Challenge
Globally, 1.3 billion people live in extreme poverty. The CGAP Graduation Program was designed to address the reality that there are few sustainable pathways out of extreme poverty for the most vulnerable. Both microfinance and livelihoods programs tend to reach people at, or immediately below, the poverty line – but not those who are extremely poor: those at the lowest level of the economic ladder. While they do benefit from social safety net programs, which typically include cash transfers, food aid and/or public-works employment, most such programs lack effective exit strategies and fail to prepare beneficiaries for market activities. So, once the support ends, beneficiaries fall back into the ranks of the food-insecure. The development problem identified was two-fold as both a targeting challenge and an approach challenge. Although the poorest of the poor are those most in need, they are often inadvertently overlooked by many development interventions.
Solution
CGAP created the CGAP-Ford Foundation Graduation Program in 2006 to learn how safety nets, livelihoods and microfinance can be sequenced to create pathways for the poorest to “graduate” out of extreme poverty in a time-bound manner. The program is built on five core elements: targeting, consumption support, savings, skills training and regular coaching, and an asset transfer. The interdisciplinary approach of the Graduation Program cuts across social protection, livelihood development, and access to finance. Ten pilot projects operate in Ethiopia, Ghana, Haiti, Honduras, India, Pakistan, Peru and Yemen. Project monitoring, qualitative research and/or impact assessments through randomized controlled trials (RCT) are built into each pilot. The program uses a targeting approach to identify the poorest households. Within 18 to 36 months, between 75% and 98% of participants graduate and become more food-secure, enjoy stabilized and diversified incomes, increase assets, have better healthcare access, increase self-confidence, and have a plan for the future.
Results
The program is building resilience among its participants. RCT impact evaluations are conducted in eight pilots to measure the benefits that can be confidently attributed to the Graduation Program. Results are in from four sites. Six pilots have been completed to date involving between 150 and 1,000 participants each for a total of 2,976 participants in the pilot phase, with graduation rates between 75% and 98%. Four of the six pilots specifically targeted women, while the pilots in Pakistan and Honduras targeted the poorest households in selected communities irrespective of gender. Five of the six graduated pilots have scaled up, with targets to reach 5,000 to 60,000 people. Four pilots are still ongoing with a total of 2,400 participants in Ethiopia, Ghana, Peru and Yemen.
The benefits in the lives of the poorest provide strong evidence that the Graduation model can work across time and location. For example, in Honduras and Pakistan, early results indicate a rise in food security and increased asset value/ownership, in particular livestock ownership. The pilot in West Bengal (PDF) showed higher food consumption, rise in control over business income and a significant increase in health indicators of the participants.
Esther Duflo, Founder and Director of the Abdul Latif Jameel Poverty Action Lab, said about the results: “Let me be clear: These are very good results . . . seeing people 10 to 15 percent richer after two or three years. I don’t think you could have expected anything much better.”
One of the most intriguing results is that reported “happiness” increased in the two sites (Honduras and West Bengal) where it was measured. These indicators of hope and an orientation toward the future may be one of the keys to unlocking poverty traps.
