Rabbainu Na Nach Nachma Nachman MeUman reveals an amazing novelty which after consideration one will realize is really the simple truth. In Likutay Moharan, torah 31, Rabbi Nachman writes that the main importance of charity is faith. This is seemingly a very odd statement, for if anything one would be inclined to base the importance of charity on the kindness put into it or that it achieves - as the Talmud says: Charity only pays (-probably referring to reward in this world) according to the gemilas chessed in it, so where does faith come into this?
Now, true, there are always powerful criminals that cultivate certain charities, and certainly there is great injustice in that - for people to have dependency and sustenance from such ill gotten provision, however that seems to be a radical element, and not something to scale the merit of all charity. Yet here we can already see that charity can produce a lack of faith, at least by the recipients, and in truth, every recipient may be faced with challenges of faith, seeing how they are being provided for by other people.
The Talmud says that if a person has 'daas' (realization of knowledge) he lacks nothing, and if he lacks 'daas' than he has nothing. Basically a person's real wealth is relative to his daas. The Talmud also revealed that a person who gives charity is blessed with 6 blessings, whereas appeasing the pauper earns 11 blessings. Appeasing brings daas, it is real giving. Rabbi Nachman says more, that these blessings are not simply rewards, rather a person who approaches to give charity opens up these great channels of blessings (in the same way our Sages ob"m said that one who prays for someone else is answered first, and Besh't explained etc.), and as he himself is blessed he blesses the pauper with his charity and appeasement. In many places Rabbi Nachman elucidates that the root of daas is faith, as e.g. Rabbainu taught that one must constantly concretize one's faith establishing it for himself as actual knowledge, and attain even higher faith in what is beyond his daas. And in this teaching too, Likutay Moharan 31, Rabbainu lays down that the root of all the blessings is faith, that is why the perfection of charity is only on Shabbos, see there. So in effect when one comes to give charity, he reaches up to the source of all blessing - faith (-even at a simple level - a person before parting with his money is forced to strengthen his faith that he will not lose by this, and if the person is in tune with the reality of Hashem, obviously he is reading this and will have these intentions B"H), and opens up channels of blessing -- daas, and bestows from this on the poor person in front of him. Ultimately the poor person has free choice to believe as he will, but the higher and holier the charity is the more the faith is apparent - even as it is apparent that the world has a creator and didn't just appear - and thus it is quite clear, that the main importance of charity is the faith - that is where it begins, from which comes the blessing, donation, the daas, and ultimately that's what we are hoping to achieve to fill the world with faith.
Na Nach Nachma Nachman MeUman!