SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  For example, here is how to disable FireFox ad content blocking while on Silicon Investor.
Strategies & Market Trends : Africa and its Issues- Why Have We Ignored Africa?

 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
From: Glenn Petersen12/5/2017 11:26:17 PM
   of 1225
 
The Promise of Kenya’s Experiment With Universal Basic Income

Peter Dörrie
World Politics Review
Tuesday, Dec. 5, 2017



Informal settlements in Nairobi, Kenya, November 24, 2016 (dpa photo by Miro May via AP images).
_________________________________________

Makanga is a village like many others in rural Kenya. Farmsteads with walls made of clay and roofs of corrugated iron sit on plots separated by bush. Dusty footpaths cross fields that bear signs of the latest drought to hit East Africa—the effects of which are especially dire in a region cut off from the electricity and water grids. From time to time, one comes across a skinny cow.

Until recently, the village’s inhabitants were themselves quite typical of the region, struggling to make ends meet by farming. Phoebe Abagi still tended to her maize field each day, despite suffering from advancing arthritis at 84 years old. With no pension and no safety net, she had no respite from daily labor.

Makanga is dominated by women. While some of them, like Abagi, are elderly, many are younger mothers caring for their children and those of close relatives. Most of the village’s men, along with a fair number of its young women, have moved to one of Kenya’s cities to look for work; from time to time, they send money home to make up for harvests lost due to climate change. These remittances generally fail to keep pace with the area’s need. Of the 45 percent of Kenya’s population that lives below the national poverty line, the majority can be found in rural places like Makanga.

Since October 2016, however, Abagi and the other 94 adults living in Makanga have become the beneficiaries of a unique experiment: Their village is the only one in all of Africa known to be receiving a monthly universal basic income, or UBI, stipend, which is intended to cover their living costs.

According to the terms of the experiment, each adult resident receives the equivalent of $22 per month and will continue to do so for at least 12 years. The organization behind it is an international nonprofit, GiveDirectly, which promotes the use of cash transfers to combat poverty. Payments are made electronically through recipients’ mobile phones. GiveDirectly hopes the experiment will shed light on the economic and social effects of a UBI.

UBIs are not exactly a new idea. One of their earliest proponents was Thomas Paine, the American activist and philosopher, who wrote about them in his pamphlet “Agrarian Justice,” published in 1795. Yet the concept has become increasingly fashionable in recent years, especially in industrialized nations, as technological advances in automation and artificial intelligence threaten to usher in a new age of mass unemployment.

For its part, GiveDirectly is interested in the potential for a UBI to be a cost-effective and quick way to lift people out of absolute poverty. And while UBIs have been the subject of trials and studies before, GiveDirectly describes its Kenyan experiment as the largest and most rigorous methodologically.

Not everyone is convinced the results will yield the answers GiveDirectly seeks, or that a UBI system makes sense for a developing country like Kenya. But even if the notion of a nationwide, permanent program seems like a pipe dream, the organization hopes its experience in Makanga, and the data it generates, will encourage countries with high levels of poverty to rethink their approach to social welfare and safety nets.

How the Experiment Works

To qualify as a true UBI, according to GiveDirectly and many experts, the basic income payment has to be universal, meaning it must be paid to all members of a community without precondition. It also has to be paid over a long period of time and cover at least the basic cost of living. GiveDirectly claims to fulfill these criteria.

Its 12-year experiment will ultimately expand to 26,000 participants. Some 6,000 Kenyans will receive the full UBI over all 12 years, including the inhabitants of Makanga. In addition, 10,000 Kenyans will receive the payment for two years, while an additional 10,000 will receive the equivalent of two years’ worth of UBI in a single, lump-sum payment. Researchers will also follow several thousand people who won’t receive any benefits, establishing a baseline against which GiveDirectly can measure the effects of the three other interventions.

