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We should follow the science on poverty and give cash grants to those in need

January 27, 2021
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Photo by Joel Muniz on Unsplash
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The recent scandal involving UK government food parcels to disadvantaged families where a £30 'hamper' looked so bare as to be described as 'woefully inadequate' by many - has raised a deeper question about how both governments and charities can best deliver welfare and support.

In my experience at the National Zakat Foundation, cash grants - rather than physical goods - are more efficient and effective, affording recipients a sense of personal responsibility and dignity, enabling them to improve their lives on their own terms.

Decision-makers sense something isn't working. Boris Johnson has ordered an inquiry into the food parcels and devoted another £170m to the winter grant scheme, £220m for holiday activities and food programmes, along with a rollout of a national voucher scheme. While these schemes are commendable, why not just give families in need cash directly?

Efficiency alone is reason enough. The government entrusted a third-party provider, Clerkwells, with putting together the hamper to meet the varying dietary needs of millions of different families. As well as inserting an unnecessary 'middle man', this one-size-fits-all approach often fits no one.

READ: How the 0.7% law is affecting residents in the UK during the pandemic

How the 0.7% law is affecting residents in the UK during the pandemicconversations.indy100.com


The 0.7% law states a proud, rich country like the U.K. can afford to give just 7 pence of every £10 to help people living on less than £1 a day. It also means when we have less money, the aid budget automatically goes down

Many in the charity sector, where we are often expected to achieve the most with finite resources, know there is a better way. For example, Save the Children says, "cash transfers are one of the more cost-effective ways of delivering aid. They support the local economy and, unlike food parcels, you don't need to build an entirely new production line from scratch." Centrally organised food parcels are seldom adequate for any family, do nothing for the local economy, and are a significant drain on public resources.

In devolved governments, things have already shifted with most of Scotland and Wales using cash injection schemes.

The UK government should follow suit, particularly since they have no problem allowing the millions of furloughed people to choose what they should spend their money on.

The furlough scheme is cold hard cash, not an 'unemployment package' consisting of food, colouring books, and a Netflix subscription. It seems implicit in the policy that the government believes that once someone slips below the poverty line, they can no longer be trusted to spend money responsibly.

Margaret Thatcher famously said that "poverty is a character defect," i.e., that if low-income families were financially responsible, they wouldn't be low-income families in the first place.

Although some low-income families may have issues with alcohol or drug dependency, that is not representative. In any case, it has complex causes, including low self-esteem - something not helped by being robbed of your ability to choose what to have for dinner. Unfortunately, some charities, as well as governments, seem to be falling for this gross caricature.

In 2014, the Chinese billionaire Chen Guangbiao arranged a lunch for the homeless people of New York. He intended to give each of the participants $300 to spend as they wished. The organisation involved, Rescue Mission, stepped in and accepted the total figure of $90,000 on their behalf, expressing their fears the money would be spent on drugs and alcohol.

This strategy - and the concerns behind it - isn't backed up by the data. The World Bank conducted a meta-analysis on cash injection schemes for homeless people in 19 different countries and found that the purchase of nicotine and alcohol increased in only two cases, and even then, the evidence was mixed.

Countless examples of evidence from around the world show that cash injections are a more effective way of relieving hunger and stimulating local economies, which has a cyclically-virtuous impact on the whole community. Just as we 'follow the science' regarding the pandemic, we should follow the evidence regarding poverty.

Aside from efficiencies, which are much-loved by governments of all stripes, cash support has an important psychological dimension.

Giving people dignity and autonomy allows them to make better decisions. Going from handout to handout, rather than managing a household budget, changes the way our brains function and entrench poverty.

When the brain perceives scarcity (e.g., there is a hamper and all the food our family has), it makes poor decisions. Princeton psychologist Eldar Shafir has documented many examples of the 'scarcity mindset' in his book "Scarcity: Why Having Too Little Means So Much."

Shafir explains how the perception of scarcity consumes 'mental bandwidth', which uses energy that would otherwise go to longer-term problem solving or planning. The compound benefit of a little extra financial cushion would allow low-income families to plan and work towards a better future.

