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The following article was published today on the Gateway. Thank you to the Portal de Microfinanzas for translating this post into Spanish.
In the lead up to the 17th Microcredit Summit featuring the theme “2014 Generation Next: Innovations in Microfinance,” the Microcredit Summit Campaign shares its views on a range of innovative social protection programs that are showing large promise in facilitating movement out of poverty.
When we look at the world we live in today, we see people suffering and living in extreme poverty. According to the World Bank, Sub-Saharan Africa has the largest proportion (49.2%) of people living under $1.25 a day. In fact, the median poor in Africa lives under 70 cents a day (Brookings, 2013) and will likely not transition out of poverty in the short to medium term, calling for a particular focus on chronic or intergenerational poverty. But our world doesn’t have to be like this. We have the power and the ability to create a better world, a poverty free world. And that’s exactly what we intend to do.
World Bank President Dr. Jim Kim has called for an end to extreme poverty by 2030. We can achieve this ambitious goal, but to get there we have to start with the final outcome and work our way backwards to determine the steps that we need to take to make that outcome a reality. Changing our reality to end extreme poverty is like completing a jigsaw puzzle. At first it is ambiguous and the task seems daunting. However, each action we take towards ending extreme poverty makes up a piece of the puzzle. In the fight against extreme poverty, the Microcredit Summit Campaign believes that graduation model programs and conditional cash transfer programs are two of the largest and most helpful pieces of the puzzle. They respectively help advance the goal, but combined help to alleviate poverty through building resilience and decreasing the vulnerability of the poor.
The Graduation Model
The graduation model was pioneered by BRAC, and to date BRAC’s program has graduated more than 1.4 million households out of extreme poverty. Generally, the ultra-poor (BRAC’s terminology), are defined as the bottom half of the population living on less than $1.25 a day. Effectively functioning as a ladder out of poverty, families participating in graduation programs achieve a series of goals until they are generating enough income to support themselves —thus graduating from the program. A graduation program follows prescribed steps to move families out of extreme poverty. After programs effectively target those who are in most need, the program transfers productive assets to the family in addition to training, cash transfers, and access to healthcare. Over time, the family begins to build up a sustainable income base and becomes more integrated into the social fabric of the community in which they live.
In contrast, conditional cash transfer (CCT) programs are more effective with populations that wouldn’t qualify for the assistance of the graduation approach. Implemented and run by national governments, CCTs give poor families a small sum of money on a regular basis, provided that the families meet certain conditions and comply with the program requirements. These conditions often require parents to vaccinate their children, take them to a health clinic for regular check-ups, and ensure that they pass their classes in school. CCT programs have shown great promise in terms of getting program beneficiaries to comply with regulations; however, poverty is a multi-faceted problem, and CCTs are only one tool in a large toolbox.
Together, the graduation model and CCT programs have the ability to help a families lift themselves out of extreme poverty and stay out. However, families that are graduated still face challenges that could be setbacks into extreme poverty. It is in this area that CCTs fill the void. CCTs provide a safety net, extra monthly income while the family invests in its own human capital. These programs require a subsidy to be sustained, as they start with transfers of cash and/or food and the donation of an asset that the client can use to build an income. From this secure platform, clients can move on to self-employment using microfinance, or they can develop skills which lead to employment with others. Graduation model programs and CCTs work in conjunction and fit together perfectly, like two pieces of a puzzle that were meant to be connected to add to the overall picture.
However, puzzles do not solve themselves. They require dedicated individuals working together to make progress, especially when trying to solve a puzzle as large as extreme poverty. A final solution needs cooperation among practitioners, funders and social investors, and policymakers. Graduation model programs and CCTs have already proven to be effective tools individually, but they could be even more powerful when working together. This implies that policymakers have a central role to play in implementing pilot programs and then scaling them up to a national level. Practitioners and individual families are working tirelessly at a micro level to overcome poverty, but policymakers are in a position to effect change at a macro level. We often take the improvements we have made over the past decades for granted; change for the better is not guaranteed. Policymakers have the ability to make sure that there are regulations and social protection programs in place at a national level to complement the work of practitioners.
This year, Microcredit Summit Campaign is organizing a field visit for policymakers from various government ministries across Africa to experience some of the most innovative social protection programs being implemented around the world. They will have the opportunity to talk with program officials and beneficiaries in Ethiopia and Mexico. In Addis Ababa, participants will attend presentations about the World Food Programme’s R4 Rural Resilience Initiative, Productive Safety Net Project (PSNP), and a BRAC replication program at REST (Relief Society of Tigray) and talk to program beneficiaries to get a micro-level view of the program’s impact. In Mexico, the African policymakers will be briefed on Mexico’s CCT program, Oportunidades, and again visit with program beneficiaries. Following their field visits, participants will attend the 17th Microcredit Summit and contribute to the plenary session, Building Pathways out of Poverty, engage with industry experts, microfinance practitioners, program beneficiaries, and other policymakers. But it doesn’t stop there; overcoming poverty requires all of us working together.
The 17th Microcredit Summit, Generation Next: Innovations in Microfinance, will take place in Merida, Mexico, on September 3-5.
Join the discussion and make global partnerships by attending the 17th Microcredit Summit! Register today for the 17th Microcredit Summit in Merida, Mexico, this September 3-5! Find out what’s on the agenda:
- Field visits on September 1st and 2nd (pre-Summit)
- PRONAFIM’s 13th National Microfinance Conference on September 3rd (pre-Summit)
- Plenary sessions and workshops on September 3rd to 5th
- Summit Trainings on September 6th (post-Summit)