Figure 10: Participatory Rural Appraisal Mapping Process in Nadu Colony (India)
Source: Image used with permission of Dave Bockmann.
2015 Relief Society of Tigray (REST) Ethiopia Campaign Commitment
“By sequencing safety net transfers, livelihood supports, and access to finance, REST seeks to position extreme poor households onto the first rung of the growth ladder from where they can start looking and investing into the future, and create sustainable pathways out of extreme poverty.”
— Teklewoini Assefa, executive director, REST, Ethiopia
The Campaign Commitment from REST includes:
- helping 348,000 chronically food insecure families lift themselves out of extreme poverty by extending safety net transfers to help them smoothen their consumption and help them diversify their livelihood, and
- helping 22,500 families with the Weather index insurance coverage against drought.
When villagers draw maps of their own communities, they learn more about their neighbors and the challenges that each of them face (see map of Nadu Colony in Tamil Nadu, India, in figure 10). The Participatory Rural Appraisal system starts with community mapmaking. MFIs, such as BRAC, Bandhan, and Fonkoze, use a similar approach called Poverty Wealth Ranking to identify which families live in huts rather than concrete or wooden structures and, among those families, which ones live in the greatest poverty. Having identified the families they will work with in their ultra-poor graduation program, they also identify a group of leaders in the village. These leaders take on the responsibility of making sure these families move out of poverty within two to three years.
The people reached with this graduation approach are the ultra poor, those living on less than $0.70 per day. They have no regular source of income that would allow them to participate in savings groups and face too much vulnerability to take on the additional responsibility of repaying a loan.
Graduation programs require ongoing subsidies in order to pay for monthly stipends of food or cash to the participants, training in livelihood management and financial capability, the gift of an asset and regular mentoring. They involve financial services from the beginning in the form of the regular payment of the stipend and a savings program. They also prepare their members for ongoing participation with financial services, including access to loans for those who graduate and choose to expand their livelihood activities.
Most of the graduation program implementations to date have been implemented by NGOs or MFIs receiving grant funding, but they also can be implemented through partnerships between a government social protection program providing the funding for stipends and assets, an NGO providing training and mentoring, and a financial institution providing payments and savings services.
CGAP and the Ford Foundation have sponsored replications of the BRAC Graduation model in eight countries. The Abdul Latif Jameel Poverty Action Lab (J-PAL) and Innovations for Poverty Action (IPA) have conducted RCTs of seven of these replications in Bangladesh, Ethiopia, Ghana, Honduras, India, Pakistan, and Peru. These studies found that the replications successfully targeted the ultra-poor, reporting that “the proportion of households living below US$1.25 per day that were identified as eligible for the program and included in the study sample exceeded—often by a substantial margin—the proportion of the population living below US$1.25 per day in every country.” Further, the program helped the ultra poor “shift into more stable self-employment that increased their standard of living both two years after the productive asset transfer, and three years after the asset transfer—a year or more after all program activities ended.” J-PAL and IPA noted these key results of the Graduation model:
- The Graduation approach caused broad and lasting economic impacts. Pooled data from six sites show that Graduation households’ consumption increased 5.8 percent, relative to the comparison group two years after the asset transfer. Graduation households’ consumption increased 7.3 percent in Bangladesh, 16.4 percent in Ethiopia, 6.9 percent in Ghana, 13.6 percent in India, and 10.2 percent in Pakistan, relative to the comparison group, though there was no impact on consumption in Honduras or Peru. Households experienced similar improvements in food security, asset holdings, and savings. Most positive impacts on participating households were consistent three years after the asset transfer—one year after all program activities ended.
- The improvements in well-being were mostly the result of increases in self-employment income. Injecting a combination of productive assets and relevant skills training led to an increase in basic entrepreneurial activities, primarily concentrated on livestock and activities, like petty trade.
- Graduation led to some improvements in psychosocial well-being. Happiness, stress, women’s empowerment, and some measures of physical health and political engagement improved for participants at some sites. The effects on women’s empowerment and physical health were no longer statistically significant one year after all program activities ended.
- These effects were consistent across multiple contexts and implementing partners. The program’s positive results on economic well-being, which range from very economically significant to moderately so, are not driven by any one country.
- Long-run benefits of the Graduation approach outweigh up-front costs. Comparing the program’s economic benefits to its total costs, researchers find a positive rate of return three years after the asset transfer in all contexts, except Honduras, ranging from 133 percent to 433 percent.”
The replications of the graduation model, which you can see in figure 11, employed a series of sequenced steps:
- Proper targeting tools ensure that a graduation program reaches the poorest by using community input, via local maps, to identify households and Participatory Wealth Rankings. Surveys, poverty scorecards (such as the PPI), and visits cross-verify selected households.
- Consumption support is provided at determined frequencies in the form of cash or food, as food insecurity can prevent the poor from taking advantage of opportunities or planning for the future.
- By saving regularly, participants become financially disciplined and familiarized with financial service providers.
- Asset transfers help participants take part in an economic activity.
- Through skills trainings, participants learn asset management, business administration, and basic health and nutrition. They also receive information about government services available to them, particularly health clinics.
Figure 11: BRAC’s Graduation Approach
Source: Image used with permission of BRAC.
The CGAP-Ford Foundation experience has demonstrated that, apart from BRAC (the institution where graduation programs originated), “few organizations have the human or financial capacity to offer all the components of the graduation model effectively.” Carolina Trivelli, an economist with CGAP who specializes in rural finance and financial inclusion in Peru, points out that an effective way of meeting resource and financial demands is to transform them into public-sector interventions.
Looking at the development of Haku Wiñay, a government graduation program in Peru, Trivelli proposes three steps to successfully scale up efforts behind graduation programs as a public sector effort:
- Learn and test the feasibility of desired objectives.
- Pilot and test the idea independently or as part of another policy within the public sector in order to ascertain the possibility for implementation at a larger scale.
- Use lessons learned from pilots to put together public policy or programs and to determine how to design, define guidelines, and determine resources.
Effective partnerships are also instrumental in making sure that graduation programs are far reaching. Results from the CGAP-Ford Foundation study of pilot programs determined that these types of partnerships should be based on shared vision, aligned practices, and trust. One such partnership could exist between a government and NGO, in which a government agency provides consumption support while the NGO provides skills training and savings services. Conversely, NGO-led programs could integrate government safety-net programs.
Although government-sponsored graduation programs appear to be the most logical place for scaled-up implementation, lessons learned from the CGAP-Ford Foundation experience underscore that, regardless of implementer, the program should have predefined goals and develop indicators for success that are coherent (i.e., targeted), meaningful (i.e., realistic), and measurable (i.e., indicators are weighted). By assuring that the extreme poor are properly targeted for participation in a graduation program, they have a greater chance of profiting from the long-term benefits associated with the various microfinance products and services designed to keep them out of poverty.
Government social protection programs: Employ the Graduation approach as a key tool for helping people move from government support to generating income-building assets from their own livelihoods.
Financial service providers: Link with participants of graduation programs, providing them with savings, credit, and payment facilities.
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Table of Contents
- Executive Summary
- Where’s the Map?
- Global Data Show Diverging Paths
- Integrated Health and Microfinance
- Saving Groups
- Graduation Programs
- Agricultural Value Chains
- Conditional Cash-Transfer Programs
- Digital Finance
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