Webinar recap: Is it too late for microfinance to be pro poor?

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On April 21st, the Microcredit Summit Campaign co-hosted with Uplift a webinar discussion focusing on the promise that graduation holds for sustainably reaching the ultra-poor. Our featured speakers were Debasish Ray Chaudhuri, CEO of Bandhan Konnagar in India, Rachel Proefke, a research associate with BRAC Uganda, Mark Daniels, the Philippines director for Opportunity International, and Allison Duncan, CEO of Amplifier Strategies and founder of Uplift. Anne Hastings, a global advocate with Uplift, moderated the webinar.

The conversation looked closely at the experiences that each of the three practitioners on the panel have had in implementing the program as well as the global advocacy message supporting the graduation approach being delivered by Uplift and its allies.

We hope you will get engaged with this promising avenue for reaching those living in ultra-poverty and be inspired by the potential it holds for helping microfinance institutions to reconnect to their original purpose. Some final thoughts from speakers on the webinar follow.

Anne Hastings noted,

We weren’t really able to address in depth how a pro-poor MFI, struggling for sustainability in a competitive, regulated environment can attain sustainability while operating the graduation program. In the models we saw, the institution was either an NGO or a regulated MFI that had formed a non-profit foundation for the graduation program and perhaps the delivery of other non-financial services. We shouldn’t be surprised or embarrassed that donor funding may still be needed, but partnerships with government safety net programs and other NGOs can also be very helpful in paying for the program. As the 6 RCTs funded by the Ford Foundation concluded, “Although more can be learned about how to optimize the design and implementation of the program, we establish that a multifaceted approach to increasing income and well-being for the ultra-poor is sustainable and cost-effective.” (Science Magazine, 15 May 2015, Vol 348 Issue 6236, p. 772.)

Rachel Profke added,

I think the point that I would stress, which we begun to address in the discussion, is the importance of finding the right partner for the implementation of components that an MFI does not have the core capacity to implement. While BRAC is able to leverage both microfinance and additional programming in the areas that we operate all programs, this is not always the case for us or other MFIs that will be interested in implementing graduation programming. Often, MFIs can provide the scale in identifying communities and in providing financial services, but linkages with implementing partners providing similar programming is fundamental to ensuring best practices in programming — as Mark highlighted. However, aside from NGO implementers, governments are often running existing programming that can be leveraged not only in identifying beneficiaries through such channels as social protection programming but also in providing some components through existing service provision, in terms of health or extension services. We find it helpful to look at what is already at place — and at scale — through government programs is useful, as we have done in Tanzania. This is also useful as we think about scaling because, apart from donor buy-in, governments offer larger potential through larger budgets and capacity.

Thank you to all panelists for contributing to this important conversation about the importance of the graduation approach. We also wish to thank all participants who submitted thought-provoking questions and comments to help make the session a very lively and interactive discussion!

Couldn’t join us? Watch the session recording!

April 21st Webinar: Is it too late for microfinance to be pro poor?

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You’re invited to an exciting webinar organized by Uplift on April 21st (10 AM EDT / GMT-4): “Is it too late for microfinance to be pro poor? The case for linking microfinance with graduation.”

The Graduation Approach was first developed by BRAC to help address the needs of those who were too poor for microfinance services.

In recent years, shifts in the regulatory environment and disruptive digital inclusion technologies have put pressure on microfinance institutions to go up market and move away from their original pro-poor mission.

Please register by April 19th. The password to register is “MCSEWORKSHOP”.

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Where’s the Map? Another sneak peek!

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John Snow mapped out London's cholera epidemic in the 1850s. This helped my make connections between seemingly unrelated unrelated
“A map does not just chart, it unlocks and formulates meaning; it forms bridges between here and there, between disparate ideas that we did not know were previously connected.”
— Reif Larsen, The Selected Works of T.S. Spivet

How does BRAC, the world’s largest non-governmental organization (NGO), develop pathways out of poverty for the poorest people in a village? They begin with a map. As you see in the photo on the cover of this report, they bring the village together and start drawing maps in the dirt, identifying each household, market, business, and place of worship. They then ask the help of the community to identify the poorest households, marking each one on the map. Their work begins with those households.

This painstaking, household-by-household approach of identifying the excluded and locating them within their community and context represents the next step that we need to take to achieve a new set of ambitious global development goals.

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Getting the ultra-poor on the “economy train”

BRAC group meeting

BRAC group meeting

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>>Authored by Yanira Garcia and Sabina Rogers of the Microcredit Summit Campaign

More than one-fifth of the world’s population lives on less than US$1.25 per day (the “extreme poor”), and most of those people live in rural areas. Due mostly to geographic constraints, it is difficult and costly to reach this population with financial and social services. Having poor infrastructure and few tools, they are stuck in a perpetual cycle of poverty.

This is a problem just begging for a solution. How about six financial inclusion strategies — our “six pathways” — that show promise in ending extreme poverty? Specifically, how about BRAC’s Graduation Approach? In 2002, BRAC set out to help the ultra-poor living on less than 80 cents a day to move up one level of poverty and to develop an approach that could tackle the geography obstacle. (Read Shameran Abed’s blog post to learn how BRAC developed Graduation Approach.)

Exciting results from impact assessments

In June, Science magazine published the results of six randomized controlled trial (RCT) impact assessments of BRAC’s Graduation Approach. The RCTs were conducted in Ethiopia, Ghana, Honduras, India, Pakistan, and Peru among 7000 households and provided the following complementary approaches:

  • Productive assets
  • Training and regular coaching and household visits
  • Access to savings and health services
  • Consumption support

At a half-day event in June at the World Bank, “Creating Sustainable Livelihoods for the Poorest,” the Consultative Group to Assist the Poor (CGAP), Innovations for Poverty Action (IPA), and J-PAL disclosed results from these six RCTs.

The RCTs showed that the Graduation Approach is a cost-effective, clear pathway out of poverty. Specifically, attendees learned that it can help drive a sustainable transition to self-employment and ultimately have large lasting impacts on the standard of living of the ultra-poor. “There will be growth in the economy,” stated Esther Duflo, “and the ultra-poor are not on the [economy] ‘train’ and would never get on the train [without help]…The Graduation Approach would push them onto the train.” (Dr. Duflo is co-director of J-Pal and professor of economics at MIT.)

Eligible households were identified through a participatory wealth ranking process as well as through household visits. On average, participant households had higher incomes, increased savings, greater food security, and improved health and happiness. These effects were consistent across multiple contexts and implementing partners.

Additional outcomes from the study include the following:

  • Daily consumption was not negatively affected over time in the selected sites after the program had ended. The authors suggest increased consumption is a result of increasing self-employment activity.
  • Household members were able to afford two meals per day more often.
  • Households continued to increase their productive assets (most in the form of livestock) as well as their savings after the program had ended, with the exception of Honduras. (Participating households in Honduras suffered an unexpected illness that killed all of the chickens, causing the study to be incomplete.)
  • In Bangladesh, where women were targeted, land ownership increased by 38 percent.

The Graduation Approach had the largest impact on ultra-poor households in Bangladesh, Ethiopia, and India. Researchers suggest that income diversification may have been a leading factor. In addition, cost-benefit calculations confirm that long-run benefits for the ultra-poor outweigh the graduation program’s overall cost.

