Interview with Shameran Abed, director of BRAC’s microfinance program, Bangladesh (which serves more than 5 million clients in seven countries); and Syed M. Hashemi, chair of the Department of Economics and Social Sciences, BRAC University, Bangladesh, and former co-leader of the CGAP-Ford Foundation Global Graduation Program.
We had been working for almost 30 years by the time we started thinking about the ultra-poor as a separate sector. After so many years, we realized that there was a lot of self-exclusion from microfinance by the ultra poor, and also other group members and group leaders were actually excluding the ultra-poor from their groups, mostly women. So, that was part of the reason we decided that we needed to look at the ultra-poor separately—not from just a credit angle or a strictly credit and savings angle but how to provide a sequenced sort of combination of interventions that could target the ultra-poor.
These are people who don’t necessarily have productive assets. They don’t have resilient homes. They don’t have access to sanitation or water. Their health conditions are typically poor. They don’t have social capital. So, even within their communities, they are typically socially excluded or ostracized. We had a fairly good understanding of the lives of the poor through our work with microfinance, health, education, agriculture, and value chains. We looked at the interventions they needed and how it would make sense to sequence them together.
What we learned is that targeting is very important. The community comes together to find the poorest among them, which builds ownership of this intervention. This also helps explain to people why some people get grant-based support and other people get market-based solutions.
The second critical element of the BRAC ultra-poor program is a substantial asset transfer (whereas a lot of similar programs do a cash transfer or conditional cash). BRAC and the clients work together to find the best enterprise for that client. Although the consumption stipend in the BRAC program is fairly small, we want ultra- poor households to be able to have the normal calorie intake. It’s basically to protect the asset and to provide them some room to maneuver because the asset doesn’t become productive right away.
We also do intensive hands-on training. We provide healthcare support because health shocks are a big reason that people backslide into poverty. A very critical part of the BRAC model is reintegration of the socially excluded, those ostracized—typically women—back into society. The community owns these households and says, “We will take care of these people. They’re part of us.”
Savings comes in very early, and our main intention is not how much they save but how regularly they save. Even when ultra-poor households graduate from poverty, a lot of them don’t borrow immediately or at all, but a majority of them continue to save and with much greater regularity than our normal microfinance members.
In Bangladesh, we have graduated 1.4 million households out of extreme poverty. One program provides the asset transfer as a grant, and we have another program in which everything else remains the same but the asset transfer is done through a soft loan. We’ve made a Campaign Commitment to graduate a further 250,000 households out of extreme poverty by 2016.
Syed M. Hashemi
At CGAP and the Ford Foundation, we were concerned with expanding the finance frontier to ever larger numbers of poorer people. We recognized that conventional microcredit programs were not well equipped to serve the poorest (those living on less than $1 per day), but safety-net programs did so successfully. Cash assistance, food- or cash-for-work programs, conditional cash transfers, and the like, however, generally failed to get people out of their dependence on such assistance. What we were interested in was building ladders for the poorest to “graduate” out of extreme poverty by developing sustainable livelihoods, generating incomes to keep them food secure, and linking up to quality financial services that could meet their diverse needs. We adopted the experience from BRAC’s hugely successful “Targeting the Ultra Poor” (TUP) program and piloted the graduation model in 10 sites* in 8 countries.
From the outset, we were convinced that we needed rigorous impact assessments to create credible evidence. We therefore brought in IPA, the Poverty Action Lab from MIT, and New York University to conduct randomized controlled trials, so that any improvements in the conditions of the extreme poor participants could be directly attributable to the program itself. The results are finally in and published in the journal Science. Most of the pilots demonstrated clear evidence of success measured in terms of consumption, assets, savings, and social indicators. The model works.
CGAP and the Ford Foundation realized early on that the graduation model could most effectively be scaled up through governments, using their safety-net (cash-transfer) programs as the foundation. More than a billion people around the world currently receive safety-net support. While many will continue to require ongoing assistance—the elderly, children, the disabled, and other vulnerable populations—significant numbers can seriously benefit from the graduation model and develop sustainable sources of earnings. So, along with the pilot testing, we conducted consistent advocacy with policymakers. We explained to them that “graduation” needed to be an integral element within a holistic, well-integrated social-protection program. Whether through our efforts or on their own, governments are adopting or planning on adopting different variants of the graduation model. We see this in Ethiopia, Kenya, Indonesia, Mexico, Paraguay, and Colombia. We also see genuine interest in Ghana, Malawi, Tanzania, Mozambique, Pakistan, Philippines, and Brazil. Interestingly, UNHCR has also adopted this model for some of their long-term refugees in Egypt, Burkina Faso, Zambia, Costa Rica, and Ecuador.
* One site each in Haiti, Honduras, Peru, Pakistan, Yemen, Ethiopia, and Ghana, and three sites in India.
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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
- Read the Full Report
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