Video Corner | Lev Plaves of Kiva on measuring impact

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18th Microcredit Summit Video Corner Interview Series

Lev Plaves, portfolio manager at KIVA in the USA, interviewed by Miranda Beshara, editor of the Arabic Microfinance Gateway.


Lev Plaves of KIVA talks with Miranda Beshara, editor of the Arabic Microfinance Gateway, about what he was most excited to learn about at the 18th Microcredit Summit. “What we are most excited about is how much discussion there was at the Summit about how different stakeholders — whether investors or practitioners — are really working to improve how we’re measuring impact,” Plaves says. “That was really great to see, and I am excited to see moving forward how that plays out in terms of people working to really increase how we are quantifying the outcomes we are having as an industry.”

Plaves explains that KIVA’s mission is to connect people through lending to alleviate poverty, mobilizing people on a global level to lend as little as US$ 25 on their crowd-funding platform. KIVA has expanded its reach beyond traditional microfinance institutions, which now account for only half of their partners and thus extending their portfolio outside the microfinance sector.

Answering the question about the role of microfinance to help end poverty, Plaves explains that this has allowed KIVA to “expand the breadth our reach in terms of the number of people and the types of services we’re providing and also the depth and the impact we’re having.”

Swedes, chimps, and you and me on sustainable development

Hans Rosling shows how the child mortality rate declined at a phenomenal rate across the globe between 1964 and 2012.

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>>Authored by Sabina Rogers

Earlier this year at the World Economic Forum (WEF), Hans Rosling opened his presentation, “Sustainable Development: Demystifying the Facts,” with three questions for the audience about the state of global development (about extreme poverty, measles vaccination, and population in 2100). He was testing their knowledge in order to illustrate how preconceived ideas will do us wrong.

He had done this test before. Rosling conducted studies with Swedes, Americans, and chimps about the state of global development. The chimps were asked to choose a banana that is associated with 1 of 3 possible answers, and they got the answer correct 33 percent of the time. In essence, they were bound to be right 1 time in 3; the humans were not as lucky. Basically, according to his study, chimps in a zoo have a better chance of choosing the right answers at random to questions about the state of the world than the average Swede and American does.

It is detrimental when we underestimate the progress that has been made just in the last 15 years. In 1964 (the date he starts with his child mortality chart), the world was clearly divided into two worlds: the developing world with large families and high child mortality and the developed world with the opposite. Today, there really is just one world, with a few outlying countries, mainly in Africa.

It’s also a world of inequality within countries. Take India, for example. “If someone comes from outer space and wants to see the world,” says Rosling, “and [they] have only one day to visit, they should go to India. Because they can see everything in India: the most fantastic success [and] progress being made, but also remote, rural areas where still, extreme poverty is rampant — but decreasing.”

This is where the post-2015 agenda has to focus the world’s energy and money: the still marginalized, the remote and hard-to-reach areas. This is why we at the Microcredit Summit Campaign are championing six financial inclusion strategies (our “six pathways“) that we believe hold the greatest promise in helping to end extreme poverty at the frontiers — at the margins of society in economic, social, and geographic terms. The six pathways offer a means to reduce the cost of delivery (mobile money), help the poor build assets (cash transfers linked with savings), tackle the challenge of a weak health infrastructure, and more.

But, this isn’t just about practitioners and donors. With the launch of the Global Goals for Sustainable Development, we are seeing a massive media campaign targeted at you and me. It is a media campaign designed to get people excited and believe in the possibility of achieving the SDGs. Each goal has been reworded to express greatly simplified concepts. No numbers. No percentage signs. Just simple framing: No poverty, no hunger, good health, and so on.

It is also is designed to put “we the people” in the driver’s seat of this “next generation” of development. This is good because we are going to need everyone behind this agenda to fund it and traditional “aid” funding will not suffice. Tax revenue must contribute to the estimated $172.5 trillion price tag (over 15 years). The MDGs cost $915 billion in total. That’s $114 billion per goal compared to more than $10 trillion per goal for our post-2015 agenda.

In an interview on NPR’s Goats and Soda blog, Paul O’Brien of Oxfam America said, “It’s not just about more aid and donors doing more. This is going to be about sustained political will by governments to use their own money to tax corporations more effectively and make sure the money from their natural resources goes to poverty reduction.” This is the same conclusion in Who Pays for Progress?, a report from RESULTS UK about how to finance healthcare in new middle income countries. And, we can only do this if we understand what Rosling is trying to show us with his charts: “We can make the world much better. The long-term trend is going in the right direction.”

I would add, don’t underestimate what a world united by a set of global goals can achieve.

Watch Hans Rosling’s presentation at the World Economic Forum

Here is Rosling’s first question for WEF attendees:

In the last 20 years, the proportion of people living in extreme poverty has…? A. almost doubled, B. remained more or less the same, C. almost halved.

The answer was C (though the numbers of extreme poor may not have decreased in absolute terms). How many got it right? 61 percent of respondents from the WEF were right; in an online survey he conducted, 23 percent from Sweden and 5 percent from the US answered C.

How many of the world’s one-year-old children are vaccinated against measles? A. 2 in 10, B. 5 in 10, C. 8 in 10.

Again, the answer was C, and 23 percent of WEF got it, 8 percent of Swedes, and 17 percent of Americans.

How many children will there be in the world in 2100? A. almost 4 billion, B. 3 billion, C. 2 billion (with no increase from 2000).

26 percent of the WEF audience answered the correct answer, C, 11 percent of Swedes, and 7 percent of Americans. Rosling’s chimps surveyed answered correctly 33 percent of the time.