Policy lessons for scale-up and replication

The RCTs also provide us with important policy lessons for scale-up:

  • For the Graduation Approach to have a lasting impact on ending extreme poverty, the support and action of governments and policymakers is essential.
  • It is possible to make sustainable improvements in the economic status of the poor with a relatively short-term intervention.
  • The positive results to date indicate that this approach can have a profound impact on improving the lives of the world’s ultra-poor.

Scale-up of the Graduation Approach is underway and will reach thousands of households in the coming years. Mariana Escobar, deputy director general for the Department for Social Prosperity in Colombia, spoke about Colombia’s pilot that started two years ago.

In Colombia, the Graduation Approach has helped repair the lives of the victims of the internal conflict and victims of sexual violence. Ms. Escobar explained that these results demonstrate to policymakers and governments that the extreme poor can make good economic decisions when they are given the right tools.

Edgar Leiva (Secretary of Technical Planning, Directory of Public Policies for Paraguay), Hugo Zertuche Guerrero (Director General of Geostatistical Information of PROSPERA in Mexico), Camilla Holmeno (Senior Economist with the World Bank in Ethiopia), and Fiona Howell (Senior Social Assistance Policy Advisor with the National Team For the Acceleration of Poverty Reduction in Indonesia) shared their respective country’s perspective on the Graduation Approach. On a scale of low to high, policymakers were asked to answer the questions below.

Q: How high was the impact evidence to decide to start a program in your respective country?

A: All of the policymakers answered “high.”

Q: How influential was visiting the site and seeing it in person to starting a program?

A: All of the policymakers answered “high.” Edgar Leiva (Paraguay) explained that his government started a pilot program two days after visiting Colombia’s pilot program.

Q: What was each country’s biggest challenge in implementing the program?

A:

  • Camilla Holmeno (Ethiopia): both cost and complexity.
  • Edgar Leiva (Paraguay): maintaining the positive attitude of workers in the program, which helps create a sort of magic and is so important to the success of the program.
  • Hugo Zertuche (Mexico): budget constraints due to recent decrease in oil prices as well as cross-program competition (and a perception that Zertuche’s program was poaching resources from other programs).
  • Fiona Howell (Indonesia): existing structures and system and coordination among the Ministries.

Q: What is the number one research question you would like to know the answer to?

A:

  • Camilla Holmeno (Ethiopia): test different types of packages with varying levels of transfer across Ethiopia.
  • Edgar Leiva (Paraguay): how closely tied the Graduation Approach is to the psychology of people.
  • Fiona Howell (Indonesia): how we can integrate the urbanized poor into the economic system.

Additional questions for future research were posed in the closing section of the event:

  • Which components of the Graduation Approach drive results? Through this study, CGAP and Ford Foundation learned that household visits allotted for 30 percent of the cost of the program. Are household visits necessary?
  • How do the impacts of the Graduation Approach evolve over a longer time span?

Watch the event recording

Related reading

Ultra Poor Graduation

PRA

Photo credit: BRAC

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>> Authored by Shameran Abed, Director, BRAC Microfinance Programme

Shameran Abed, BRAC’s Director of Microfinance, joined the Microfinance CEO Working Group in January. He and BRAC are welcome to additions to this collaboration. He joins the Working Group’s efforts to support the positive development of the microfinance industry and brings tremendous insigShameran Abedht into the discussion around pathways out of poverty.

This month, the results from six randomised controlled trials (RCTs), published in Science magazine highlighted a model of development that is an adaptable and exportable solution able to raise households from the worst forms of destitution and put them on to a pathway of self-reliance. The graduation approach — financial services integrated within a broader set of wrap-around services — is gaining steady recognition for its astonishing ability to transform the lives of the poorest.

These findings can be contrasted with the results of six RCTs published in January by the American Economic Journal: Applied Economics, which cited limited evidence of “microcredit” transforming the lives of the poor.

In many ways, that was not surprising. There is only so much that microcredit alone can do to address a phenomenon as complex as poverty, especially within the rather short, 18-month timeframe of a research project. This partly explains the diversification most financial service providers have made into savings, microinsurance, financial education, and other models of financial inclusion that integrate different development services.

While the transformative effects of microcredit alone — or even microfinance — remain up for debate, it is now clear that access to savings and credit provided together with other wrap-around services not only provides a viable pathway out of poverty for the poor, they do so for the very poorest!

Following 30 years of work in building livelihoods for the poor, largely through microfinance and agricultural extension, BRAC learnt the hard way that we were not making effective poverty reduction gains for those most in need. We were consistently failing to reach the millions of households at the very bottom.

Classified as the “ultra poor,” this sub-segment of the extreme poor, who live on less than USD 0.80 per day, fail to meet their daily energy requirements, are chronically ill, and live on the fringes of society. In these circumstances where basic needs are unmet, microfinance alone can do little to provide a pathway out of poverty.

In 2002, BRAC developed a model designed to create livelihoods for the ultra-poor in a way that also addressed the other dimensions of abject poverty creating barriers to their development. Capitalising on our previous social safety net programme experience, BRAC’s Targeting the Ultra Poor programme (the basis of the graduation approach) combined asset transfer with livelihood development and social support.

GradBlogGraphic

For two years, clients receive an integrated package of cash stipends, an asset (such as a cow or chickens) with training, and basic healthcare. Early into the programme, clients cultivate strong savings behaviour, and learn the basics of financial management. The programme also includes a large social component: regular household visits from our staff and integration in the community.

Notably, the model in Bangladesh does integrate microcredit for some clients; 70 percent of the graduates in Bangladesh actually received their assets as “soft loans,” which they repay over the course of two years.

The results have been remarkable. Since 2002, 95 percent of the 1.4 million clients who have come through this programme have graduated from ultra-poverty. The programme is costly in one sense, because it’s grant-based and financially unsustainable, but the social returns are high and extend well beyond the end of the intervention period.  An RCT has shown that even years after members graduate, most continue to experience growth in their household income and well being.

The achievements of ultra-poor graduation are even greater because this is not a success story limited to Bangladesh. An initiative led by CGAP and the Ford Foundation sought to test the replicability of the BRAC model by piloting it in several contexts internationally.

The RCT results published in Science, which covered pilots in India, Pakistan, Ethiopia, Ghana, Honduras and Peru, show definitively that they were successful. In all six of the countries studied, all treatment households witnessed significant improvements across a range of indicators that continued beyond the end of their programmes. Today, the graduation approach is continuing to break ground with a range of other actors that include microfinance providers, multilateral agencies, NGOs (e.g. Fundacion Capital, UNHCR, Concern Worldwide) as well as governments looking to improve costly social safety net programmes that protect the poor from destitution, but fail to put them on a ladder out of poverty.

As a sector that has come under fire for failing to make conspicuous reductions in poverty, the success of ultra-poor graduation carries notable implications for the role that financial services can play in putting millions onto pathways out of extreme poverty.

One is a lesson to microfinance providers that, actually, the extreme poor can be extremely credit worthy – once the initial investment is made. Indeed, some of BRAC’s most reliable and disciplined microfinance clients are graduates from our ultra-poor programme. Microfinance institutions may not be the ones to make that investment, but they can help ensure that “graduates” of such programmes have a bridge that transitions them from ultra-poverty into mainstream microfinance.

Secondly, this model shows that financial services, when integrated within a broader set of wrap-around services, is unquestionably transformational, even for those in the most desperate forms of poverty.

