The most exciting new idea for tackling poverty and feeding billions around the world has got nothing to do with hydroelectric dams or back-slapping summitry. Instead, this one begins with a story about kung-fu movies.

In the mid-90s, Claire Melamed was working in a village in the far north of Mozambique. Nacuca had no electricity, nor running water, and precious few distractions. As the development economist recalls: "Villagers would ask, 'We have to live here, but how come you've chosen to stay?" Then one day visitors came, bearing entertainment.

They were former soldiers from Mozambique's long civil war and, like the other 90,000 or so demobbed men, they were getting $15 a month from donors, along with some funding to start businesses. This lot had pooled the hand-outs to buy a TV, a video recorder and a generator.

Oh, and a few old Bruce Lee tapes.

The former soldiers toured villages across Mozambique showing copies of Enter the Dragon and Fist of Fury for cash or, failing that, maize and cassava. And they went down a storm in the remote rural yawn of Nacuca, staying for days and playing the same films over and over.

What Melamed saw in Mozambique was one of the first major exercises in what is now among the most talked-about new ideas in aid, called cash transfers – or, as a new book title puts it, "Just give money to the poor", as those donors did to the former soldiers. The authors, Joseph Hanlon, Armando Barrientos and David Hulme, count 45 countries that hand cash to more than 110m families. In Brazil, poor families can collect money from lottery shops. Pick-up trucks drive across Namibia, bearing safes with cash machines welded on the front, used by old ladies to take out their monthly pensions.

It sounds forehead-smackingly obvious: isn't giving cash to the poor what we do every time we shovel change into an envelope, or pledge a donation to Comic Relief? But when that money – whether from individuals or governments or big international institutions like the World Bank – gets to Africa or Asia, it's typically turned into new roads, schools, even community radio stations. The idea is to give poor people the infrastructure and training they need to lift themselves out of destitution.

Or perhaps I should say that was the idea. Looking back over the last few years, we see in retrospect a brief golden period for aid. It was marked in Britain by turning Clare Short into the new secretary of state for international development, and defined internationally by the 2005 pledge at Gleneagles of the G8 richest countries to give more money to Africa. And it appears to be drawing to a close.

Academics and writers such as Bill Easterly and Dambisa Moyo now gain plaudits for books with titles such as Dead Aid. Recession-hit politicians at events such as last weekend's G20 summit in Toronto avoid even mentioning the Gleneagles promises. And when official money is handed over, it often ends up on the most useless projects. In 2008, Berlin spent half a million dollars on what it called a "basic nutrition project" but which turned out to be a scheme to reduce unpleasant smells from food-processing factories in China and (naturally enough) Germany. That would be called a joke, if it was only remotely funny.

Against all that, the idea of just handing over a hefty chunk of the world's $100bn aid money directly to the 1.4bn people living on less than $1.25 a day is pretty attractive. Less funny business from donors, and far less waste. And what makes this most remarkable of all is that while the rich countries squabble over how much money to give and in what form, this initiative has sprung largely from the poor nations – usually under pressure from some of their poorest people.

This is the world of aid turned upside down. A couple of years ago, Oxfam tried the idea out in a few villages in Vietnam. Charity workers gave the equivalent of three years' wages in one go to more than 400 families. When they returned they found that poverty had dropped through the floor, with most of the money spent sensibly on food or fertilisers, seeds and cows. But older people had put some cash towards coffins, explaining that funerals were a major expense. And one group had built a communal house, to practise yoga.

It takes a village to raise a child, Hillary Clinton once wrote; on this showing, it takes just a few million Vietnamese dong to raise a village into a bijou Notting Hill.

Findings such as these have led the author Joe Hanlon to call for most of the Gleneagles millions to be shovelled into poor people's pockets. That's going too far: individual donations cannot replace schools or hospitals. It may be that giving cash works best when there are amenities and opportunities – and people who can use both. As Richard Dowden at the Royal African Society points out: "Village communities are often tightly controlled by elders, chiefs and kings. Just handing over dollars to a rural community – even to the supposedly poorest people – risks reinforcing that hierarchy."

But, qualifications aside, the concept is only going to get more popular. Indeed, New York recently tried the idea with its poor citizens, handing over money if they successfully sent their kids to school.

Cash transfers may first have been made in a poor country, but the idea travels well. A bit like those Bruce Lee films.