Past programs and studies have fallen short on at least one of the aspects covered by GiveDirectly. Some early trials in the U.S. and Canada in the 1960s and 1970s, for example, were neither universal nor long-term. Later studies in India and Namibia covered only a short span of time, while also lacking rigorous scientific evaluation and failing to provide sufficient funds to cover basic living costs.

Large-scale cash-transfer programs in medium-income countries—Brazil’s Bolsa Familia, Mexico’s PROSPERA and China’s Dibao—have proven to be effective at lifting people out of poverty. But these cash transfers are targeted at specific segments of society, thus falling short of the universality inherent to true UBIs.

Of course, the GiveDirectly trial makes some compromises as well. While having 6,000 participants makes for a large sample, it is only a fraction of Kenya’s population of almost 50 million. That said, it is still a much larger sample size than Finland’s ongoing two-year UBI trial, which is targeting 2,000 recipients. And in contrast to Finland, GiveDirectly is distributing payments to entire communities instead of randomly selected unemployed people, and it has multiple control groups along with a longer trial duration.
As automation and artificial intelligence threaten to usher in a new age of mass unemployment, the concept of a universal basic income is becoming increasingly fashionable.
GiveDirectly is also focusing on rural communities. Participating villages are chosen at random, but the project is only implemented where the potential recipients and local authorities are in favor of the experiment. Makanga was chosen as a pilot because it fit the profile and is situated in a region where GiveDirectly already had field operations. (At GiveDirectly’s request, the name of the village has been changed in this article to protect the privacy of village residents and ensure the village won’t be targeted by criminals.)

In total, GiveDirectly plans to spend $30 million over the duration of the trial, with almost all that money raised from individual donors, mostly in the United States. The project is almost completely financed, with $27.2 million having been raised by the end of September.

Despite the steps taken to make the experiment as sound and informative as possible, there is ample skepticism that it will accomplish what GiveDirectly hopes it will.

“This is a well-thought-out and well-designed trial, using the most advanced technologies in order to avoid some of the pitfalls of previous UBI experiments” says Yannick Vanderborght, a political scientist at Saint-Louis University in Brussels who researches UBIs. “However, I am very doubtful that it can inform us about the impact of a real unconditional and universal basic income.”

According to Vanderborght, all trials, by definition, lack the capability to model the effects that would be produced by countrywide implementation of a UBI, which would need to be funded by tax increases. As with other experiments, GiveDirectly can only look at behavior changes among UBI beneficiaries, not taxpayers. Yet it stands to reason that taxpayers, faced with higher marginal rates under a UBI system, might choose to work less.

“This question is left unanswered: What happens with those who will have to finance the system in the real world?” Vanderborght says.

GiveDirectly readily concedes that its trial in Kenya won’t answer all outstanding questions about the impact of a UBI. But the organization argues that it will still provide important insights into the potential benefits and drawbacks for people like Abagi—effects that, at present, experts can only speculate about.

Specifically, GiveDirectly’s experiment is designed to answer five main questions: Will monthly cash payments improve recipients’ capability to plan their economic decisions? How does the UBI affect saving behavior? How will recipients’ ability and willingness to take risks be affected? What is the impact of a UBI on gender relations, in particular women’s empowerment and domestic violence? And, lastly, how might a UBI change recipients’ outlook on life?

To answer these questions, researchers will follow up with all recipients roughly every three months, collecting quantitative and qualitative information via individual questionnaires and focus groups. While the first conclusive results will take a few years to materialize, the pilot program in Makanga is already delivering some revealing insights.

Where Does the Money Go?

It should come as no surprise that, in Makanga, recipients eagerly welcome the payments. Who wouldn’t? “People are happier,” says Mary Abagi, an elderly resident of the village who is of no relation to Phoebe Abagi. “They are more energetic and are thinking of new ideas to develop.”