Critics will likely ask, which are the most crucial elements? Is it financial access that is making wrap-around services transformational, or is it the wrap-around services that make financial access transformational?

The answer is most likely some combination of the two, but so long as this interaction is producing these results, I am satisfied in knowing that access to financial services remains a vital ingredient in the solution to extreme poverty.


Shameran Abed is the director of the BRAC microfinance programme, which serves more than five million clients in seven countries in Asia and Africa, and has total assets exceeding USD 1 billion.

Starting its work in the early 1970s, BRAC was one of the earliest known organisations to use the modern microfinance model of lending small amounts to groups of women. Working alongside several other development programmes, the success of the microfinance programme supported BRAC in its growth to be the largest development organisation in the world in terms of staff numbers.

Mr Abed also serves on the boards of BRAC Bank’s mobile financial services subsidiary, bKash, and Guardian Life Insurance. Additionally, he sits on the Microfinance Network Steering Committee and the World Economic Forum Financial Inclusion Steering Committee. Prior to joining BRAC, Mr Abed was a journalist and wrote primarily on political issues.

Mr Abed is a lawyer by training, having been made a barrister by the Honourable Society of Lincoln’s Inn in London, UK. He completed his undergraduate studies at Hamilton College in the United States, majoring in economics and minoring in political science.


BRAC launched a Campaign Commitment in 2014! We invite you also to…

Get Inspired. Set a Goal. Make a Commitment.

Join the movement to help 100 million families lift themselves out of extreme poverty:

#tbt: Interview with Sir Fazle Abed of BRAC

Photo courtesy of BRAC

Photo courtesy of BRAC

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Pathway

Ultra-poor graduation programs


We are pleased to bring you this #ThursdayThrowback blog post, which was originally published in The State of the Microcredit Summit Campaign Report 2011. It documents an interview conducted with Sir Fazle Abed, founder and chair of BRAC in Bangladesh.


Interview with Sir Fazle Abed of BRAC

What excites you about microfinance today?

Microfinance is the most exciting thing that has happened to poor people over the last 30 years. We have worked with the poor in a way that honors their dignity, and we have shown that poverty alleviation is not a give-away thing.

What concerns you about microfinance today?

BRAC Chair Fazle Abed to Attend Africa-Middle East Regional Microcredit Summit

Sir Fazle Abed, founder and chair of BRAC in Bangladesh

There is a lot of greed coming into microfinance. A lot of people wish to make a lot of money out of it, and that worries me a little bit. I also [understand] the other side of it – when return on investment is high, more money will flow into the sector … I just don’t think that people should make money out of poverty.

I think we still have a long way to go in reaching people, particularly poor people in remote areas, rural areas, and so on. That remains a great challenge.

You came into microfinance as a poverty alleviation tool …

[Yes], we came to microfinance by looking first at integrated rural development, looking at people for their health, education, employment [and] savings. We actually started a savings program before we started giving credit.

I have always felt that poor people have very short time horizons to think about – daily bread, daily needs. They can’t think more than 24 hours at a time. I thought the thing to do was to start savings because that would give a person a longer time frame to think about, not just one day.

What about the randomized control trials (RCTs) that have been done to measure the impact of microfinance? Largely they have shown very limited impact, sort of mixed results, and yet in BRAC you have millions of people coming back for loans year after year. How do you reconcile your experience with the results of these studies?

I understand that RCTs may be scientifically quite good to have, but microfinance works best when you have done it for a number of years. With the first microcredit taken by a woman, she has immediate consumption needs, so she buys those things which she needs most [but] doesn’t show a great deal of improvement in either nutrition or health or welfare. But we found in a longitudinal impact study [from] 1999 to 2005 that you can see significant results in somebody’s income and welfare if somebody has taken three loans and the quantum of the loans is more than US$400.

Does microfinance help a poor person lift herself out of poverty, or is it microfinance combined with other things that does that?

Microfinance has to be combined with other things like health and education. When going into a new area, [get] microfinance … working right and then you can provide education and health care and other things.The unique thing about microfinance is that it creates…capital that can be leveraged to supply other development services. We have eight million women meeting together every week in 300,000 Village Organizations. They know how to invest money, pay it back and save for the future. They know how to work together. Because of their work with us, they now know how to interact with formal institutions. So that forms the base for addressing the other constraints that they [face], and it also provides the scale you need to develop [viable] programs.

That sounds complicated. Shouldn’t a microfinance organization focus on what it does best, financial services, and let others focus on the other needs?

I think that is too limited a way to think about what we do best. The basic spirit of microfinance is to search for possibilities based on knowledge, understanding and perspectives that start at the ground level. We understand our clients and their needs. We know how to select clients, enforce contracts, manage money, develop systems and deploy people and resources on a very large scale. There is no reason why we cannot use those same skills to address the other constraints our clients face.

In BRAC, we saw that many women were stuck in low-return activities. We saw that many were involved in poultry but were not making much money because of diseases, so we trained a person in each Village Organization to do vaccinations, treat basic diseases, and train in proper feed and hygiene. These people get paid for the services they provide to the women who raise chickens. Between the growers, advisers and sellers, they have created almost two million poultry jobs.

We did something similar with basic health care. We trained a person from each Village Organization … to provide basic health information and advice. They each cover 300 households and sell nonprescription medication, bring pregnant mothers in for check-ups and help mothers bring their children in for immunization. We have 80,000 volunteers covering 64 districts and a population of 92 million.

We’ve added other things, too. Economic development for adolescents, training in legal rights, programs for commercial sex workers, primary schools that have trained four million students, and programs aimed at those too poor to make good use of our financial services.

How can someone be too poor for microfinance?

Our Research Division looked at those who dropped out of our program and found that most of them were among the poorest. This group tended to borrow far smaller amounts, do so less frequently and have more problems with repayments. We worked with donors to develop a program that targeted the ultra-poor.

It starts with a ration card for food, plus training in business skills and money management. Over time, we provide them with a small loan and then seek to graduate them to our microfinance program. So far, about three quarters of them have graduated. CGAP did a study on this program and found that the average subsidy per woman was US$135. As more and more of these women graduate into the microfinance program, we hope to recoup these subsidies.

What is BRAC doing with small and medium businesses?

You need to create jobs for poor people [in addition to making] them social entrepreneurs. [For this reason], I asked a group of donors [for] money to start a small and medium enterprise lending program, and this has been very successful in creating new jobs for people. We set up a bank in Bangladesh and it is creating jobs on a fairly large scale, $1.2 billion now for small enterprises.

Are you able to use technology in a way that lowers your costs and helps you get out to more rural areas?

This is my hope. In the next three to five years in Bangladesh, almost everybody, including our poorest clients, will have access to a cell phone. BRAC has already got a license from the Central Bank to set up a mobile cash management system. In other words, all these 30 million Bangladeshi microfinance borrowers will have access to mobile payments, and then we will be able to cut down the costs of delivering financial services to the poorest people in the remotest areas.

Do you think this will create a push to more individual lending, or will the group programs continue?

The group programs will still continue, but face-to-face time with people will diminish a bit and we will have to find another way of meeting them. Right now, 8.2 million people in Bangladesh meet BRAC staff every week. That is too costly. I would rather meet these 8.2 million people once a month and cut down [their] travel. We can collect their money and stay connected to them through cell phones. They will be able to transact business among themselves through their cell phones. I think tremendous efficiency comes out of this, on their side as well as our side.

It sounds like you are looking forward to what comes next.