We need to accept that, in general, individuals know what they need better than governments do. We seem delighted to fund direct cash transfers to alleviate food poverty abroad. Isn't it time we tried that at home?

Iqbal Nasim MBE is the CEO of National Zakat Foundation.
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Can tech help female entrepreneurs break the bias?

Women founders continue to come up against common challenges and biases
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Written by Kelly Devine, Division President UK & Ireland, Mastercard

Starting a business may have historically been perceived as a man’s game, but this couldn’t be further from reality. Research shows women are actually more likely than men to actively choose to start their own business – often motivated by the desire to be their own boss or to have a better work-life balance and spend more time with their family.

The recently published Mastercard Index of Women Entrepreneurship 2021 found that in the category of 'Aspiration Driven Entrepreneurship’ – capturing those who actively choose to start their own business – women in the UK surpass men: 60% vs 56%. And Mastercard research from February 2022 found 10% of female business owners started their business in the past two years compared to 6% of men – meaning women were 67% more likely to have started a business during the pandemic.

Yet, there are common challenges that women founders continue to come up against - not least the gender imbalance in the household and long-held biases which are still prevalent.

In the UK, women are almost three times more likely to be balancing care and home commitments than men, and this was exacerbated during the pandemic as the additional barriers of school closures and lockdowns meant that the care time of dependents rose significantly on a day-to-day level for women. In addition, women were less likely to have access to a home office, greatly impacting the work they were able to accomplish when working from home was the only option.

It's also widely known that female business owners are still more likely to struggle to access funding for their business ideas. According to Dealroom, all-women founding teams received just 1.4% of the €23.7bn invested into UK start-ups in 2021, while all-male leadership teams have taken almost 90% of the available capital.

Without financial support, and when juggling significant time pressures both at home and at work, how can women grow their companies and #BreaktheBias (as this year’s International Women’s Day termed it)? What tools or support can save them time and money, and give them the headspace they need to focus on building their business?

With female owned businesses collectively estimating revenue growth of £120 billion over the next five years, solving this problem is bigger than supporting women – it’s about supporting the national economy.

Using tech to level the playing field

There are clearly societal issues at play that need to be resolved. But when we look at the rise in technology businesses during the pandemic, we can plainly see an alternative source of support critical for business growth: digital tools.

A third of female business owners say new technologies will be crucial to the success of their business in the future and one in five say it is the most important thing for business growth.

With new technology comes new ways to pay, create, and work. And yet there are barriers that prevent business owners accessing this technology. Women are significantly more likely to say they want to use more digital tools but don’t know what is best for their business and also more concerned about the security of digital tools.

When technology is adopted by businesses – whether using online accounting solutions or messenger services for communicating with staff – it saves them time, allows them to maintain and grow their customer base, and ultimately increases cost savings and profit.

By drastically improving the training and support that is available to women-owned business to access and utilise technology we will allow these businesses to grow and succeed. And we know there is demand for it.

Research done by the IFC and Dalberg shows that female entrepreneurs are more likely to invest time and money in business development. This includes product development, customer base expansion, and digital tools and training and there are plenty of services available offering this type of support – many of them for free.

One such programme is Strive UK – an initiative of the Mastercard Center for Inclusive Growth – which aims to reach 650,000 micro and small business owners across the UK and empower them with the tools they need to thrive in the digital economy through free guidance, helpful tools and one-to-one mentoring.

Working together with small business experts – Enterprise Nation, Be the Business and Digital Boost – we hope to ensure hundreds of thousands of UK female business owners have the tools they need to succeed and reach their ambitious goals. Because this ambition remains strong in the UK, with female business owners largely optimistic about the future despite the multitude of challenges they are facing. Four in ten say they will grow their business in the next five years – compared to only a third of male business owners – and they’re also 35% less likely than men to say they plan to downsize or close the business.

But if we do not empower female entrepreneurs to access the tools and technology they need to grow, there is a risk this optimism could be misplaced. Support programmes that provide business owners with guidance and mentorship can help ensure this isn’t the case, allowing female entrepreneurs to not only survive but thrive in the months and years ahead.