In conversations with her and other villagers, a few spending priorities become clear. Most of the UBI payments are spent on short-term consumable goods like food, school fees and medicine. At the same time, many recipients save at least part of the UBI for larger purchases. And in a few cases, local entrepreneurs have used UBI payments to invest in new or existing businesses.



A herder drives his animals away after watering them at one of the few watering holes near the
drought-affected village of Bandarero, Kenya, March 3, 2017 (AP photo by Ben Curtis).
_________


Aswan Abagi, the village chief and a stepson of Mary Abagi, says he uses his UBI money to offset the effects of the ongoing drought, especially the rise in market prices for maize, the local staple food. “There has been a drought in this area for more than eight months now,” he says. “So most of the money has been used on foodstuffs.”

The potential impact of UBI payments on nutrition is of particular interest to GiveDirectly, in light of the fact that 2.6 million Kenyans are experiencing “crisis levels of food insecurity,” according to Oxfam. Caroline Teti, GiveDirectly’s external communications director, says anecdotal reports indicate that nutrition in Makanga has improved across the board since the UBI was introduced.

Aswan Abagi agrees. Even if a UBI isn’t enough to cover all food purchases, the experiment has made it easier for consumers to get credit, as shop owners know that people have a reliable stream of income.

It would be hard to overstate the beneficial impact of eradicating malnourishment in recipient communities. According to one calculation, malnourishment’s effect on the global economy amounts to $500 per capita—about double what GiveDirectly spends per UBI recipient.

Those who have money left after covering essential expenses tend to save it. Even before the UBI was introduced, Makanga was home to a small saving group of six members, although not all of them could always afford their monthly contributions.

Now there are six such groups, with 10 members each. Each member contributes about $10 per month; every month, one member receives all of the contributions, a system that allows members to plan for larger purchases.

Jael Abeta’s experience is a great example of how being able to save can improve residents’ quality of life. She used her savings from the UBI to finish a new house she had started building with remittances from her children, who have moved to Kenya’s urban areas in search of work.

Her husband, Andrew, plans to buy two bulls once he has saved enough. “With the bulls, I will be saving money because I don’t have to rent a tractor to plow my fields” he says. “I can even plow for others and boost my income.”

A Job Creator

Like the Abetas, Samson Wandolo Adera also invests his UBI. The former government worker is considered the most affluent citizen of Makanga, though he insists this is merely a reflection of the poor local economic situation. “I’m leading an average life” he says, “not poor, not rich.”

Before the UBI was introduced, Adera tried to start a fish farm in nearby Lake Victoria, but he realized that he did not have enough capital to sustain it. “For a bank loan, the interest was too high,” he says, noting that he feared he would lose his initial investment.
“If you give me money, I know what I need better than somebody else.”
The UBI revived the project, which he now runs along with other investors. He has hired several people for the farm, including those paid to keep an eye on the fish. “You cannot keep fish in the lake alone,” he explains. “They will be stolen.”

Adera is not the only one who has managed to create some local employment. Phoebe Abagi, the 84-year-old, used parts of her UBI to pay for casual laborers to help her with tending her fields and the harvest. Because of her arthritis, she lately hasn’t been able to do all this work herself. Thanks to the help, she says, her harvest for this year increased even with the drought.

Makanga’s residents make clear they prefer the UBI to other means of development aid, such as food donations. “You go for relief food and expect 3 kilograms,” one elderly woman says. “But you get 1 kilogram, or 2 kilograms, or 4 kilograms. It is very unpredictable what support you get.”

Abeta summarizes the general sentiment: “If you give me money, I know what I need better than somebody else.”

The UBI recipients also report that there has been a reduction in petty crime in the community. This seems to be connected to the increased money available for food, which has made stealing out of hunger unnecessary.

Does a UBI Make Long-Term Sense?

A cursory poll among the population of Makanga reveals broad support for an extension of the UBI across the whole of Kenya. But it will take a few years to get the first meaningful sets of data on longer-term impact and how the UBI compares to other development interventions.