What does this mean? When you answer worse than random, it means that the problem is not lack of knowledge, the problem is that you carry preconceived ideas, which makes your score worse than chimps.

The whole point of this exercise queued up his presentation (starting at 6:33) on the state of child mortality between 1964 and 2012 (hint: the vast majority of countries are doing amazingly well). He showed how child mortality today in Bangladesh (8:52) is better than the state of child mortality in Italy in 1964 and that even the worst off families (women with absolutely no education) are, today, where the better-off and most-educated Bangladeshis were in 2001.

Hans Rosling shows why the concept of “developing countries” (those with less than US$12,000 per capita) doesn’t have much meaning anymore — for a happy reason. We have great reason to be optimistic about ending extreme poverty by 2030.

The main reason for optimism is the evidence of the past…the long term trend is going in the right direction.

Campaign to host workshop with World Bank Annual Meeting in Peru

Attending the World Bank meeting in Peru? Join our workshop, “6 Financial Inclusion Pathways to End Extreme Poverty – What Role Can You Play?”

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Are you attending the 2015 Annual Meetings of the World Bank Group and the International Monetary Fund in Lima, Peru? Join us at the Civil Society Policy Forum* for a workshop to explore how microfinance and financial inclusion can contribute to the fight against extreme poverty.

The Microcredit Summit Campaign will host a workshop at the Forum at the World Bank Annual Meeting in Lima from October 6-9. The Forum promotes substantive dialogue and an exchange of views between Bank/Fund staff, civil society organizations (CSO), government officials, academics, and other stakeholders.

6 Financial Inclusion Pathways to End Extreme Poverty

What Role Can You Play?

As the 2014 Global Findex has shown, important progress toward universal financial access is evident. However, there has been much less progress for groups commonly considered to be among the most excluded or hardest-to-reach. Ensuring that these groups are not left out of the march toward universal financial access in the coming four years, intentionality in our approach will be essential as will be a clear framework for actors to coordinate their efforts.

The Campaign is highlighting six pathways that have shown positive outcomes for reaching and including the hardest-to-reach groups especially when delivered in an integrated manner. This lens can offer helpful ways to view opportunities where investment can accelerate progress in including the most excluded, hardest-to-reach populations by 2020.

Session Objective

We will show how the Universal Financial Access by 2020 (UFA2020) campaign links with ending extreme poverty by 2030. In breakout groups, participants will brainstorm how organizations like theirs (CSOs, in Bank-speak) can contribute to financial inclusion pathways to end extreme poverty.

Speakers

  • Larry Reed, Director, Microcredit Summit Campaign
  • Susy Cheston, Senior Advisor for the Center for Financial Inclusion at Accion and leads the Financial Inclusion 2020 campaign
  • Martin Spahr, Senior Operations Officer at the International Finance Corporation
  • Carolina Trivelli, Economist, CGAP

Date

October 8, 4-5:30 PM

Contact Jesse Marsden for more information.

* Note that registration for the Forum is closed. You can see the full Forum agenda here.


The 2015 Annual Meetings of the World Bank Group (WBG) and International Monetary Fund (IMF) will be held on October 9 – 11 in Lima, Peru. The Civil Society Policy Forum, a program of events including policy sessions for civil society organizations (CSOs), will be held from October 6 – 9, 2015.

Imprimir

Some Annual Meeting sessions will be livestreamed. Find out how to watch.

The registration platform for CSO representatives interested in attending the Civil Society Policy Forum is now closed. We will be processing registration requests that were received within the last few days and will be notifying applicants on the status of their request. This process can take a couple of weeks and so we ask for your patience. As previously published, no new registration request will be entertained.

#tbt: Clients Continue Movement above the US$1 a day Threshold

The study found that, on net, 1.8 million microcredit client households, including 9.43 million household members, crossed the $1.25 a day poverty threshold between 1990 and 2008.

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We are pleased to bring you this #ThursdayThrowback blog post, which was originally published in The State of the Microcredit Summit Campaign Report 2011. We commissioned a study to estimate the net number of microcredit client households in Bangladesh that crossed the US$1.25 a day threshold between 1990 and 2008. You can download a copy of the study from our Resource Library as well.


Authored by Sajjad Zohir, the director of the Economic Research Group; he is based in Bangladesh.

The Microcredit Summit Campaign is committed to using microfinance to powerfully contribute to the end of poverty. Its decade-long focus on client poverty measurement and progress out of poverty underscores this commitment. To this end, the Campaign continues to track progress towards its second goal to ensure that, from a starting point in 1990, 100 million of the world’s poorest families move from below US$1 a day adjusted for purchasing power parity (PPP) to above US$1 a day adjusted for PPP by 2015.

Evidence from Bangladesh

Findings from a nationwide study in Bangladesh commissioned by the Campaign shows promising results. The study, undertaken by the Bangladesh-based Economic Research Group, was administered between February and August 2009. Researchers surveyed a nationally representative sample of 4,000 Bangladeshi microcredit clients and estimated the net number of households in Bangladesh that crossed the US$1.25 a day threshold between 1990 and 2008.[1]

The study found that, on net, 1.8 million microcredit client households, including 9.43 million household members, crossed the $1.25 a day poverty threshold between 1990 and 2008. A second key issue raised in the report, seen in Figure 1 below, was that in some years a large percentage of clients left poverty, whereas, in years coinciding with the 1998 floods and the food crisis of 2008, many households, including some who where non-poor when they joined the microcredit program, slide below the $1.25 threshold.