I just hope I live long enough to see this happen. It is wonderful to see all the changes that are happening and in the right direction. Some people have said that as you grow older you get more and more pessimistic, but I get more optimistic the older I get.

Voices from the Field: Syed Hashemi

Pathways: financial inclusion to end extreme poverty | Find out what we heard from the industry in this year’s Listening Tour

We’ll be bringing you articles throughout April that reflect the results of this year’s Listening Tour
Photo credit: by Geoff (originally posted to Flickr as Pilgrim’s path) [CC BY 2.0], via Wikimedia Commons

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April is the Month of MicrofinanceLearn more

April is the Month of Microfinance
Learn more

In preparation for our 18th Microcredit Summit, the Campaign conducted a Listening Tour from December 2014 through February 2015. The Listening Tour served two purposes. First, it was our hope to find out how our audience (you) felt about the World Bank’s goal of eradicating poverty by 2030, and equally important, we wished to consult you in identifying the topics that were at the top of everyone’s mind.

The Listening Tour is our time to listen — and your time to speak — on the issues that the microfinance and financial inclusion sector face. We collected your feedback through an online survey and organized conversations with 27 leaders in the microfinance and financial inclusion sector. We heard from them on how financial inclusion can contribute to the goal of ending extreme poverty by 2030 and the role of microfinance in the post-2015 agenda. The results of this consultation will be reflected in the 2015 State of the Campaign Report, the 18th Microcredit Summit, and Campaign Commitments.

Below is a short excerpt from our conversation with Syed Hashemi, senior adviser for the CGAP Vulnerable Segments Initiative and professor at BRAC University in Bangladesh.

Q: What do you think will be needed to achieve the goal of global financial inclusion by 2020 and how can this contribute to the goal of eradicating extreme poverty by 2030?

Syed M Hashemi_BRAC_187x249There have been major efforts to achieve financial inclusion through developing better and more flexible products to meet client demand, using technology to lower costs and financial education to improve client money management. Far less has been happening on linking access to finance to extreme poverty eradication. In fact, few MFIs actually reach out to those in extreme poverty. Part of this is due to the singular focus on credit which is not what the poorest often need immediately. And, possibly more importantly it is the failure of the microfinance sector to work with other development sectors.

What microfinance needs to do is better understand the lives of the poorest (as distinct from “the poor”), the risks they face and the needs they have. So, savings and insurance, specially designed for this group, as well as financial education, is what is required. But, too often the poorest spend all their time with the day to day struggles for food security. And too insecure to even plan for the future. This is where the primary need is for safety nets to guarantee them basic consumption levels.

Now if microfinance was to work closely with safety nets and build on top of the food security that safety nets provide, it could assist in creating a ladder for the poorest to eventually use financial services, build sustainable livelihoods and graduate out of extreme poverty. This is the graduation model that BRAC pioneered and CGAP and Ford Foundation adapted and promoted globally.

However, it is not enough to have some models that work or some products that increase outreach. What is required is massively scaling these up so that we can indeed achieve the global goals we set out. This is where governments and policy makers are key. MFIs can only achieve so much on their own. It will ultimately be governments who have the bandwidth to make this happen, of course with MFIs and NGOs as critical strategic partners.

Q: What is the role of microfinance in the post-Millennium Development Goals (MDGs)/ Sustainable Development Goals (SDGs) era?

Many of the sustainable development goals will focus on building resilience of different demographic groups — children, the youth, the elderly, the disabled — as well as the extreme poor. Microfinance has a huge role in the effective design and delivery of child support grants, universal pension schemes, health insurance as a key element of universal health coverage, financing schooling and training, credit for micro and small enterprises, better transfer payment and emergency loan mechanisms, deposit services and of course partnering with graduation programs.

The Summit is an ideal platform to convene people to show case ideas and campaign for financial inclusion and the end of extreme poverty through more effective use of financial services.

Q: What are the most recent innovations and proven best practices in the field helping those living in extreme poverty? What are key themes to consider or important debate topics we need to address in the microfinance & financial inclusion sector in the coming year?

Let me highlight the key concerns moving ahead:

  1. Financial education and consumer protection.
  2. Children, the youth, the elderly, and the disabled.
  3. The environment, climate change, and the shrinking ecological reserves.

And the way forward in addressing these issues (and addressing pervasive market and government failures) is far greater collaboration with governments. We know governments can be slow and unresponsive, but ultimately, they have the budget and the constitutional obligation to increase the welfare of its citizens. We need to hold them accountable to that.
19_plenary_Going-the-extra-mile_SyedHashemi_594x345_photo credit - Vikash Kumar Photography

About BRAC University

BRAC University (BRACU) was established in 2001 building on BRAC’s experience of seeking solution to challenges posed by extreme poverty by instilling in its students a commitment to working towards national development and progress. The mission of BRAC University is to foster the national development process through the creation of a centre of excellence in higher education that is responsive to society’s needs, and able to develop creative leaders and actively contributes to learning and creation of knowledge.

Syed M. Hashemi is Professor and Chair of the Department of Economics and Social Sciences at BRAC University. Prior to that, he spent five years as founder-director of the BRAC Development Institute—a resource center for promoting research and building knowledge for addressing poverty, inequity and social injustice. Hashemi also spent nine years with CGAP at the World Bank in Washington DC, focusing on identifying pro-poor innovations and disseminating best practice lessons related to poverty outreach and impact. Hashemi was amongst the pioneers who started the Social Performance Task Force to promote a double bottom line in microfinance. He also headed a multi-country program to develop new pathways for the poorest to graduate out of food insecurity through building sustainable livelihoods. Hashemi continues to be involved with the graduation work at CGAP. Earlier, Hashemi directed the Program for Research on Poverty Alleviation at Grameen Trust and taught Development Studies at Jahangirnagar University in Bangladesh. He has a Ph.D. in Economics from the University of California at Riverside.

Click here to visit the BRAC University website.

Can tablets and apps fight poverty?

Kids learning_LISTA_599x450

Kids use the financial literacy app developed by Fundacíon Capital called LISTA
Photo credit: Fundacíon Capital

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>>Authored by Julieta Bossi, Communications Officer, Fundación Capital

MoMF

April is the Month of Microfinance

We can talk about innovation and we can talk about technology, but when we work on poverty reduction, the most important thing we need to talk about is community.

It is only when we understand what capabilities and tools already exist and are being used within a community that we can develop and explore new technologies and solutions for that community. And it is only by working together with the social innovation community that we can ensure that these new tools can reach millions and have a lasting impact.

At Fundación Capital we work to eliminate poverty by fostering economic, financial, and social inclusion. Without economic opportunities and financial abilities, one cannot obtain full citizenship, including all of the rights and responsibilities that it entails. Therefore, our main goal is to promote financial inclusion and create economic citizenship. We do this by strengthening the productive, financial, human, and social assets of people living in conditions of poverty and extreme poverty, empowering them to find their own way out of poverty. Throughout this process, we rely on innovation and technology that we created in partnership with the community to provide sustainable and effective solutions.

Fundación Capital works with public and private institutions, helping government entities to create more innovative and efficient public policies and helping the private sector to develop products and services that fulfill needs at the base of the pyramid.

Working with communities, we identify needs and preferences that guide the design of new solutions we dream up and develop. Existing knowledge, capabilities, and social capital become the springboard for innovation and represent valuable tools that can be combined with digital solutions to generate real and effective change with the potential to reach millions, including those living in the most remote and rural regions.

