Digitization makes aid programs more effective


For years, the Indonesian government sent 10 kilo bags of rice to the villages, and the local leaders distributed them to the poor residents every month. But since five years ago, recipients have instead been sent to buy debit cards themselves.

As a result, according to a study led in part by MIT economists, people accepted 81% of all food intended for them – as opposed to 24% previously. Under the old system, some of it would have been given to non-poor people. The cards have eliminated this problem.

“This would dramatically reduce poverty,” says author Benjamin Olken. When the study began, the total poverty rate for the poorest 15% of households dropped by 20%.

The researchers found this in a real-world experiment: The government randomly selected 42 of 105 districts to start the program a year earlier than the others. This means that the results can be compared in similar situations.

According to author Abhijit Banerjee, “This is an advantage of doing a randomized controlled trial rather than guessing and guessing about possible outcomes.”


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