Figure 1: Percentage of Client Households, on Net, Crossing the US$1.25 Threshold in Bangladesh

Figure 1: Percentage of Client Households, on Net, Crossing the US$1.25 Threshold in Bangladesh
Data showed that among those taking their first microcredit loan between 1990 and 2008, the following poorest client households crossed the US$1.25 threshold:

1990-1993 8.94%
1994-1997 19.83%
1998-2002 0.33%
2003-2008 1.84%

It is important to note that the findings in this report were significantly influenced by the period in which the data was collected. In 1998 Bangladesh suffered from what are often described as the most severe floods ever to hit the country. In 2008, a food crisis coupled with political instability in Bangladesh and the global economic crisis led to a general slack in economic activities. All these factors may have led to the depletion of assets that are commonly chosen as proxies to measure poverty status among the very poor in Bangladesh. This in turn may have led to under-estimation of the number of microcredit client households that may have otherwise crossed the threshold.


Footnote

[1] This study made no attempt to establish causality between microcredit and poverty alleviation. Instead, it simply estimates the change in status of microcredit client households between 1990 and 2008, when compared with their status during the time of the first loan received by any member of the household.


Related reading

Colombia, a “Pathways” poster child

cct-grad-model_infographic_final_en1_Medium

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>>Authored by Paul Gostomski, Microcredit Summit Campaign Program Intern

The 100 Million Project, an initiative of the Microcredit Summit Campaign, aims galvanize and support work that helps advance industry toward the goal of helping 100 million families lift themselves out extreme poverty. To do so, the Microcredit Summit Campaign advocates adoption of “Six Pathways,” which are financial inclusion strategies that can reach the extreme poor and facilitate their movement out of extreme poverty.

The Consultative Group to Assist the Poor (CGAP), a global partnership of 34 leading organizations that seek to advance financial inclusion, recently published a paper that does an excellent job highlighting two pathways that are currently being implemented in Colombia: conditional cash transfers and an initiative to link mobile banking services with agent networks.

Conditional Cash Transfers

The Más Familias en Acción program began in 2001 and aims to supplement the income of families who live below the poverty line and have children under 18. Mothers receive the cash transfer conditioned on their child’s regular attendance at school. This condition also qualifies the family for a health subsidy if their child receives regular health check-ups. In 2012, Más Familias en Acción was reaching 2.7 million families throughout the country. Between 2001 and 2012, malnutrition among children in Colombia aged two and under in rural areas decreased by 10 percent. Also in this time, school attendance for children between 12 and 17 increased by 12 percent.

The Campaign advocates for the use of conditional cash transfers (CCTs) within our six-pathways framework due to evidence such as is seen from programs like Más Familias en Acción. An array of positive externalities are also associated with CCTs, including income smoothing. Stabilizing income through CCTs help families better plan for the future as the immediate risks of today are somewhat mitigated.

Conditioned cash transfers are also incentivizing beneficiaries to make investments in themselves, often through participation in programs to increase health or education for the family. During last year’s Innovations in Social Protection program led by the Campaign, participants in PROGRESA (then called Oportunidades) indicated that while they appreciated and valued the security the transfer brought, they found that the greatest positive change was understanding the significance of the education and health investments they were making in their families.

Another positive externality of conditional cash transfer, and one we find significant, is its effect on women in poor communities. Almost all conditional cash transfers are administered to the mother of the household and this in turn increases women’s bargaining power, something that’s all too often neglected in poor communities.

 Mobile Money with Agent Networks

The second of the two pathways currently being implemented in Colombia is mobile money linked with agent networks in low-income communities through the mobile banking service DaviPlata. DaviPlata, launched as a private mobile service in 2011, was able to garner 500,000 customers in its first year of operation. Taking notice of this success, the government of Colombia contracted DaviPlata in 2012 to deliver the conditional cash transfers of Más Familias en Acción to its 937,000 beneficiaries.

After being contracted, the paper noted, DaviPlata as an organization began a new focus on how to serve the poorest in the country. DaviPlata, working solely through mobile phones, makes financial inclusion easier by making transferring, receiving, and withdrawing money less costly to the recipient of the conditional cash transfer. The recipient now spends less time traveling to the bank or post office and takes less risk as he or she has less cash on their person.

The World Bank reports that of the poorest two quintiles of those living in developing countries, only 30 percent have access to a savings account, whether formal or informal. The Campaign is looking at mobile money within its six-pathways framework because of how digital financial tools are decreasing the cost of transacting and, when linked with savings, increasing the ease with which the poor can access accounts, begin to develop savings, and more easily transfer money when needed.

Although many of the poor do not have savings accounts, many do have mobile devices. Mobile money linked with agent networks like DaviPlata helps link those living in more rural and remote areas to the mobile platforms where traditional financial institutions are less easy to find.

However, DaviPlata has room for improvement as a payments facility. The CGAP paper reports that DaviPlata faces an illiterate customer base and also issues with customers that do not understand the technology. DaviPlata must also deal with dormant accounts, where customers signed up for the service but their accounts have not been used in more than 30 days. Overcoming these challenges will be critical to moving forward.

Colombia’s Next Step

Colombia’s Más Familias en Acción, is a global leader in the use of CCTs to support increased health standards and school attendance among the poor. Now, work needs to be focused on decreasing the inefficiencies around the mobile banking service DaviPlata. In the CGAP paper on Colombia, it was made clear that Colombia’s greatest development challenge was in regard to DaviPlata and increasing its financial stability. This includes taking fuller advantage of the product while making the processes and channels more efficient. With a more effective method on distributing funds, the intended effects of Más Familias en Acción can then be multiplied.