So far, the UBI hasn’t featured prominently in Kenya’s debate about economic development. Touring the country prior to this year’s hotly contested general elections, nobody outside of Makanga’s immediate environment and GiveDirectly’s own staff had even heard of the trial.



Kenyan President Uhuru Kenyatta waves to his supporters as he arrives for his inauguration ceremony,
Nairobi, Kenya, Nov. 28, 2017 (AP photo by Sayyid Abdul Azim).
__________________________________


The two main candidates for Kenya’s presidency, incumbent Uhuru Kenyatta—who ultimately prevailed—and his main challenger, opposition leader Raila Odinga, offered competing visions for economic development, but the UBI was not part of either one. While Kenyatta’s platform focused on large-scale infrastructure investments, Odinga promised greater social cohesion through reconciliation in a country still plagued by political violence; further devolution of resources and responsibilities from Nairobi to the counties; and more emphasis on social justice in general.

While Odinga’s vision may have sounded more conducive to the implementation of the UBI, Kenyatta’s administration is closely cooperating with GiveDirectly to make the trial possible. The government is also working on a universal pension scheme for those over the age of 70, building on a pilot program that provided $19 every two months to 200,000 households in three counties.

According to Teti, GiveDirectly’s UBI trial is not meant to function as the sole basis for radical policy change. Instead, she hopes it will strengthen arguments for cash-based benefit programs. Ideally, she says, the results of the trial will help convince Kenya and other developing nations to slowly but steadily transform their social safety nets, bringing them more in line with the philosophy behind a UBI, even if a UBI itself is not implemented.

“There is a lot of evidence that cash works,” Teti says. For example, programs involving lump-sum cash transfers to recipients in Kenya, Uganda and Rwanda, as well as in other parts of the world, have been shown to reduce poverty and child labor while increasing the labor market participation of adults, among other things.

Even if GiveDirectly’s UBI trial in Kenya results in similarly positive outcomes, the broad implementation of a universal basic income in developing countries faces long odds.
Researchers hope the results of Kenya’s universal basic income trial will convince developing nations to slowly but steadily transform their social safety nets.
Financing is one challenge. For Kenya, a UBI along the lines of the pilot program in Makanga would cost about $6.6 billion per year to roll out nationwide, slightly more than the $6.1 billion the government is currently spending on all economic development programs, including investments in new hospitals, roads and power stations.

Given that the UBI would not cover structural investments, the government would have to close a funding gap of several billion dollars to introduce a nationwide UBI. This could potentially be achieved by increasing the tax base—not an unthinkable solution, given that Kenya’s government spending is currently about 30 percent of GDP, less than many industrialized countries.

Resource-rich countries like Angola, or countries with stronger economies like South Africa or Senegal, could also conceivably shoulder the financial burden of a UBI designed to lift people out of abject poverty.

But for other, poorer countries like the Central African Republic or the Democratic Republic of Congo, a UBI program could cost around 50 percent of GDP.

Kenya also has important structural advantages over other poor countries: its M-Pesa mobile money system, which reaches almost every adult in the country, as well as widespread access to biometric IDs. Both of these are essential tools for the deployment of a UBI, and few developing countries can match them.

Despite these myriad challenges, both GiveDirectly and the residents of Makanga are bullish on the concept of a universal basic income. Although the goals of the Kenya experiment are quite different from those of UBI studies carried out in wealthy countries, the data it generates will likely be useful for policymakers the world over, especially those curious about the choices workers make once they attain a guaranteed level of financial security.

Given the ambition, scale and audacity of the experiment, it is certainly one worth following. If, as Teti says, cash does indeed “work,” the data may tell researchers whether a universal basic income is the best way to distribute it.

Peter Dörrie is a freelance journalist and analyst specializing in resource politics and security in Africa. Follow him on Twitter @PeterDoerrie.

worldpoliticsreview.com
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext