63336 Reaching the Poorest: Lessons FOCUS NOTE from the Graduation Model M icrofinance is about extending financial access to poor and excluded people. However, apart from a few notable exceptions, microfinance has not CGAP–Ford Foundation Graduation Program, a series of 10 pilot projects in eight countries involving a broad range of partners and an extensive research effort, to typically reached extremely poor people—those at test the universality of BRAC’s approach (see Box 1). the lowest level of the economic ladder.1 The majority of the world’s estimated 150 million microcredit This paper highlights the lessons learned from the clients are thought to live just below and, more often, Graduation Program first by describing how the just above the poverty line. This achievement is not model works and how various partner organizations negligible since, for most of these clients, the only implement it in the field. A subsequent section distills other options are informal sources of finance that are the early findings and is followed by a section on often more costly and less reliable. costs. The final section takes stock of the learning to date, including key constraints and outstanding Some practitioners, governments, and funders, questions. however, are specifically interested in reaching extremely poor people. Whether seeking to foster social protection or financial inclusion, many wish Box 1. Reaching the poorest: BRAC’s approach in Bangladesh to understand how best to put them on the path One of the world’s largest nongovernmental toward sustainable livelihoods—a path that increases organizations (NGOs), BRAC works in 70,000 rural incomes, expands assets, and provides food security villages and 2,000 urban slums in Bangladesh. so that the poorest no longer require support from BRAC has always had a strong focus on poverty— safety nets and can make good use of credit, if they providing microfinance, schooling, healthcare, legal services, and marketing facilities. But in the 1980s, want to. BRAC realized that its microfinance programs were not reaching many of the poorest. In 1985, BRAC Successful efforts to reach extremely poor people partnered with the Government of Bangladesh and the World Food Program to add a graduation often have combined access to financial services with ladder to an existing national safety net program a variety of nonfinancial services, such as livelihoods that was providing the poorest households with training. In CGAP’s search for models to fight a monthly allocation of food-grain for a two-year extreme poverty, we were particularly inspired by the period. BRAC worked with these beneficiaries and added skills training, mandatory savings, and small innovative and holistic approach developed by the loans to accelerate livelihoods development. In Bangladesh Rural Advancement Committee (BRAC) less than 20 years, the program reached 2.2 million over the past three decades.2 We have written about households. In 2002, BRAC fine-tuned its approach the model and have extensively advocated for it as an both through better identification of the ultra- poor (defined as people who spend 80 percent of important pathway for many of the poorest to escape their total expenditure on food and cannot attain extreme poverty.3 80 percent of their standard calorie needs) and No. 69 through a more intensive sequenced set of inputs. March 2011 By 2010, BRAC had reached around 300,000 ultra- In 2006, CGAP and the Ford Foundation launched poor households with this new approach termed an initiative to test and adapt BRAC’s approach in a “Challenging the Frontiers of Poverty Reduction/ Syed M. Hashemi diversity of countries and contexts. We were intrigued Targeting the Ultra Poor (CFPR/TUP). BRAC and Aude de Montesquiou with the idea that, with the right mix of interventions, estimates that over 75 percent of these households are currently food secure and managing sustainable the poorest could “graduate” out of extreme poverty economic activities. in a time-bound period. The result of this initiative is the 1 Notable exceptions include Jamii Bora in Kenya, Grameen Bank’s Struggling (Beggar) Members Program, and Palli Karma-Sahayak Foundation’s Programmed Initiatives for Monga Eradication in Bangladesh. 2 BRAC’s work in this area has evolved over the years, starting with the Income Generation for Vulnerable Group Development (IGVGD) program and its more recent incarnation, the Challenging the Frontiers of Poverty Reduction/Targeting the Ultra Poor (CFPR/TUP) program. 3 See Hashemi and Rosenberg (2006). 2 The Graduation Model: Five building blocks One Approach to Reaching The graduation model is built on five core elements: the Extreme Poor targeting, consumption support, savings, skills training and regular coaching, and an asset transfer (see Figure CGAP and the Ford Foundation launched the 1). Pilots adapt the building blocks—prioritizing, CGAP–Ford Foundation Graduation Program in sequencing, and shaping the elements to the priority 2006 to pilot test whether BRAC’s model could needs of the poorest and the reality of the markets in be successfully adapted outside Bangladesh. The the various program sites. Understanding the core objective of the program is to understand how safety logic of the model and knowing how and when to nets, livelihoods support, and microfinance can be bring in flexibility is a key role of the implementing sequenced to create pathways for the poorest out partners—especially the program staff charged with of extreme poverty. the close monitoring and coaching of participants.5 Ten pilot programs in eight countries have been launched, representing regional, economic, cultural, Targeting and ecological diversity. The pilots are as follows: Deliberately targeting the poorest and excluding better off households is the first step to ensure the pilots truly • Haiti with Fonkoze reach the extreme poor. Once pilot implementers • Pakistan with Pakistan Poverty Alleviation identify the poorer regions and communities in a country Fund (PPAF) through implementing partners: through national poverty maps or the implementer’s Aga Khan Planning and Building Services, knowledge of the area, the poorest households are Badin Rural Development Society, Indus Earth selected, using a combination of methods (see Box 2): Trust, Sindh Agricultural and Forestry Workers Coordinating Organization (SAFWCO), and Orangi • Community input. Communities are directly Charitable Trust engaged in determining the criteria for extreme • Honduras with Organización de Desarollo poverty. They first create a local map identifying Empresarial Feminino Social and Plan International each household. They then conduct a poverty wealth Honduras ranking (PWR) to discuss household characteristics • Peru with Asociación Arariwa and Plan International and reach consensus on who the poorest are and Peru who should be included in the program.6 • Ethiopia with the Relief Society of Tigray (REST) • Surveys. The results of the PWRs are then typically • Yemen with the Social Welfare Fund and the Social verified through more traditional household Fund for Development means-tests conducted by program staff using a • Ghana with Presbyterian Agricultural Services and few easily verifiable indicators, such as family size, Innovations for Poverty Action number of children attending school, and type of • Three in India with Bandhan, Swayam Krishi housing. Some pilots use poverty scorecards, such Sangam (SKS), and Trickle Up as the Progress Out of Poverty Index.7 • Cross-verification. In a final step to minimize Five pilots in Haiti, India and Pakistan are completed selection errors, senior program staff visit all 4 while the others are ongoing. Annex 1 includes a selected households to triangulate information summary description of the 10 pilots. from the community and the surveys. 4 Pilots in Haiti and India have started to scale up. 5 The research built into the pilot in Ghana will shed light on the relative impact of the wholesale implementation of the model, versus implementing some of the building blocks separately. For more information on the research design, see http://graduation.cgap.org/pilots/ ghana-graduation-from-ultra-poverty-program/ 6 Research at Bandhan shows that community targeting is quite precise and that PWRs are “reasonably good indicators of economic well-being.” See Banerjee, Duflo, Chattopadhyay, and Shapiro (2007). 7 The Progress out of Poverty Index is a simple tool that measures poverty levels of groups and individuals. 3 Figure 1. The Graduation Model THE GRADUATION MODEL MARKET REGULAR SUSTAINABLE ANALYSIS COACHING LIVELIHOODS ACCESS TO CREDIT Poverty Line Extreme Poverty Asset Transfer Targeting to ensure only the poorest Skills Training households are being selected. Consumption support to stabilize consumption. Savings to build assets and instill Savings financial discipline. Skills training to learn how to care for Targeting an asset and how to run a business. Asset transfer of an in-kind good (such as livestock) to help jump-start Consumption Support a sustainable economic activity. 0 MONTHS 3 MONTHS 6 MONTHS 21 MONTHS 24 MONTHS The community input helps build acceptance for the Consumption support pilot in program areas. Combined with the surveys, A major premise of the graduation model is that food it enables program staff to better understand insecurity causes significant stress that reduces poor the characteristics of extreme poverty in their people’s ability to take advantage of opportunities and region. However, this multidimensional targeting plan for the future. Consumption support, either as methodology requires significant time investment. cash or directly as food, is thus meant to create some Typically, a PWR exercise takes at least half a day per peace of mind for participants as they are selected community. The household surveys and verifications into the program. This support helps participants and are also time consuming, especially when homes are their families stabilize their food consumption levels dispersed across a large area. until they start earning income from the productive asset they receive as part of the program. Box 2. Who are the poorest? The design of consumption support requires decisions The pilots’ experience with targeting confirms on a range of issues—the form of support (cash or that poverty indicators depend on local context. in-kind), the amount, frequency, and duration. In For example, food insecurity seems to be a solid indication of poverty in Ethiopia and Haiti, but Ethiopia and Yemen, consumption support is offered in Peru the poorest are relatively food secure, to all participants through a pre-existing government so social and geographic isolation count more. safety net program. At Bandhan in West Bengal, Lack of access to productive land is a reasonable indicator of poverty in South Asia, but not in Ghana the duration of consumption support is linked to where villagers can farm communal land. Absence the participant’s livelihood selection. Participants of productive assets is often a key indicator of working in agriculture receive support for a longer poverty, but it is not always easy to differentiate period than those with small shops because their between actual ownership of an asset and leasing or borrowing. Strict adoption of national poverty agricultural activities take more time to generate indicators can be misleading. Bringing in local income. In Honduras and at Trickle Up in West knowledge helps reach a more nuanced and Bengal, consumption support is needed only during relevant understanding of what constitutes extreme the lean season as participants have sufficient caloric poverty within a community. intake otherwise. 4 Beyond improving food security, consumption Ensuring that deposit services are safe, accessible, and support also has less tangible but important benefits. flexible is a priority, especially because participants Fonkoze in Haiti, for example, considers it to be are particularly poor and vulnerable.8 This has been key to generating trust in the early stages of the a challenge when implementing partners, such as program. Fonkoze also found that it is essential to NGOs in India, are not legally permitted to mobilize be transparent about the purpose and duration of deposits. Moreover, pilots are predominantly located consumption support to help participants plan ahead in remote areas where few regulated financial for when it is no longer available. institutions offer saving services. Direct food assistance can be a cushion against Some MFIs are able to mobilize participant’s deposits inflation—particularly at a time when food prices on individual accounts. Other pilots facilitate globally are volatile. Cash, however, is often savings in a variety of ways. SKS opened accounts preferred by participants and also provides a unique for participants at post offices, Trickle Up in West opportunity for program staff to start hands-on Bengal organized self-help groups, and other pilots financial management training and to encourage are exploring communal village savings options. participants to save. A PPAF partner, SAFWCO in Pakistan, tried cash stipends and in-kind distribution Most pilot sites establish financial literacy programs. of rice, oil, and lentils. After testing both, it decided For example, Fonkoze staff in Haiti work with each to offer only cash stipends of US$6 every two weeks: participant to create an individual savings plan this option is easier for SAFWCO to administer and with specific goals. SKS delivers financial education preferred by participants. modules during weekly group meetings in the form of a snakes-and-ladders game focused on money There is a natural tension between standardized management. support, where all participants get the same amount for the same period, and customized stipends, Asset transfer which are more responsive to household needs. Transferring an asset to help participants jump-start Standardization is simpler for program staff to a sustainable economic activity is a critical element of implement and manage and it is often more cost- the graduation model. Options for viable livelihoods effective, but it does raise issues of equity: households are developed through market studies that analyze with fewer members can go much further on their demand constraints, infrastructure availability, value support. chains, and upstream and downstream linkages.9 Program staff then discuss the menu of livelihood Savings options and corresponding assets with participants. Savings are at the core of the graduation model. The goal is to match the right activity to the interest Savings help poor people manage risks, build and skills sets of participants. The most common resilience, and reduce the likelihood of having to asset transferred across all pilots is livestock. Pilots sell assets when faced with a shock. Although many have also offered seedlings and other agricultural poor people save informally, saving regularly in a inputs, sewing machines, and a stock of commodities formal way helps program participants build financial to start small shops. discipline and become familiar with financial service providers. Pilot participants represent a new client A range of considerations must be factored in segment for most financial service providers, so they selecting the appropriate asset. For one, each type also benefit from this introduction. of livelihood and associated asset yield different cash- 8 See Deshpande (2006). 9 See, for example, the market analysis done for the pilot in Ethiopia at http://graduation.cgap.org/pilots/ethiopia-graduation-pilot/. 5 flow patterns. Chickens, for example, can generate monitoring and coaching provided by program staff income in the very short term through the sale of are equally important. In most pilots, staff make eggs, though the income is low. Calves, on the other weekly visits to participating households. During the hand, are a longer term, higher return asset. visits, they monitor progress and address problems. More importantly, they develop strong bonds with The time, effort, and skills required for assets vary. participants and become their mentors, providing Some activities need up-front investment; for informal coaching over the 18 to 24 months of the example, building boxes for bee hives or shelters for program. Staff check if participants are on track to goats. Others require a lot of management. Poultry reach their goals by the end of the program and is complex to care for; it is vulnerable to diseases offer guidance on how to do so. They also often offer and weather and needs to be vaccinated. Cows business planning advice, provide social support, require relatively less care, but need more space and promote health and nutrition, and encourage positive helping hands to gather fodder. The sociocultural attitudinal changes along the way. Program staff need values assigned to specific assets also differ. In India, a mix of skills and qualities, ranging from technical participants in the SKS program favored buffaloes expertise in specific livelihoods to listening skills and because they bring social prestige. In many countries, empathy for participants. goats, though often profitable, are less valued. Skills training, centered on managing assets and To mitigate risks, pilots encourage households to running a business, is part of all pilots. The most engage in multiple livelihoods using a diversity of effective trainings are practical, short, and hands on. assets. In Haiti, Fonkoze’s strategy included providing Pilots also serve as an information clearinghouse, chickens for short-term income and goats for longer pointing participants to services they can leverage term returns. All the pilots in India encouraged from government health clinics to extension participants to continue daily labor activities when workers. Almost all pilots include some social possible. In Honduras, the asset strategy is designed messaging on personal hygiene, safe drinking water, to allow participants to take part in the seasonal coffee immunizations, contraception, and the importance harvest—a valuable source of income for families. of schooling for children. Protecting assets and dealing with uncertainty around different livelihood options is a priority for all pilots. Box 3. Fostering support through village Price fluctuations, the absence of reliable support assistance committees services, and poor infrastructure can undermine In Bangladesh and elsewhere, rural leaders tend to participants’ efforts to earn a decent life with their new control structures of power, monopolize resources, asset. For example, nearly one-third of the livestock and often exploit the poor. However, in most places, they also see themselves as the traditional Trickle Up provided to participants in West Bengal custodian of the poor with the responsibility of died due to exceptionally high rainfall that led to a helping them. BRAC has successfully tapped surge in water-borne diseases. After this experience in into this aspect of patriarchy and created Village the first 10 months of the pilot, Trickle Up hired a part- Poverty Alleviation Committees— groups of village leaders tasked with helping the poorest protect time veterinarian and trained community “barefoot their assets, providing advice, and facilitating access veterinarians” to provide basic care to livestock. PPAF to government and other resources. Although partners in Pakistan linked program participants to Bandhan started its pilot program without these committees, it soon introduced them to help ensure government veterinary services. participants’ security and mediation in cases of domestic violence and alcohol abuse. The pilots Skills training and regular coaching in Haiti and Honduras have also organized such Consumption support, savings, and the transfer of an committees to support beneficiaries, foster local buy-in for the program, and reinforce its messages asset are all tangible contributions that participants within communities. receive from the pilot programs. However, the regular 6 Implementing Organizations, What does “graduation” mean? Partnerships, and Linkages The graduation model is structured around the Few organizations have the human or financial capacity careful sequencing of five core building blocks, to offer all the components of the graduation model with “graduation” out of extreme poverty and into effectively.10 Indeed, finding good implementing sustainable livelihoods as the end goal. Achieving partner organizations is a critical success factor of this goal typically takes between 18 and 36 months. the model—and one of its most challenging aspects. While the overarching goal of graduation is common across all pilots—exit from extreme poverty— Ensuring the right set-up and forging the terms measurement criteria differ. Each pilot sets its own of the partnerships is a time-consuming process. context-driven indicators for graduation, since the Partnerships must be nurtured. They require a faces of poverty vary in different sites. shared vision, aligned practices, and trust. Strong management, the ability to identify and train highly The five completed pilots incorporated some of the motivated program staff willing to work under difficult following elements in their graduation criteria: food circumstances, and significant financial resources are security, stabilized and diversified income, increased also needed. assets (including savings), improved access to healthcare, increased self-confidence and a plan for the In most instances, the pilots are implemented future. Put together, these criteria attempt to assess not through partnerships between livelihoods providers only the status of an individual at a specific point in time, and financial service providers; this is the case in but also that person’s potential resilience to shocks Haiti, SKS in India, Honduras, and Peru.11 In Yemen and vulnerabilities. After all, the ultimate goal is not a two government agencies are co-implementing the short-term escape from extreme poverty due to the program. Partners are also opportunistic and try program investments themselves, but rather to provide to link up to healthcare or other services providers the tools, livelihoods, and peace of mind for participants offered by government or NGOs. Where possible, to sustain themselves after the program is over. leveraging existing government infrastructure and The Graduation Program recognizes that not all services is especially helpful as programs scale up. participants want to take on credit. However, financial services do have a role in participants’ trajectories beyond graduation. Continuing to save after the end of the program can help participants protect Figure 2. Implementing Organizations assets and accumulate money for future investments or emergencies. In some cases, participants choose to borrow to expand their activities or start new Livelihoods Financial Service enterprises. A shared goal across pilots is that by the Provider Provider end of the program, members are creditworthy and in NGO, government agency, or MFI or other (SHG, Post other Office, etc.) a position where they can access credit if they want to. Provides in-kind grants for Provides savings services. income generating activities and Offers credit, insurance, offers training. transfers in the longer term. Findings From the Healthcare Pilot Programs or other Service Provider The pilot programs are new and experimental. All NGO, government agency, or other Provides accessible healthcare or partners in this initiative are eager to learn what works support services such as veterinary care, agricultural extension services, and what does not. We have built a robust learning water and sanitation, etc. agenda into the Graduation Program in partnership with program staff, leading academics, and research 10 BRAC, with its pioneering work in this area, is an exception. 11 The livelihood provider is sometimes a foundation or an NGO linked to an MFI. 7 Table 1. Graduation Program Learning Methodology12 Monitoring Careful monitoring by program staff allows implementing organizations to track participant progress. It also helps identify areas for course corrections, refinements, and adaptations to increase the chances of success. Pilots have all developed simple monitoring tools to keep track of participants in a systematic and cost- effective manner. Qualitative research Qualitative research by independent experts helps implementers understand the realities of participant lives, the process through which change takes place, and the challenges they face. RCT impact RCT impact assessments by external academics prove causality between program assessments participation and changes observed in participants’ lives through random assignment of potential participants to treatment and control groups and comparing changes between them. institutes like the Abdul Latif Jameel Poverty Action had stopped 10 months earlier. This is impressive Lab, BRAC Development Institute, Innovations for since the food crisis dramatically increased the price Poverty Action, Institute for Development Studies- of staples (the evaluation was completed shortly University of Sussex, Institute for Financial Management before the 2010 earthquake). Anthropometric and Research, and New York University. The learning measurements also indicate that severe child under- component rests on three approaches. Each helps nutrition decreased from 13 percent at the start answer different questions about how the pilots are of the program to 4 percent six months after the affecting participants’ lives: monitoring by program end of the program—both measures were taken staff, qualitative research by independent experts, and in the summer, a lean season in Haiti. Preliminary impact assessments through randomized control trials RCT results from Bandhan in West Bengal show that (RCTs) by external academics. (See Table 1.) participants consume on average 25 percent more per month than those in control households—and All pilots monitor participants. In addition, qualitative the largest consumption increase is in nutritious research is being conducted with eight pilots. Given 13 foods (fruit, nuts, dairy, eggs, and meat). that pilots are in different stages of completion, we expect to have more research results in the next Income, assets, and savings year. For now, we have only early results from the first round of RCT impact assessments from Bandhan In Haiti, the total value of assets owned by in West Bengal; the results there are unquestionably participants increased from approximately US$138 attributable to the program. We present these right after the assets were transferred to US$152– findings below. The other findings highlighted reflect US$380 six months after the program’s end. learning primarily from program monitoring and This increase in the value of assets indicates that nonexperimental qualitative research in Haiti and India. participants were able to grow their assets during and after the program. With regard to savings, Food security however, the results are less positive. Despite significant savings during the first nine months of the At Fonkoze in Haiti, the percentage of food insecure program, most participants stopped saving when households declined by over 50 percent by the end the pilot ended. Qualitative interviews suggest that of the program, although consumption support participants are converting savings into assets, such 12 This table builds on “Measuring Changes in Client Lives: Contributions of Different Approaches”, upcoming CGAP Brief. 13 RCT impact assessments are being conducted by the Institute for the Financial Access Initiative at SKS and by Institute for Financial Management and Research Centre for Micro Finance and the Poverty Action Lab at Bandhan in India. Innovations for Poverty Action (IPA) is conducting randomized impact assessments in Pakistan, Honduras, Peru, Ethiopia, and Yemen. A mix of quantitative and qualitative research was conducted by Institute of Development Studies, CGAP, and BRAC Development Institute (BDI) at Fonkoze in Haiti. BDI is conducting qualitative research at SKS and Trickle Up in India, OCT in Pakistan, and in Ethiopia and Yemen. IPA is conducting qualitative research in Honduras and Peru. 8 as donkeys, because of the high transaction costs delayed or simply did not access medical care in of going to a Fonkoze branch to deposit money. the face of disease decreased from 24 percent at At Bandhan, treatment households increasingly baseline to 6 percent two years after the start of the rely on self-employment rather than irregular program. This was because of increased demand and agricultural labor. They also own more assets and ability to pay for treatment and because Fonkoze durable goods, although this does not appear to partnered with a healthcare provider (Partners in be statistically significant. Finally, they save more Health). Trickle Up monitoring data shows an increase than control households, depositing, on average, in the use of free government primary health centers US$0.50 more over the month preceding the data as well as a drop in the amount of money spent on collection. Program households also score higher on doctors’ fees and borrowing from self-help groups for an index of financial autonomy and express higher medical emergencies. In addition, about 30 percent financial confidence than control households. of eligible participants adopted permanent family planning methods over the course of the program. Empowerment At Bandhan, participating households score higher than the control group on an index of health behavior In Haiti, women report having gained confidence. and knowledge. The study does not, however, find Qualitative research suggests they feel this way that the program has any effects on actual health because of the assets they have accumulated, their outcomes, such as working days lost to illness, enhanced business skills, and their ability to care although adults residing in treatment households are better for their children and provide regular meals. 6 percent more likely to perceive that their health has Self-evaluation exercises—during which participants improved over the last year. were asked to place themselves on a staircase at the start of the program, and then nine, 18, and 24 months Education afterwards—indicated that every participant felt her life had significantly improved in the two years Although the graduation model does not include following the start of the program. There is also specific programmatic interventions linked to children’s evidence of increased social capital. Monitoring schooling, it was hoped that improved economic data from Trickle Up in India shows that program conditions and awareness would lead to higher school participants are more likely to purchase new clothes enrollment. In Haiti, children’s school attendance and attend social events at the end of the program increased dramatically: participants reporting that than at its beginning. In-depth qualitative interviews “all or most children are regularly attending school” showed that 10 out of 15 participants in the Fonkoze increased from 27 percent to 70 percent. Trickle Up program in Haiti had either taken their old partner monitoring data show an increase from 5 percent to back or found a new partner in the course of the 83 percent in the proportion of school age children program. Economic empowerment seems to be the enrolled—although there is no school in one of the driver of these relational changes. As one interviewee program areas, which may explain why the rates bluntly said, “If he treats me badly, I will tell him are not even higher. However, these relatively high to leave. I do not need him, he needs me. That’s school enrollment rates might not translate into better why he is so nice to me now.” At Bandhan, women education: the number of drop outs is high, the quality participating in the program are less likely to report of schooling is not good, and discrimination against symptoms of mental distress, and they have a more very poor children can be intense. At Bandhan, positive outlook on the future (measured by an index program staff were worried parents might take their of mental health) than the control group. children out of school so that the children could help them in their new economic activities. However, Health preliminary results from the impact assessment show that even though participants’ children under In Haiti, the use of health clinics and hospitals went 14 spend, on average, 20 minutes more than before up from 14 percent to 46 percent among program tending to livestock or enterprises than those in participants, while the percentage of people who control households, this has not impacted school 9 Box 4. Spotlight on results achieved by BRAC’s CFPR/TUP BRAC’s program for the poorest, CFPR/TUP, has consumption of vegetables, eggs, meat, and fish. The been intensively studied since 2002. Three rounds upward trend continued a year after the program’s of surveys were conducted with the same group of end, suggesting that beneficiaries were able to sustain participants: the baseline in 2002, an endline in 2005, higher consumption levels without program support. and three years after the program’s end in 2008.a Savings and credit. Participants save more than nonparticipants. Approximately 60 percent of Results indicate the following: beneficiaries also save informally—a practice that increased with program participation. The percentage Graduation rate. 95 percent of program beneficiaries of participants with outstanding loans increased from graduated on the basis of participants fulfilling 6 out 27 percent at baseline to 77 percent in 2005. of 9 indicators, such as food security, diversified Empowerment. By the end of the program, 83 income sources, asset ownership, improved housing, percent of selected households felt more confident and school enrollment. about coping with crisis and accessing resources from their communities. Poverty. 85 percent of participants started on less than half a dollar a day. Three years after the Health. Spending on medical treatment among program’s end, 92 percent of participants moved participants increased. Sanitary conditions also above the half a dollar a day threshold (purchasing improved, with a majority of participants accessing power parity adjusted). latrines and wearing sandals when they use them (an important hygienic practice). Food security. Chronic food insecurity fell by 47 percentage points among participants. Annual Additional results. A larger number of boys were food expenditure rose by 93 percent, and caloric enrolled in primary school a year after the program intake increased over 22 percent, particularly in the ended; there was no change in girl’s schooling. a Survey on over 5,000 treatment and control households using a difference-in-differences methodology. Difference-in-differences is a nonexperimental impact measurement technique that measures the effect of a program comparing a control and treatment group. The methodology does not use randomization and may be subject to certain biases. attendance. In fact, they actually spend an additional stem from the emphasis pilots place on each of 30 to 40 minutes per day studying. the building blocks. The amount spent on the asset (25–33 percent of the total program cost in the Indian pilots), the size and duration of consumption Costing support (up to 10 months at Bandhan), head We have not conducted a full cost–benefit analysis office management costs (lower when programs of the graduation program yet, since five pilots are managed locally), and additional support for are still ongoing. As the results of the qualitative other components (e.g., healthcare or housing research and impact assessments come in, it will be support in some pilots) all factor into the cost per possible to do meaningful cost–benefit analysis. We participant. Another key determinant of costs is have, however, done cost calculations for four of the the participant to staff ratio, determined largely by five completed pilots.14 population density in program areas. Finally, the cost structures of different economies also matter. Total program costs per participant for the duration All elements of cost (labor, assets, etc.) are far of the program vary widely among the four pilots. cheaper in India than in Haiti. It ranges from about US$330–US$650 in India to about US$1,900 in Haiti.15 The total cost per The upfront investment required by the graduation participant includes consumption support, asset model is high, but economies of scale may kick-in transfer, all staff costs, and head office overhead when programs scale up, with some likely cost- over the whole program period. The variations efficiency gains. In the final analysis, whether the 14 Unpublished costing analysis conducted by M-Cril. March 2010. 15 In Haiti, the pilot data was not available at the time of the study due to the earthquake in January 2010. This costing analysis uses data from a small scale up of the pilot conducted in 2009 with 220 families in the Plateau Central area. 10 model is a worthwhile investment will depend Limited health infrastructure on: (1) impact on the participant, and (2) cost- effectiveness compared to other social protection Health emergencies are a primary reason for and economic development programs. households to lose their savings, sell assets, and go into debt. The pilots try to mitigate health shocks Context Matters by providing nutritional support, building health awareness, and encouraging savings, but these The graduation program is a household-level services are often insufficient in the face of serious intervention that focuses primarily on individually crises. The existence of medical and hospitalization targeted participants. But factors beyond the infrastructure is thus crucial, especially when program’s reach greatly influence its outcomes. healthcare is low-cost or free as in Zanmi Lasante in Haiti or with the government clinics in West Constraining household characteristics Bengal. While affordable healthcare sadly remains absent for most of the poorest, some implementing Participants enter the program with different family organizations are thinking of creative ways to address structures. Women tend to be at a disadvantage these challenges without stretching themselves too because they are frequently limited to certain thin. Bandhan is creating “health entrepreneurs”— income-earning activities. In Haiti, India, and Pakistan, women who take on healthcare provision as a it appears that households with cooperative men are livelihood. They will be trained in preventive and more likely to succeed in the program. However, basic curative health services, and taught to deliver female-headed households still tend to be better hygiene and family planning messages. Bandhan is placed than households with abusive men. In confident that these women will be able to provide situations where husbands do not work, and in cases treatment for common illnesses while earning income of alcohol or quat abuse, 16 households will almost from the sale of health products. always fail to improve their economic conditions. Households that access more social networks tend Lack of physical infrastructure to fare better: help from friends and neighbors, especially if they are wealthier, can offer much Pockets of poverty tend to form in environmentally needed relief in the face of income loss and economic challenging regions. For example, some parts shocks. Extended families can also provide important of costal Sindh in Pakistan are barely cultivable support, especially in helping run the household’s because of soil salinity, and Tigray, in Ethiopia, is new economic enterprise. extremely drought-prone. Without substantial water management investments in these regions, livelihood options will remain limited. (See Box 5.) Absence of markets Poor regions also tend to be threatened with natural Most pilots are implemented in economically calamities—earthquakes in Haiti, hurricanes in depressed areas where local markets are extremely West Bengal and Honduras, floods in Pakistan and limited. Since infrastructure and communications are Peru—all contributing to growing vulnerability. In poor, participants have few opportunities to sell the Haiti, the program is exploring how a catastrophic products from their small businesses. Without any microinsurance product could help families cope with major public or private sector intervention to help natural disasters. But ultimately, the responsibility create new markets, household-level enterprises can for providing storm shelters, embankments, or early be severely constrained. warning systems, lies in the hands of the state. 16 Quat is a plant that contains an amphetamine-like stimulant that is often used in Yemen and Pakistan. 11 design of livelihood options, but does not directly Box 5. Using public works programs for tackle market conditions. The absence of physical water management infrastructure (access to water or markets), health The Tigray region in northern Ethiopia faces severe infrastructure (availability of basic health services), droughts. REST, the program implementer in Ethiopia, realizing that economic improvements and vulnerability to ecological and other macro- are contingent on efficient water conservation level shocks can prevent sustained progress out of management, is using government public works poverty at the household level. undertaken as part of the national Productive Safety Net Program to improve water channels and build small dams and underground water There is still much learning to do. More research is tanks. These measures will both protect existing needed: to determine whether the initial changes livelihoods and build new ones. observed in participants’ lives are sustained overtime; to identify success factors and determine Macroeconomic shocks better what contributes to and what inhibits success; to understand the role of access to finance Economic crises have a major effect. The combined and how it can be better mediated for those in food and fuel crises in the late 2000s severely extreme poverty. We also need to understand how affected the poorest. It also affected the programs the pilots can be successfully and cost-effectively themselves, putting pressure on their budgets for scaled up, including showing the relative efficiency consumption support, transport, etc. of this approach versus other interventions targeted to the poorest. Conclusion The CGAP–Ford Graduation Program, with its 10 References pilots implemented and researched by a broad network of local and international partners, offers Banerjee, A., E. Duflo, R. Chattopadhyay, and J. insights on how to reach the extreme poor. It Shapiro. 2007. “Targeting Efficiency: How Well Can seeks to contribute new practical know-how and a We Identify the Poor?” Working Paper Series No. 21. rigorous evidence base on creating pathways out of Calcutta, India: Institute for Financial Management extreme poverty. and Research Centre for Micro Finance, December. The pilots are beginning to demonstrate that a Banerjee, A., E. Duflo, R. Chattopadhyay, and J. well-sequenced, intensively monitored program Shapiro. 2010. “Targeting the Ultra Poor, India: combining consumption support, access to savings, Preliminary Analysis.” The Abdul Latif Jameel Poverty livelihoods training, and an asset transfer can Action Lab, October. Unpublished draft. lead to increased consumption, asset and income diversification, and some level of empowerment. Deshpande R. 2006. “Safe and Accessible: Bringing Lessons about each of the building blocks can Poor Savers into the Formal Financial System.” Focus be useful to a wide range of other programs Note 37. Washington, D.C.: CGAP, February. working with very poor people. But the model may not work for everyone. Some demographics Hashemi, Syed, and Richard Rosenberg. 2006. (elderly, severely disabled, or dysfunctional “Graduating the Poorest into Microfinance: Linking households) may simply be too challenging for a Safety Nets and Financial Services.” Focus Note 34. model that rests on the ability of individuals to Washington, D.C.: CGAP, February seize the opportunity to create new economic activities and create their own pathways out of Huda, K., and S. Chanani. 2010. “Results from Ultra extreme poverty. Most pilots are implemented in Poor Program Client Monitoring System Implemented economically depressed areas where local markets by Trickle Up in West Bengal—January through are extremely limited. The program takes market December 2009.” London: BRAC Development challenges and opportunities into account in its Institute, June. 12 Huda, K. 2010. “Shocks, Stresses and Safety Nets: ———. 2008. “Chemen Lavi Miyo—Midterm Voices from the Poverty Trap.” London: BRAC Evaluation.” London: Concern Worldwide and Development Institute. Unpublished draft. CGAP, July. Huda, K., and A. Simanowitz. 2010. “Chemen Lavi Misha, F., and N. Das. 2010. “Addressing Extreme Miyo—Final Evaluation (24 months).” London: Poverty in a Sustainable Manner: Evidence from Concern Worldwide, March. CFPR Programme.” Draft. Dhaka, Bangladesh: BRAC Research and Evaluation Division, May. 13 Annex 1 Fonkoze Chemin Project implementer: Fonkoze Consumption support: US$5.50/week (based Lavi Miyo Program Project partners: Concern Worldwide and on price of a kilo of rice a day) for 8 months (Haiti) Partners in Health Savings: Individual savings accounts at Fonkoze Location: Rural Boukan Kare, Twoudino, and Livelihoods: Chicken, goats, and small trade Lagonav Pilot Start date: 2006 Pilot end date: 2008 Participants: 150 women Bandhan Targeting Project implementer: Bandhan Consumption support: US$2.30 /week for up to the Hardcore Poor Project partners: None 10 months Program Location: West Bengal Savings: Weekly savings of US$0.20 (India) Start date: 2007 Livelihoods: Goats, cows and small trade Pilot end date: 2009 Participants: 300 women Trickle Up Ultra Project implementer: Trickle Up Consumption support: US$ 2.25 /week for 6 Poor Program Project partner: Human Development Centre months (India) Location: West Bengal Financial service: Savings with self-help groups Pilot start date: 2007 (each SHG has a savings account with the State Pilot end date: 2010 Bank of India) Participants: 300 women Livelihoods: Goats, rice paddy, fish, and small trade Swayam Krishi Project implementer: SKS NGO Consumption support: US$18 for asset support Sangam (SKS) Ultra Project partners: Swiss Development on a “per needs basis” over 18 months Poor Program Cooperation, NM Budharani Trust, and others Savings: Individual savings accounts at post (India) Location: Andhra Pradesh offices; grain bank scheme in 50 villages Pilot start date: 2007 Livelihoods: Goats, buffaloes, land cultivation, Pilot end date: 2010 trade, and tailoring Participants: 426 women Pakistan Project implementers: Aga Khan Planning Consumption support: Food or cash transfers Graduation Pilot and Building Services Pakistan (AKPBSP), of US$12/month for 12 months Badin Rural Development Society (BRDS), Savings: Savings with village groups Indus Earth Trust (IET), Sindh Agricultural and Livelihoods: Petty trade, crafts, goats, cows, Forestry Workers Coordinating Organization and other livestock (SAFWCO), and Orangi Charitable Trust (OCT) Project partner: Pakistan Poverty Alleviation Fund Location: Coastal Sindh Pilot start date: 2007 Pilot end date: 2010 Participants: 1,000 families (5 x 200) Mejoramiento Project implementers: Organización de Consumption support: US$17/month for 6 Integral de la Desarollo Empresarial Feminino (ODEF) and months Familia Rural Plan International Honduras Savings: Individual accounts at ODEF (Honduras) Project partner: Plan International Livelihoods: Chicken, coffee, cereals, vegetables, Location: Lempira pigs, and fishery Pilot start date: 2009 Participants: 800 households Peru Graduation Project implementers: Arawiwa and Plan Consumption support: US$34 for 9 months, Pilot International Peru building on government conditional cash Project partner: Plan International transfer program Location: Cusco Savings: Village community banks implemented Pilot start date: 2010 by Arariwa Participants: 800 households Livelihoods: Livestock, small trade, and cultivation Ethiopia Project implementer: Relief Society of Tigray Consumption support: 15kg of wheat/month Graduation Pilot (REST) for 3 months and equivalent in cash for 3 other Project partners: Dedebit Credit and Savings months, building on government’s food for work Institute, USAID, the Italian Development program Cooperation, and the European Commission Savings: Individual savings accounts at DECSI Location: Tigray Livelihoods: Sheep, goats, bee-keeping, Pilot start date: 2010 vegetable cultivation, and other Participants: 500 households continued 14 Annex 1 Continued Yemen Graduation Project implementers: Social Welfare Fund Consumption support: US$24 per month Pilot (SWF) and Social Fund for Development building on government cash transfer program (SFD) Savings: Individual and group accounts at the Project partners: None post office and VSLAs Location: Aden, Lahij, and Taiz Livelihoods: Goats, cows, small trade, and other Pilot start date: 2010 Participants: 500 households Ghana Project implementers: Presbyterian Consumption support: TBD Graduation from Agricultural Services and Innovations for Savings: TBD Ultra Poverty Poverty Action Livelihoods: TBD Program Project partners: 3ie Location: Tamale, East Mamprusi, and Bulsa Pilot start date: 2010 Participants: 650 households Bibliography Hossain, N., and I. 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Graduation Program Overview CGAP and Ford Foundation. 2011. Graduation Qualitative Research Program Handout, February http://www.cgap.org. Huda, K. 2010. “Shocks, Stresses and Safety Nets: CGAP–Ford Foundation Graduation Program Web Voices from the Poverty Trap.” London: BRAC site: www.cgap.org/graduation Development Institute. Unpublished draft. El-Zoghbi, M., A. de Montesquiou, with S. Hashemi. Huda, K., and A. Simanowitz. 2010. “Chemen Lavi 2009. “Creating Pathways for the Poorest: Early Miyo—Final Evaluation (24 months).” London: Lessons on Implementing the Graduation Model.” Concern Worldwide, March. Brief. Washington, D.C.: CGAP, December. ———. 2008. “Chemen Lavi Miyo—Midterm Hashemi, Syed, and Richard Rosenberg. 2006. Evaluation.” London: Concern Worldwide and CGAP, “Graduating the Poorest into Microfinance: Linking July. Safety Nets and Financial Services.” Focus Note 34. Washington, D.C.: CGAP, February. Impact Targeting Banerjee, A., E. Duflo, R. Chattopadhyay, and J. Shapiro. 2010. “Targeting the Ultra Poor, India: Banerjee, A., E. Duflo, R. Chattopadhyay, and J. Preliminary Analysis.” The Abdul Latif Jameel Poverty Shapiro. 2007. “Targeting Efficiency: How Well Can Action Lab, October. Unpublished draft. We Identify the Poor?” Working Paper Series No. 21. No. 69 March 2011 Please share this Focus Note with your colleagues or request extra copies of this paper or others in this series. CGAP welcomes your comments on this paper. All CGAP publications are available on the CGAP Web site at www.cgap.org. CGAP 1818 H Street, NW MSN P3-300 Washington, DC 20433 USA Tel: 202-473-9594 Fax: 202-522-3744 Email: cgap@worldbank.org © CGAP, 2011 The authors of this Focus Note are Syed M. Hashemi (CGAP consul- are thankful for review and valuable comments of Rich Rosenberg tant and BRAC Development Institute) and Aude de Montesquiou and Greg Chen from CGAP, and Nathanael Goldberg (Innovations of CGAP. for Poverty Action), Frank DeGiovanni (Ford Foundation), Damian Milverton (independent consultant) and Tony Sheldon (independent The Graduation Program is a joint CGAP–Ford Foundation initiative. consultant). We also want to thank Esther Duflo (The Abdul Latif Frank DeGiovanni (Ford Foundation), Tony Sheldon (independent Jameel Poverty Action Lab), and Rabeya Yasmin (BRAC) for their consultant, Ford Foundation), and Alexia Latortue, Elizabeth Little- valuable inputs on specific sections of the paper. field, Steve Rasmussen and Jeanette Thomas, from CGAP, have been consistent champions of the Graduation Program and provided We are grateful to those researching and funding the Graduation advice and guidance that was critical to its success so far. We also Program. We are particularly indebted to the management and gratefully acknowledge the support of the MasterCard Foundation. staff of the pilots for generously sharing their experiences and insights. We also deeply admire the women and men who are par- The authors are indebted to Alexia Latortue (CGAP) who has ticipating in the program and have embarked on the difficult path greatly helped in improving the analytical clarity of this paper. We out of extreme poverty. The suggested citation for this Focus Note is as follows: Hashemi, Syed M., and Aude de Montesquiou. 2011. “Reaching the Poorest with Safety Nets, Livelihoods, and Microfinance: Lessons from the Graduation Model.” Focus Note 69. Washington, D.C.: CGAP, March.