A client of Fundacíon Capital wiht her daughter Photo credit: Fundacíon Capital

A client of Fundacíon Capital wiht her daughter

Photo credit: Fundacíon Capital

Through this process of innovation and co-creation, we have developed a number of digital solutions. One of them is LISTA, an initiative that was born out of the need to provide financial education to millions of conditional cash transfer recipients in a cost-effective way. LISTA offers interactive and relevant content delivered via a tablet computer provided to the families. The app called “Produciendo por mi futuro” provides tips for financial planning, familiarizes users with ATMs and mobile money through simulators, and seeks to break barriers between low-income communities and the formal financial system. This tool is brought into families’ homes, providing users with the opportunity to study on their own time, concentrate on topics most relevant to their needs, and include all family members in the learning process.

Another way we transfer knowledge to less advantaged communities living in remote areas is through government, this app teaches them how to run a business, manage and invest the capital into productive activities. It ensures that these injections of capital will be invested and provide a foundation to build on and eventually graduate out of poverty. Once they’ve built up their businesses, communities can access additional funding through LittleBigMoney, Latin America’s first crowdfunding platform for projects or businesses led by bottom of the pyramid entrepreneurs or whose impact benefits vulnerable communities.

Another challenge encountered in poverty alleviation programs is training field workers and ensuring the quality of the financial education they deliver. Since they engage with the community on a daily basis, it is important that they are properly trained, so we have created an e-learning course for fieldworkers working with our graduation program.

We also provide fieldworkers with the “Produciendo por mi futuro” app  to increase their productivity. The fieldworkers leave the tablets with participating families, who study the material over the course of the week, so that when they meet with their fieldworker “coach”, they can have more productive and personalized conversations with real outcomes. The app empowers families living in extreme poverty, by offering them financial education and business training.

After years of working on designing, developing, and implementing these kinds of solutions, we have come to understand that the most important input for our work and innovation is the constant feedback we receive from communities. They are our inspiration and a great source of ideas for constant improvement and adjustment. While we can’t expect that any one of these digital solutions will provide a “magic bullet” tool for poverty alleviation, these tools support communities as they work to improve their lives and reach their goals.

A Fundacíon Capital family in their shop Photo credit: Fundacíon Capital

A Fundacíon Capital family in their shop
Photo credit: Fundacíon Capital

The only way to ensure that innovation and technology works is by both designing and testing it with the community and then learning from failures and making the necessary adaptations. For us, it is also important to learn from and share ideas with the social innovation community, so we look forward to working in partnership with other members of the community.

Fundación Capital made a Campaign Commitment to end extreme poverty, watch this video to know more about it:

 

From Microcredit to What?! by Sam Daley-Harris

April is the Month of Microfinance. http://monthofmicrofinance.org/

April is the Month of Microfinance. http://monthofmicrofinance.org/

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Reposted with permission


>>Authored by Sam Daley-Harris, founder and former director of the Microcredit Summit Campaign. He is currently running the Center for Citizen Empowerment and Transformation.

When the American Economic Journal recently published a group of independent studies suggesting that tiny loans to the poor usually don’t raise incomes, it left me scratching my head (although this response to those studies did ring true). As the first director of the Microcredit Summit Campaign, I’ve had the privilege of observing anti-poverty fighters like Grameen Bank founder Muhammad Yunus and BRAC founder Fazle Abed for decades. They, and others like them, never said, “We’re giving millions of microloans a year, we’re done!” Instead, they kept asking this question: “What more do our clients need to move themselves and their families out of poverty.” That question, the effectiveness of their responses to it, and the scale of their institutions have helped their country, Bangladesh, be among the poorest countries in the world most likely to achieve all of the Millennium Development Goals on time.

I first met Muhammad Yunus in 1987. By then Grameen Bank had already worked with its clients to develop the bank’s “16 Decisions,” pledges the clients made that included: 1) we shall not live in dilapidated houses, we shall repair our houses and work towards constructing new houses, 2) we shall grow vegetables all the year round, eat plenty of them and sell the surplus, 3) we shall plan to keep our families small. We shall minimize our expenditures. We shall look after our health, 4) we shall educate our children, 5) we shall build and use pit-latrines, and 6) we shall drink water from tube wells. If it is not available, we shall boil water or use alum.

To be sure, banks like Citi and Barclay’s never had a pit latrine policy with their clients, but this poverty-fighting microfinance institution (MFI) did.

It would take weeks of blogging to cover BRAC’s beyond-the-micro-loan initiatives. But, just as an example, BRAC’s ultra-poor program has been replicated around the world and its schools for children who never entered school or dropped out at an early age are a global model.

Grameen Phone ladies

Grameen Phone ladies

Grameen Phone and Grameen Shakti (a renewable energy company) are giants in Bangladesh and their work with the poor are examples of a microfinance institution continuing to ask what more can be done to improve the well-being its clients.

This eye-popping creativity coming out of microfinance has fascinated me for decades and has taken an entirely different direction with the work of Marshall Saunders, founder of Citizen’s Climate Lobby. In the early 1990s, Saunders worked with Rotary to raise $700,000 for FINCA, teamed with Grameen Foundation and their five-year strategy to help its partners add five million new clients, and then rolled up his sleeves and started Grameen del la Frontera, a microfinance institution in the state of Sonora, Mexico. But along the way, Saunders also got involved as a citizen advocate with the anti-poverty lobby group RESULTS.

Saunders’ view of the world was shaped, in part, by this early encounter with RESULTS. He joined me for a radio interview I was doing on the NPR station in San Diego. During the interview I mentioned that RESULTS had successfully lobbied Congress for $200 million for microcredit.

“At first I thought ‘that’s not right,’” Saunders recalled. “I had busted my butt for three years to raise nearly $700,000 through Rotary, and RESULTS had raised $200 million in their lobbying….it didn’t seem to be realistic, the $200 million. I did make a mental note of it however.”

Saunders continued his work with RESULTS and made a serious commitment to Grameen de la Frontera. He had read about climate change and realized that sea level rise would affect some of his clients.

“It occurred to me that I was trying to get 5,000 more borrowers in Mexico,” Saunders said, “and that Bangladesh might lose millions due to sea level rise. I felt I had to get to the bottom of this. I went to see “An Inconvenient Truth” and went back about a week later…. Then I read that Al Gore was going to train 1,000 people. I said “holy socks, of course that’s what I want to do.”

He joined about 250 others in Nashville, TN for one of the trainings and returned to San Diego to lead the slide show dozens of times. Early on he realized that 98 percent of the information focused on the problem of climate change and that just 2 percent focused on what people could do about it. In addition, many of the actions centered on using more energy efficient light bulbs but didn’t really get at the big picture, public policy.

This microfinance promoter, hunger activist and newly minted climate educator was now reading the newspaper every morning and read that Congress had just approved $18 billion in subsidies to the fossil fuel industry.

“I’d gotten people to change 18 light bulbs yesterday,” he thought, “and that same day Congress approved $18 billion in subsidies to the fossil fuel industry. This is never going to work.”

In 2007 Saunders asked me to coach him in starting Citizens Climate Lobby (CCL). Several months later he led his first presentation with 29 people in the room. He hoped that at least four would agree to become the first chapter of CCL, but all 29 said yes. In 2014, CCL volunteers in the US and Canada had 2,253 letters to the editor published (up from 36 in 2010), had 291 op-eds published (up from 20 in 2010), and had 1,086 meetings with members of Congress, Parliament, or their staff (up from 106 in 2010). Doing something to protect microfinance clients in Bangladesh from the effects of climate change was his first impetus.

When the American Economic Journal recently published a group of independent studies suggesting that tiny loans to the poor usually don’t raise incomes it left me scratching my head. While CCL is truly a unique case, I still wonder why the researchers keep looking at just one intervention when the practitioners know it takes more and why they keep looking at the wrong institutions.


Sam Daley-Harris is the author of Reclaiming Our Democracy (www.reclaimingourdemocracy.org). He founded the anti-poverty lobby RESULTS in 1980 (www.results.org), founded the Microcredit Summit Campaign in 1995 (www.microcreditsummit.org), founded what would grow to become Truelift in 2010 (www.truelift.com), and founded the Center for Citizen Empowerment and Transformation in 2012 (www.citizenempowermentandtransformation.org). Portions of this blog are taken from Reclaiming Our Democracy: Healing the Break between People and Government © Copyright 2013 by Sam Daley-Harris. Published by Camino Books, Inc., Philadelphia, PA. Used by permission of the publisher. All rights reserved.

Is it April Fools’ Day, or ‘Groundhog Day’?

Pathways: financial inclusion to end extreme poverty | Find out what we heard from the industry in this year’s Listening Tour

We’ll be bringing you articles throughout April that reflect the results of this year’s Listening Tour Photo credit: by Geoff (originally posted to Flickr as Pilgrim’s path) [CC BY 2.0], via Wikimedia Commons

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>>Authored by Larry Reed, Director, Microcredit Summit Campaign

MoMF

April is the Month of Microfinance

We are capitalizing on the occasion of the Month of Microfinance to bring you articles throughout April on our 100 Million Ideas blog that reflect the results of this year’s Listening Tour. We received written feedback from 151 people and conducted 27 interviews with thought leaders like Beth Porter (UNCDF), Syed Hashemi (BRAC University), Essma Ben Hamida (enda inter arabe), and William Derban (Fidelity Bank). This feedback from the industry forms the basis of the Campaign’s theme for 2015 of financial inclusion to end extreme poverty and the six pathways that we think show promise in getting us there:

  • Mobile money linked with agent networks in low-income communities;
  • Agricultural value chains that reach to small scale producers;
  • Savings groups (aka village savings and loans associations);
  • Conditional cash transfers linked with mobile delivery and asset building;
  • Ultra-poor graduation programs; and
  • Microfinance savings and/or borrowing groups linked with health education, health financing, and health product delivery.

These six pathways will be reflected in the 2015 State of the Campaign Report, the 18th Microcredit Summit, and Campaign Commitments to be featured this year. From the start, the Microcredit Summit Campaign has advocated scaling up microcredit (and, by extension, “microfinance”) as just one part of a larger effort to end poverty. We have held up as paramount the continued innovation and client-focused development of financial tools, creative ideas for delivering these services to remote and hard-to-reach areas at affordable prices, and the promise that microfinance can help create positive and durable changes in the lives of those being served. These six pathways are a continuation of that promise.

Fazila Begum struggling Member of Grameen Bank Shakhaerchar branch

We met Fazila Begum in 2007. She was a struggling member of Grameen Bank, Shakhaerchar branch.

When will researchers catch up with microfinance leaders?

From the very first loan of $27 that Mohammad Yunus gave to 42 women in Bangladesh, the heart of microfinance has always been about getting to know the needs of people living in poverty and designing products and services that help them loose the bonds that keep them in poverty. The aim of Yunus and many other founders of the movement was not to build financial institutions, but to empower people women to create a better future for themselves and their children. To do this they had to get to know people living in poverty and their cash flows, needs and aspirations in order to develop combinations of helpful products and services.

So when our team listened to the presentations of academic researchers made at the World Bank covering six randomized control trials of microcredit programs, we came away more than a little underwhelmed. Their big conclusion, after spending several years and millions of dollars on research: “Understand clients.” (Watch a recording of the forum.)

Even more alarming was that many of the researchers and the audience seemed surprised by the news. We have been engaged with leading microfinance groups around the world and have seen how they have learned — on their own — the lessons that the researchers presented as well as how they adapted their programs to address them long ago.

Here are some examples of research findings presented at the World Bank gatherings and actions previously taken by leading MFIs:

“Credit alone, on average, has neither large positive or negative effects.”

Very few of the leading MFIs that have focused on reaching people in poverty and facilitating their movement out of poverty have ever offered only credit. Grameen, from the start, had group savings and the 16 Decisions. The Village Banks developed by FINCA offered group savings and a group insurance fund. Many also provide training in business, marketing, health, nutrition, and sanitation in their group meetings.

“When only credit is available, people may use it when what they really need is savings, or insurance or other financial products.”

Microfinance leader BRI in Indonesia has been offering individual voluntary savings accounts since the 1980s and now has over 35 million savings accounts and 8 million borrowers. While many of the group lending systems provided loans, savings, and insurance bundled into one package, many of the leading MFIs have begun unbundling those services in the last two decades.

Grameen II, instituted in 2001, provides a range of financial services to clients, including voluntary savings and micropensions, and it removed the group guarantee on loans. Opportunity International began providing microinsurance in 2002, expanding from life insurance to health, casualty, and crop insurance and then spinning off MicroEnsure as a subsidiary that now reaches over 10 million clients.

Nangolkot, Noakhali, Bangladesh

Villagers in Nangolkot, Noakhali, Bangladesh
Photo credit: ©Shamimur Rahman and Giorgia Bonaga

“For 5-10 percent of the clients, credit has a very large positive impact on business growth and income.”

Aris Alip, founder of the CARD network of mutually reinforcing development institutions, saw this happening in the villages where CARD provided group-based savings and lending services. He also saw that those 5-10 percent that grew benefited the community by providing stable employment to others. In 2008, CARD created an SME bank to work specifically with fast growing microbusinesses and to see if, by providing appropriate products and services to this group, they could increase the percentage of growing businesses to 15 or 20 percent.

“For the ultra-poor, a gift of an asset has significant positive impact.”

REST Client photo_427x569

A woman client of Relief Society of Tigray (REST) in Ethiopia harvests her mango tree.
Photo credit: REST

This learning came directly from the work of BRAC and its ultra-poor graduation program. BRAC found that those who live on less than $.50 per day face so much vulnerability in their lives that they do not want to take on more debt. They developed a system of regular stipends of food or cash, a gift of an asset like an animal or a sewing machine, business training, savings, and regular mentoring. This program has now been replicated in several countries, and studies of these programs show strong positive impact.

The Relief Society of Tigray (REST) has combined this programs with the government’s Productive Safety Net Program so that the government provides the stipends and the assets, REST provides training and mentoring, and Dedebit Bank provides savings and lending facilities.


We are glad that these studies have proven out the innovations implemented by many leading MFIs. But if researchers want to get ahead of the learning curve, they could start to engage with some of these leading institutions on the questions that they are asking now. Here are some suggestions we have for new areas of research:

Research question 1: Conditional cash transfers (CCTs) seem to play an important role in providing some regularity in lives that are filled with unpredictability and vulnerability. How can these be linked with other services, like savings and insurance, to help beneficiaries move from resilience to asset building?

