens after the fact?"

What’s more is that providing people with cash doesn’t always make sense, as in some cases, like following a natural disaster or in conflict zones, there’s nothing to buy with cash.

"Giving people money to procure health services in the absence of health services doesn't help too much," a Global Affairs official told CBC.

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There are measures in place to prevent exploitation of the funds. The UN's World Food Programme, for instance, uses iris scans and digital cards, according to CBC.

Bhushan still cautions that final results could be minimal.

One study from Uganda observed two groups over nine years — people in one group received $400 in unconditional cash transfers and people in the other didn’t.

Over time the differences between the groups for employment income and general economic well-being were about the same, Bhushan said.

Still, there is something to be said for providing direct funding to women like Nyiet who is able to feed her children and herself thanks to this cash.