Research question 2: Are there some financial services that consistently provide benefits and rarely cause harmful effects so that they should be recommended for all? It looks like savings could fit this category, provided the savings mechanism is safe and the account maintains its value over time.

Research question 3: How do we refine our understanding of the situations in which credit is most likely to be helpful? And, what role do other services, such as group meetings, access to health care, insurance, and savings, improve the likelihood that a person will benefit from credit?

Research question 4: Graduation programs that start with a donated asset, group meetings, mentoring, and community involvement and lead to other financial service like savings and credit have proven to have a positive impact. Can we start to determine under what circumstances a person will need all of these services — and which people might need only one or two — to start moving from extreme poverty?

Instead of taking more time and money to prove that we need to understand clients, we suggest that researchers work with microfinance institutions that already listen to their clients and develop with them research agendas based on that growing understanding.

The same family from the top of the article has gone through the Stoplight process and now their situation is much improved.

A Fundación Paraguaya family has gone through the Poverty Stoplight process and now their situation is much improved. Read our blog post about the Poverty Stoplight.
Photo credit: Fundación Paraguaya


Relevant Resources

2013 State of the Campaign Report:Know Your Client

Social protection: innovative programs deliver financial services at scale

How families are creating step-by-step plans for poverty elimination


 

A few key takeaways from the World Bank forum on microcredit (video)

The diagnosis of the six randomized evaluations that spanned six countries on four continents, in both urban and rural areas with different borrower, lender, and loan characteristics, was that they showed no significant impact on the poverty level or living standards of the clients.

In some studies, it was concluded that the top 5-10 percent of clients did have some significant impact on their income and assets. One study showed some positive impact on women’s empowerment while another showed that depression seemed to go down for clients who had taken a loan, but their stress levels went up. Basically, it was all rather inconclusive, yet it also opened a transformative dialogue about how we can learn from our mistakes and what we need to do better to meet the needs of our clients.

On learning from what we know does work

The results of the randomized evaluations suggest that microcredit alone doesn’t have a transformative effect on the poor. However, despite its shortcomings, it is recognized that microcredit enhances the range of choices available to the poor and allows them to manage their circumstances as they consider appropriate.

Furthermore, microcredit still serves, in many cases, an important role as a risk absorption tool, acting as an insurance product that allows the clients to react to shocks and emergencies. In these instances, credit provides stability and prevents the clients from falling deeper into poverty. It has long been recognized that credit is not suited for many people, so insurance products should not be built around a credit product. In fact, several panelists said that microinsurance may be more needed than microloans particularly in sub-Saharan Africa,

For his part, Alex Counts (Grameen Foundation) invited the audience to focus on the five percent of clients — equivalent to millions of families — who moved out of poverty with microcredit. We should do this because we should want to understand (isn’t it our job to understand?) what it was that helped them compared to those less successful (or unsuccessful).

More research is needed to stimulate this conversation around what is working and what is not and to promote models that can serve as examples for adaptation and replication.

On understanding your clients

The research presented at the World Bank forum showed us that we need further analysis on what poor people really want and in understanding the heterogeneity of needs. It is important to study the particular context of each country, region, and community. Different circumstances lead to heterogeneous needs, so we need to offer a variety of products and services that actually meet the specific needs of the clients.

In addition, we need much more work on tracking how the money is being used. Perhaps we should not only look at factors like change in profits, wages, or consumption to test the success of microcredit products. Clients sometimes use their loan for personal needs, like for health issues or for social obligations such as weddings and funerals, and in order to see the impact of microcredit on the overall quality of life for clients, we need to know where the money is going.

Knowing more about these two dimensions will enable better product design, promote innovation, and help microfinance evolve in a manner that is both sustainable and beneficial to the extreme poor. It comes back to what Dean Karlan said, “Understand your clients.”

On the implications of digital innovations

Innovations in financial technologies are increasing client outreach and reducing transaction costs (to nearly zero), but they are also creating new transparency challenges that could pose serious risks to the clients if they are not addressed.

The main concern is the lack of adequate regulation for digital financial services. Client protection measures need to be in place to raise awareness of the risks linked to loans and ensure that customers understand the terms and conditions of the loans they are taking out. This is particularly important when we consider the rapid pace of growth and expected outreach of the new digital services.

When looking at agent networks, serving 100,000 clients after five years was a big achievement; today, however, they are expected to reach 1,000,000 clients after only one year of implementing a digital service.

We need to carefully assess the risk of inflicting harm to a large number of people at the base of the pyramid to ensure that digital financial services are being provided in a responsible way that brings no harm to the clients. Keeping this in mind may inspire innovative ideas for consumer protection and improve the quality of existing products.

On their recommendations for further research

In the coming years, Abhijit Banerjee (J-PAL) stated that research should focus on answering the questions: Why is there a low demand for microcredit products? What do clients need? What are the right products to offer them and the right channels? Where does the money go if it doesn’t reduce poverty?

Esther Duflo talked specifically about the graduation pilot programs, which are targeting the ultra-poor and already show some positive results on poverty levels. The results of this research will buoy efforts to promote the adoption of graduation programs as a poverty alleviation tool and underscores the need to segment the poor for the purposes of understanding the impact of microcredit and designing adequate products.

Are we measuring the real story? Jaikishan Desai, one of the researchers of the RCTs, posed this question to the audience. This seemed to go beyond how do we interpret the data to what is the purpose of measuring the impact of microcredit? Is microcredit and microfinance supposed to be the cure of the world poor or should it be used as a tool to include ignored segments of the population and reduce risk to those most vulnerable? Are we looking for a change in poverty levels or should we be focusing on the impact credit has on maintaining stability?

Other questions that were not resolved included, was the length of the study a factor? Do we need more long-term or short-term assessments? What about the generational impact? Could it be that we won’t see the effects of microcredit on clients unless we track progress through the next generation?

What impact does an MFI’s staff incentives and governance have on its clients? Does this impact the type of loans they receive and the quality of the product?

Relevant resources


For those who are unfamiliar with the cultural references in the title

April Fools’ Day: April 1st is a day of pranks and practical jokes and has its roots in medieval Europe — or possibly even earlier — and is similar to (or may be related to) the Holi festival of India.

Groundhog Day: February 2nd is an American tradition brought over by our German ancestors and adopted by popular culture and the media; it consists of looking to a rodent (a groundhog) to find out if winter is over or not. However, our reference here refers to a fantastic movie of the same name where Bill Murray relives the same day over and over again to hilarious effect.

Friday News Round-up: January 16, 2015

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#action2015 digital rally

This is a screenshot of the #action2015 digital rally this morning

This has been an exciting week for people interested in and organizations committed to achieving the MDGs and getting the next round of goals-setting right with the sustainable development goals (SDGs).

Yesterday, we saw the launch of Action/2015, a growing global movement of more than 1000 organisations in over 120 countries that will use large-scale mass-mobilization campaigns throughout 2015 to call on our global leaders to take ambitious decisions for our future. The hashtag #action2015 was trending worldwide due to the synchronized efforts of organizations around the world the publicize the event in a “digital rally.” (See the hashtag trending over the past 24 hours.) From the U.S. Department of State to our very own Twitter chat on #SocialDeterminants, thousands of people from around the world shared their thoughts on achieving the MDGs and setting the SDGs.

In our Twitter Chat yesterday, one of the questions asked how sanitation affects the health MDGs.

This photo article from November of last year, “Microfinancing to improve sanitation in Dodoma, Tanzania” illustrates how some organizations are building local capacity to improve sanitation solutions and providing financial services to enable families to build latrines.

On Thursday, we announced the first Campaign Commitment for 2015. The Mifos Initiative is committing to integrate social performance management and poverty measurement tools into its free and open source cloud-based core banking system. The Mifos Initiative joins a global coalition of 56 other Commitment makers working to help 100 million families lift themselves out of extreme poverty. Learn more.

On Monday, Martin Ravallion published an article on Vox (“No-one left behind?“) that might have a profound effect on the way that our sector thinks about measuring progress out of poverty. Is it enough to count the numbers under a certain poverty line (be it $1.25/day or $0.50/day) or should we, as Ravallion argues, adopt an additional indicator that assesses the success in raising the consumption floor of the ultra-poor (those living on less than $0.50/day) in order to measure the movement of extreme/ultra poor households out of poverty? In his conclusion, Ravallion explains,

To anticipate one response, it might be argued that progress in lifting the floor is a second-order issue, as long as fewer people live near the floor. That is implicit in the traditional counting methods used to assess progress against poverty. However, proponents of this view must surely take pause when one notes that for a long time, and across countries at very different levels of development, social policies have often claimed that they aim to ensure a minimum level of living above any biological consumption floor required for mere survival.

That same day, The Guardian published “The ultra-poor: a pioneering technique is helping the hardest to reach,” an article by Scott MacMillan at BRAC USA about the Targeting the Ultra-Poor Programme (better known as the graduation model) and help them lift themselves out of poverty in a sustainable way. MacMillan announced, “We’re now ready to open-source that approach.” We salute BRAC for their hard work and well-earned recognition; indeed, they’ve been a favorite topic in our annual State of the Campaign Report, as you can see in “Graduating out of CCTs” and our infographic, “The CCT-Graduation Model Ecosystem”:

cct-grad-model_infographic_final_en1_SMALL

Re-post of “Next Generation Innovation in Microfinance? The Graduation Approach”

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Aude de Montesquiou, a microfinance specialist at CGAP, published a nice summary of the June 9th e-workshop called “Adopting the Graduation Model to Serve the Ultra-Poor.” If you want to learn more about the graduation model, BRAC offers “Immersion and Training Visits” and the next two are this August (week of the 18th and 25th). Please contact Sadna Samaranayake to register.

The e-workshop clearly unpacked how the Graduation Approach works and how microfinance institutions have and can adopt the model. Sadna Samaranayake from BRAC USA took participants through a detailed look at the various components of the program emphasizing the value of community participation in the client selection/ targeting process, the asset transfer component and how clients are trained on generating an income from their newly acquired assets. She spoke about the integrated focus on savings, health care support, and the important role played by village level poverty reduction committees mobilized to help clients with various issues and household shocks after the duration of the 24 month program. BRAC USA believes that, for sustainable MFIs looking to extend their pro-poor missions, the Graduation approach is a great use of donor or discounted funding to help them reach a previously inaccessible poorer client segment—much in line with the “double business case” work conducted by Grameen Foundation.

Read the full post.

Graduating Families out of Ultra-Poverty (E-Workshop Recap)

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Due to technical difficulties, the webinar recording function started late. We apologize for this inconvenience and have made a summary and the presenter’s slides available to you.

BRAC client

Image courtesy of BRAC


Webinar resources


Larry Reed, director of the Microcredit Summit Campaign, moderated an engaging discussion about the Graduation Model pioneered by BRAC, an international development organization based in Bangladesh, that included Sadna Samaranayake (Program Manager of the Ultra-Poor Graduation Program at BRAC USA), Carine Roenen (Executive Director of Fonkoze in Haiti) and Raymond Serios (Special Projects Manager at Negros Women for Tomorrow Foundation).

Sadna Samaranayake, BRAC Ultra-Poor Graduation Program

Sadna opened by describing BRAC’s Ultra-Poor Graduation Approach which targets ultra-poor households and follows a process of focused interventions carefully sequenced to “graduate” households out of ultra-poverty. While the World Bank uses the $1.25 per day income threshold to define extreme poverty, BRAC understands the ultra-poor as those in the bottom half of earnings among those below the $1.25 a day line.

Sadna explained that the first step in the process to graduating households from ultra-poverty is to carefully target and select families for program participation. This requires community mapping and wealth ranking exercises to determine which community members are in the most need.

Once chosen to participate in the program, clients receive a transfer of productive assets and a cash stipend. Sadna explained that productive assets can be livestock, seeds for planting, or small goods for enterprise. The cash stipend allows clients flexibility to start improving their livelihood while beginning to generate an income from the productive assets.

Next the clients receive training and they start to generate an income for themselves. As time progresses, clients are encouraged to save money and are given access to appropriate health care. Ultimately, the objective of the graduation approach is to ensure that all families are better integrated into the social fabric of the community and are generating enough sustainable income to conquer ultra-poverty.

Graduation occurs over a period of 24 months when households achieve set economic and social goals including not having a reported food deficit in the past year, having multiple sources of income, owning livestock/poultry, having a sanitary latrine and clean drinking water, having cash savings and school age children attending school. Over the past 12 years, BRAC has graduated 1.4 million people, mainly in Bangladesh and has committed to graduating 250,000 more families by the end of 2016.

Carine Roenen, Fonkoze

Carine followed by illustrating the challenges of implementing a graduation model in Haiti. The Fokonze approach is an adaptation of the BRAC model with slight changes for the context for working in Haiti. Fonkoze has reached 62,735 clients with loans, and graduated 2,900 clients from ultra-poverty. Currently, Fokonze is hoping to expand its outreach in Haiti to graduate more households out of ultra-poverty.

Raymond Serios, Negros Women for Tomorrow

Raymond used his opportunity to interview both Sadna and Carine about the process of implementing a graduation model in his context in the Philippines. Raymond inquired about how BRAC and Fonkoze choose productive assets with the households. Carine responded that it depends on the skills of the client and should be something that she is already familiar with or willing to learn.

Larry then moderated a discussion among the panelists based on questions submitted by webinar participants. Some of the questions focused on monitoring and evaluation processes to track progress toward graduation. Others touched similarly on impact in the long term. It was a lively discussion that included an optional time extension after the official schedule ended to continue discussions. (See all the questions and comments in the webinar chat.)


We would like to thank all of the panelists and all of the participants who attended the webinar and participated via the chat and Q&A functions. We invite you to comment on this post to continue the discussion about the graduation model and further share ideas.

We also invite you to explore the links below to the recording of the webinar, presentations from BRAC and Fokonze, as well as the Robin Burgess report about the impact of the graduation model program on employment choices.

We hope you will join us for our next e-workshop “Instilling Confidence in Poverty Measurement: The New PPI Certification” on Tuesday, June 24th at 10:00 AM (EDT/GMT-4) and featuring panelists Frank Ballard (Grameen Foundation), Analí Oda Salcedo (Planet Rating), and Chiara Pescatori (MicroFinanza Rating).

Webinar Resources:


E-Workshops are hosted by the 100 Million Project of the Microcredit Summit Campaign and strive to feature the work of organizations who have announced Campaign Commitments to take specific, measurable and time-bound actions that demonstrate their commitment to the end of extreme poverty. Are you Committed?  Find out how to share your Commitment to the end of extreme poverty.