Get Inspired. Set a Goal. Make a Commitment.

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


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Community-based financial inclusion: Sarah’s story

Sarah Chikuse standing in front of her pigsty

Sarah Chikuse standing in front of her pigsty. She is proud to be one of the few women encroaching into this previously male dominated agricultural territory. Photo courtesy of Alex Dalitso Kaomba.

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>>Authored by Alex Dalitso Kaomba, development consultant and freelance writer

At 39 years of age, Sarah Chikuse’s health is visibly better than the other women in her village. A single mother of two, she lives in Kang’oma village on the outskirts of Lilongwe’s Area 23 in Malawi. Her day starts at 4:00 AM when she usually wakes up to the din of her neighbors’ jerry cans and water tins at the only borehole in the village.

Sarah starts by lighting up her charcoal burner so that it gathers heat while she fetches water at the borehole. Next on the routine (if it’s during school term) is preparing her daughters for school. Once she bids her daughters goodbye, she tends to her newly acquired livestock.

Sarah Chikuse_with pigsty

Sarah in front of her pigsty. Acquiring a pig is one highlight on her growing list of achievements. Photo courtesy of Alex Dalitso Kaomba.

Owning livestock is not only a symbol of status for the privileged but also an envied source of income in Malawi, which has one of the lowest livestock herds per family in Southern Africa. Sarah is proud to be one of the few women encroaching into this previously male dominated agricultural territory.

Acquiring a pig is one highlight on her growing list of achievements. Sarah counts herself a success in being able to afford three meals a day for her family and providing her children with a basic education. She has paid their school fees and provides their books, uniforms, and lighting for evening homework.

Two months ago, her daughter contracted malaria, and for the first time, Sarah managed to hire a car and take her to a private clinic where she got rapid, quality care. The hospital bill was US $12, and she managed to pay it in full.

Life before inclusion

Life has not always been so comfortable for Sarah and her family. After a bruising divorce, she was left with less than $4 tied up in her wrapped skirt, and she struggled to make ends meet. She could hardly afford a single meal for her children. She started selling vegetables at a local market, but her family’s daily expenses were much higher than her profits and the business did not grow.

Sarah desperately wanted to get a loan but did not possess any tangible property except the roofing sheets on her two bedroom house. One institution agreed to use the roofing sheets as collateral for a micro business loan, but after careful consideration, she could not accept the offer. She had seen people in her village having roofing sheets confiscated after defaulting on payments, and she was not ready to risk such humiliating consequences.

In January 2015, she joined a self-help group (SHG), a concept championed by a local NGO, Global Hope Mobilization (GHM), which is supported by a $150,000 two-year grant from Vibrant Village Foundation. The doors of opportunity for Sarah started opening then. (GHM’s self-help groups are basically savings groups.)

As a vegetables vendor, Sarah could make $2 a day from which she would have to provide for her family daily needs. However, the SHG she joined required that she contribute $0.20 a week into the pooled funds. She struggled to keep up for two months until her turn to borrow the funds came up. She used all the money she borrowed to buy a variety of vegetables for her fresh produce business.

Photo courtesy of Alex Dalitso Kaomba.

Sarah feeding her livestock. Photo courtesy of Alex Dalitso Kaomba.

Life after inclusion

Sarah showed me a tiny pigsty with one mother pig and eleven piglets, the first time in her whole life that she has owned livestock. In a few months, she expects to sell and collect over $500. This was possible because she joined an SHG from where she accessed loans totaling a little under $100 over a 3-month period. She pumped this money into her fresh farm produce business by ordering a wide variety of vegetables and fruits which her customers had always asked her to stock. Her business revenues increased rapidly.

I asked her what her most outstanding benefit from the SHG was. With a very wide smile and beaming face, Sarah had this to say:

“I was a pauper with no hope, but the SHGs taught me the importance of saving from the little I get and how to access low interest loans. Today I can feed my family good meals every day, I have a piggery project that will soon start bringing me revenues. I intend to diversify into selling kitchenware which brings me higher profits than vegetables and even if I stock more kitchenware it is not perishable.”

Anne Chiudza from Global Hope Mobilization says, “We are aware that the marginalized, poor, and unbanked population has its own means of survival, and from the little they get they can change their lot in life by using their numbers to pool funds together. Our organization believes in facilitating improvement of livelihoods through community owned strategies and the self-help group concept is one such strategy.”

A measure of how these groups can advance community development is a borehole which the women are planning to have drilled in a year’s time at a cost of $4,000 without any donor funding.

Sarah’s story is just one among many in her 20-member group. They have managed to improve the lot of their families by building or improving their homes, by improving their families’ nutrition, and by consolidating their economic independence through self-help groups. There are 15 more groups in surrounding villages, and evidence is clear that the women’s hard work and commitment is bearing fruit for the betterment of Kang’oma community’s standard of living.


More about Global Hope Mobilization’s self-help group model

Global Hope Mobilization’s (GHM’s) self-help groups are savings groups whose sole aim is to provide a low-interest pool fund from which members (and only members) of the group can borrow to inject into their businesses. Members can save through loaning out the savings over a period of four weeks.

The groups loan out the money from the very first meeting. No funds are kept in a box of any sort because soon after contributions have been made, a borrower must take the money immediately. The funds are only deposited in the bank when they have multiplied and no members are ready to borrow that week.

Question: How does GHM create the groups?

Answer: At the beginning of the project last year, Global Hope Mobilization trained four Community Facilitators who were all drawn from the catchment community. Their role is to spearhead the formation of the groups and act as resource persons for the groups on behalf of Global Hope Mobilization.

The SHGs are self-replicating because the roof limit for each group membership is 20 members only. To date GHM, is supporting 100 groups with a total of 2000 members, all of whom are women. There is, however, an emerging demand from men in some villages to join the groups.

Q: Are the SHGs self-sustaining or are they reliant on GHM for ongoing support / hand-holding?

A: The SHGs are self-reliant. GHM only facilitates their financial literacy training and monitors their early growth stages, providing guidance and advisory [services] where needed.

Q: What training does GHM provide to the SHG members? Do they offer other sorts of capacity building like financial literacy, health, women’s empowerment, etc.? Do they try to link SHGs to other services like government social protection services?

A: The flip side of [GHM’s] concept is to provide women with a platform and confidence to identify and demand social services from government departments like water, health, etc. Every group meeting ends with a social discussions segment. All issues are recorded for future reference and actioning. Using the SHG as a nucleus for change, GHM facilitates health talks and [sexual and reproductive health] SRH awareness campaigns.

Q: Do all SHG members take out a loan? Or, do some just use the SHG to save? What is the interest rate on loans (if there is interest) and what is the savings interest rate (if there is one)?

A: Around 75 percent of members take out loans at an average interest rate of 10 percent per month. The loans period is 4 weeks maximum, depending on the loan size and specific group by-laws. Interest [on] savings is 10 percent.


About the author

Alex KaombaAlex Dalitso Kaomba is a 35 year old Malawian rural development consultant and freelance writer. He lives in a village on the outskirts of Lilongwe the capital city of Malawi. He works with International and local NGO’s in Malawian villages in the areas of access to energy for maternal health and education, HIV and Aids, education and environmental interventions. Alex has a passion for development work and the African stories of self-sufficiency and sustainable rural development. His favorite pastime is reading, watching sport and playing cricket.

alex.kaomba[at]gmail.com | @AlexKaomba | https://www.facebook.com/kaomba


Related reading

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

Who will pay for the end of poverty?

RESULTS UK is launching a report called 'Who Pays for Progress?' at Addis. It is an in-depth study that looks at one country and one sector - health in Kenya - to unpick that complexity and give some guidance as to what really matters when trying to decide the right financing mix.

RESULTS UK launched a report called ‘Who Pays for Progress?’ at the Financing for Growth conference in Addis Ababa. It is an in-depth study that looks at one country and one sector — health in Kenya — to unpick that complexity and give some guidance as to what really matters when trying to decide the right financing mix. Download the report.

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On Monday, RESULTS UK (a sister organization to our RESULTS Educational Fund) released a report at the Financing for Growth conference in Addis Ababa, Ethiopia, (which is happening right now) where the global community is negotiating who will foot the bill to eradicate poverty. 

Titled “Who Pays for Progress? The Role of Domestic Resource Mobilisation and Development Assistance in Financing Health. A Case Study from Kenya,” RESULTS UK’s report focuses on Kenya’s reclassification from a low-income country (LIC) to a lower-middle-income country (LMIC) and how that reclassification will affect financing for health needs in Kenya. Oxley’s HuffPo article lays out RESULTS’ argument for strong and ambitious commitments from the global community to finance the next phase of development goals and the end of poverty. He closes his article with this warning:

The draft text of the Addis Ababa Accord has recently been weakened. We’ve lost time-bound commitments for rich countries to meet their aid-giving targets…If our leaders cannot make the political decisions and show the leadership necessary to ensure we have the funding needed to build a more just and equitable world, then history will judge us harshly. I, for one, want to be able to say it was this generation that finished off poverty. And I know we can.

The following article by Aaron Oxley (executive director of RESULTS UK) was originally posted on Huffington Post on July 8, 2015. Read Oxley’s article below for inspiration, and to the 2015 RESULTS International Conference (July 18-21) to learn how you can make a difference and influence policy making. 


One of the things I love about my job is that I get to be optimistic every day. That’s because I, and my colleagues working in international development, look at the problems of the world that are rooted in poverty and inequality, and refuse to accept that the world is not smart enough or rich enough to defeat them.

The evidence of history is on our side. Since the year 2000 the world has halved the number of people living in extreme poverty, the mortality rate for children under five has dropped almost 50%, millions more children live past their fifth birthday, and 90% of children now attend primary school. It’s been the best 15 years our species has had in its entire existence, with 1.7 billion undernourished people in 1999 dropping to ‘just’ 836m today. While we have a long way to go, that’s staggering progress.

That poverty still exists is a question of politics. Should we get the politics right, we can continue and accelerate those rapid gains and, truly, wipe out poverty in the next 15 years. At which point I’ll be happily out of a job.

This year, the world is coming together in a series of global meetings to decide the level of political ambition we’ll bring to the eradication of poverty. If we aim high, I get to head off to a beach somewhere in 2030. If we fail, the price isn’t just that my retirement is delayed: it means more human suffering and unnecessary death, a drag on economic growth that hurts us all, and wastes the potential of hundreds of millions of lives.

The first of those critical meetings is the Financing for Growth conference in Addis Ababa, happening from the 13th to 16th of July. This conference is all about the money: how are we going to pay for the end of poverty, and who will pay for what? I’d assert that money is not the most important element in ending global poverty, but it’s clear that so much simply cannot and will not happen without it.

Continue reading…

Aaron Oxley with John Mathai of Global Health Advocates India and a RESULTS US grassroots volunteer at the 2011 RESULTS International Conference.
Follow Aaron Oxley on Twitter: @ATOxley

#tbt: Lobbying the World Bank, Part I

#Tbt_6

Elizabeth Littlefield, CEO of CGAP in 2004, said at the 2004 Microcredit Summit in Bangladesh, “There is no evidence of a necessary trade-off between poverty and sustainability.”
Read her full quote on page 12 of the 2004 State of the Campaign Report.

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We are pleased to bring you this #ThursdayThrowback blog post, which was originally published in The State of the Microcredit Summit Campaign Report 2004. The RESULTS International Conference is only three weeks away (July 18-21), and grassroots activists from the U.S. and around the world will be in D.C. to lobby the USAID Administrator and World Bank Directors. Therefore, we’re reviewing advocacy successes and struggles in the early 2000s. This week, we look at a breakthrough we achieved in getting the World Bank to recognize microfinance as an important strategic element in reducing poverty and announcing that they were committed to increasing their funding for microfinance.


In this introduction to the State of the Microcredit Summit Campaign Report, rather than presenting a neat, uncontested picture of the field of microcredit seen solely from the Campaign’s perspective, we think it useful to listen to the challenges and opposition to what the Campaign and these parliamentarians have championed, coming as it does from some of the most influential institutions in development. In the pages that follow, we invite you to listen in on debates that contrast the views of the World Bank and CGAP with those of industry leaders like BRAC founder Fazle Abed, Grameen Bank founder Muhammad Yunus, and the Microcredit Summit Campaign. What follows are excerpts from the World Bank and CGAP’s responses to the 700 parliamentarians, along with reactions from the Microcredit Summit Campaign.

Download the full 2011 State of the Campaign Report in our Resource Library

Download the full 2011 State of the Campaign Report in our Resource Library

In his response to 188 British Parliamentarians, World Bank President James Wolfensohn wrote, “I very much agree with your observation that microfinance has a demonstrated, powerful impact in improving the livelihood of the poor, and a crucial role in reducing poverty. Access to financial services for the poor is a critical condition for the attainment of the Millennium Development Goals.”

This is a tremendous vote of confidence from Mr. Wolfensohn, but if, as Wolfensohn says, “access to financial services for the poor is a critical condition for the attainment of the Millennium Development Goals (MDGs),” then reaching those below $1 a day is also critical. Mr. Wolfensohn acknowledges the poverty goal, which seeks to cut absolute poverty in half by 2015, as the lead MDG. Absolute poverty is measured by those living below $1 a day, adjusted for purchasing power parity. This show of support is important, but the words must be followed by more effective action.

Wolfensohn asked officials from the World Bank and the Consultative Group to Assist the Poor (CGAP), to jointly address the detailed issues raised in the parliamentarians’ letter.

World Bank and CGAP officials begin their own response to the parliamentarians on a hopeful note when they write that microfinance forms “…an important strategic element in any broad based effort to reduce poverty,” and assert that the World Bank and CGAP “are committed to massively scaling up this access to financial services.”

While it is good for the Bank to declare microfinance as an important strategic element in reducing poverty, there is still a disconnect between this assertion and the fact that microfinance constitutes less than one percent of annual Bank spending. Assigning such a low priority to microfinance is neither strategic nor a sign it is viewed as important. There is also a disconnect between the Bank’s enviable commitment “to massively scaling up…access to financial services,” and the fact that the Bank offers nothing measurable in response to the parliamentarians’ request to double spending. It would seem that a massive scale-up would at least equal a doubling from less than one percent to less than two percent.

World Bank and Consultative Group to Assist the Poor (WB/CGAP) officials continue by saying, “While the World Bank Group already provides more microfinance funding than any other agency, we remain committed to doing much more. The fundamental constraint to an exponential increase in the numbers of poor people receiving financial access is, however, a real absence of retail institutional capacity. Building this capacity is an integral part of the financial systems of our client countries and is, therefore, a critical task for the World Bank Group and other agencies.”

MCS: The World Bank should provide more microfinance funds than any other agency given that its overall portfolio dwarfs that of all other bilateral and multilateral donor institutions. However, the World Bank does not provide more funding than any agency. USAID surpasses the Bank’s total spending in microfinance. In addition, more than one percent of USAID’s funds and more than three percent of UNDP funds[5] go to microfinance.

Retail institutional capacity does exist. Some of the global and domestic partners of a number of institutions and networks are either already reaching very poor clients or gearing up to do so as a result of the new U.S. law. These include institutions and networks such as ASA, BRAC, PKSF[6] and Grameen Bank in Bangladesh, NABARD and SIDBI in India, Pro Mujer, Freedom from Hunger, Opportunity International, FINCA, CARE, Save the Children, Catholic Relief Services, World Vision, Katalysis, Grameen Foundation U.S.A., ACCION and World Relief in the U.S., Développement international Desjardins in Canada, members of The Africa Microfinance Network (AFMIN), Sanabel members in the Middle East and North Africa, and members of REDCAMIF and Foro Latinoamericano y del Caribe de Finanzas Rurales in Latin America.

PKSF alone estimates that for the six years beginning July 2004 and ending in June 2010, $562 million could be absorbed by its 192 Bangladeshi partner organizations and those to come. This is in just one country.

There are scores of institutions around the world that have demonstrated the vision and systems to reach the very poor sustainably. To say there is “a real absence of retail institutional capacity” is to imply that whatever capacity exists has been fully exploited. This is clearly not the case. The greater problem is the low priority donor agencies place on finding institutions with the vision and systems necessary for expansion to the very poor, not the “absence of retail institutional capacity.”

WB/CGAP: We agree with the spirit of your recommendation that at least 50% of World Bank funds should be reaching those living on less than a dollar a day. However, we do not think that earmarking funds would be the best strategic choice for moving the microfinance industry towards sustainably serving much larger numbers of those in absolute poverty. In fact, such directed lending could have an adverse effect on scaling up, through distorting markets. Many MFIs achieve sustainability through increasing outreach to a larger diversified client group. They end up serving much larger absolute numbers of the very poor, even though they may have a smaller percentage of very poor clients in comparison with poverty-focused institutions that are not sustainable. Such MFIs would be penalized through the suggested mandate.

MCS: Institutions that do not exclusively, or even predominantly, target the poorest need not be penalized. The parliamentarians are not asking that all MFIs reach the very poor or that half of an MFI’s clients fall below $1 a day when they entered the program. They are asking that, on balance, half of World Bank spending in microfinance go to people who were very poor when they started with the program. Within the World Bank’s portfolio there might be a group of institutions that primarily serves better-off clients, another group with a more mixed clientele, and a third group largely serving those starting below $1 a day. Yet institutions such as the World Bank have not provided incentives to reach those below $1 a day. If anything, the Bank and others have discouraged depth of outreach. This is why the parliamentarians believe earmarking is required. The World Bank/CGAP response leaves the impression, however unintended, that programs reaching very poor clients may be less sustainable, but this is far from current reality. CGAP CEO, Elizabeth Littlefield, backed that up with remarks made at the Asia/Pacific Microcredit Summit held in Dhaka, Bangladesh in February 2004.

“There is no evidence of a necessary trade-off between poverty and sustainability,” Littlefield said in Dhaka. “…Very recent data from our MicroBanking Bulletin (MBB) and from The Microfinance Information eXchange (The MIX) show us that the best poverty-focused microfinance institutions are breaking right through conventional wisdom. Of the 124 microfinance institutions reporting to the MBB, 66 were fully selfsufficient. Of those, 18 were institutions that work with very poor populations, the poorest. These 18 institutions had higher average sustainability, higher return on assets, and higher return on equity than the overall averages. Sustainable microfinance institutions that serve lower end markets, the poorest, reach, on average, one and a half times as many borrowers as other microfinance [institutions] and they do it with fewer resources. Hence, these institutions do a much better job of stretching their resources to reach more clients. In terms of clients served, they are far more efficient with their human resources, serving each borrower at half the cost, on average, of a sustainable institution serving higher market segments.”

Footnotes

[5] Approximately two percent of USAID funds and three percent of UNDP funds go to microfinance.

[6] Palli Karma Sahayak Foundation (PKSF) is a Banlgadesh-based autonomous microcredit fund.

Relevant resources

The Business of Doing Good: A Chat with Anton Simanowitz

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The Business of Doing Good by Anton Simanowitz and Katherine Knotts

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Larry Reed, director of the Microcredit Summit Campaign, recently sat down with Susy Cheston, senior advisor to FI2020, and Anton Simanowitz, co-author of the new book The Business of Doing Good, to discuss how organizations can do good work and turn a profit, particularly in the microfinance sector.

In exploring this question, Simanowitz draws on key insights from the new book, in which he and co-author Katherine Knotts studied the success of AMK, a social enterprise which has touched the lives of millions of people living in poverty in rural Cambodia. This study revealed six powerful strategies to improve business to do good:

  1. Don’t just offer products; respond to client needs
  2. Ask good questions and have good conversations
  3. Do what it says on the tin
  4. Motivate staff to do difficult work in an excellent way
  5. Own the dirt road
  6. Adapt to the changing landscape

Find out more about the thinking behind these insights.

In the latter half of the book, the authors explore the disconnect between theory and practice and the resulting implications for client value. AMK’s success is largely attributed to its recognition of the distinction between client wants and client needs, which are rooted in the meaningful conversations the organization has with its clients. The authors observe, through their exploration of AMK, that vision is ensured only when it follows intent, instead being constrained by conventional wisdom.

Simanowitz was here in D.C. yesterday to discuss his book with Larry Reed and Susy Cheston on-site at the Center for Financial Inclusion. He spoke about the importance of conversation in the social sector, both with customers and within the organization itself. From his exploration of AMK, Simanowitz noted that client-centricity extends far beyond identifying the needs of the clients and becomes a feedback loop built on what he called conversational interplay.

An organization that successfully addresses the reality gap between theory and practice, he argues, embraces reality. It understands that following its social vision is everyone’s responsibility and so is built into the business model. Anton noted that we all have something to learn from this exploration of AMK, an organization that “has the client in their DNA” and “reinforces the truism that focus on the customer is good for business.”

Listen to the conversation


If you prefer, you can stream the podcast from SoundCloud, or you can download the audio file.

Voice your opinion in our comments section. How can organizations best do good and do well?

Following the conversation, we asked Larry and Anton to write up a few closing thoughts.

Larry said, “What struck me from our conversation today was how much the lessons we learn from AMK apply to any social enterprise that seeks to expand the positive results achieved by its clients while also earning enough income to sustain itself and grow. Social enterprises need to align all their people and systems around their mission, and they do this with good data, engaging and open conversations, lots of iterations and improvements, incentives that reward behavior that promotes the mission, and a governance structure that reviews performance according to mission at every meeting. The result is an enterprise whose corporate culture can consistently generate creative responses to changing client needs.”

Anton said, “Countless organizations of every shape, size, and orientation — not just in the realm of microfinance — are in the business of doing good and working with poor and vulnerable communities around the world to deliver potentially life-changing services to address a range of pressing social needs. Some are doing excellent work, and this book examines what it is that they do that makes the difference. But at the same time, a common theme has emerged in our work over the past 20 years: we see organisations missing opportunities to do things better and organisations getting things wrong, again and again. When surveying the landscape of missed opportunities, there is temptation to become blindsided by the success stories, but we must deliver on the ethical imperative to make good on our good intentions. This book explores the inevitable shortcomings of every success story and how we can learn from those who are ‘doing good’ well.”

The authors of The Business of Doing Good argue that social enterprises and organizations must understand the importance of response, be it to environment, best practices, or client needs and capacities. The Business of Doing Good challenges microfinance practitioners, social entrepreneurs, philanthropists, businessmen, and students of all kinds to reevaluate their respective journeys to deliver on their good intentions throughout their work and beyond.


Anton Simanowitz (@antowitz) has worked for the past 20 years to support social enterprises to be more effective in delivering impact, and for those who support and invest in them to make better investment, capacity building and policy decisions. For support on building organizations to deliver impact, contact him here. To receive current updates about The Business of Doing Good, follow the book on Twitter.

Larry Reed is the director of the Microcredit Summit Campaign (@MicroCredSummit). He has worked for more than 25 years in designing, supporting and leading activities and organizations that empower poor people to transform their lives and their communities. For most of that time Reed worked with Opportunity International, including five years as their Africa regional director and eight years as the first CEO of the Opportunity International Network

Susy Cheston is senior advisor for the Center for Financial Inclusion (CFI) at Accion (@CFI_ACCION) and leads the Financial Inclusion 2020 Campaign. Cheston has a long history of work in economic development, including leading roles at World Vision and Opportunity International, as well as being active in the leadership of the Microenterprise Coalition.


Related reading

“By the Numbers”: Financial inclusion still limited for the hardest-to-reach

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Figure 8 in By the Numbers shows the projected size of the excluded population by country in 2020. Download the full report.
Click on the image to zoom in.

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>>By Jesse Marsden. Jesse is the program manager for the 100 Million Project at the Microcredit Summit Campaign.

Bravo to the Center for Financial Inclusion’s (CFI) latest By the Numbers report. It does an excellent job of succinctly parsing a large amount of information in such a way that makes the implications of that information quite accessible. Here’s our key takeaway from the report:

We are making the least progress on the hardest-to-reach groups, and unless the financial inclusion community works together to develop a strategy for reaching those groups, there is no way we can meet the goal of full financial inclusion by 2020.

To begin with, we need to address the fact that the rate of improvement reported in the Global Findex seems likely to be overstated. CFI refers, in By the Numbers, to the criticism levied by Daniel Roodman and Daniel Rozas against the claims of this year’s Findex. They very clearly lay out how the differences between the 2011 and 2014 Findex questionnaire could have an inflationary impact on estimating progress.

Of particular interest to the Campaign is how the report demonstrates the unequal gains in access (what CFI calls “access gaps”) for certain segments of the population. The Campaign has a particular focus on understanding financial inclusion efforts as a piece of a larger effort to build pathways that help those in extreme poverty better manage the risks they face and seize on opportunities they find. In this light, it is worrisome that the progress reported by the Findex, and illuminated in By the Numbers, demonstrates that for those living in extreme poverty — often the hardest-to-reach — financial inclusion is still quite limited.

While the overall increase in financial access reported by the Findex was 20 percent, access has improved little or not at all for women since 2011 and there was no change in access for those without secondary education. Rural populations saw an increase in access by a mere 2 percent, and those aged 15 to 25 saw only a 3 percent gain. The wealthiest 60 percent of the population had faster gains in access than that of the poorest 40 percent, who saw only a 6 percent change.

Source: CFI, By The Numbers

Source: Center for Financial Inclusion, By The Numbers

We need a bottom-up strategy

The overall picture we get from CFI’s analysis is that very little of the progress being reported has been among the hardest-to-reach groups. This points to a central weakness of the strategies being employed by the World Bank and others. Most are top-down strategies trying to extend the reach of existing services to new populations. This means they are employing an overall strategy for increasing access that must slow, and eventually crawl to a stop, as it gets to less populated areas and poorer communities where top down approaches become less affordable to implement.

At the Microcredit Summit Campaign we firmly believe full financial inclusion will require a different approach: one that starts with the hardest-to-reach segments of the population and works its way back. It is relatively easier to add features and services to attract higher income groups once you have designed a service that reaches the lowest margin customer first. On the other hand, it is almost impossible to sufficiently reduce costs of a service or product originally designed to reach middle income customers so that it is affordable to the poorest.

If we want to reach full financial inclusion by 2020, the leaders in the financial inclusion movement should be agreeing on who are the hardest to reach and what are ways to begin reaching them now. Thanks to the work from CFI, we know in broad categories who the hardest to reach will be: the extreme poor, women, and those living in rural or remote regions. We will be able to move beyond these general categories to more specific population segments when the World Bank releases the full Findex micro-data in October.

The Campaign wants to work with CFI, the World Bank (including Group members like the IFC), the Alliance for Financial Inclusion, and others to develop the strategies to reach the hard-to-reach groups.

In April, the Campaign introduced six “pathways” to reach the extreme poor and to help them move out of poverty. They are our proposal for the types of interventions we should focus on:

  1. Agricultural value chains
  2. The graduation approach
  3. Savings groups
  4. Conditional cash transfers
  5. Integrated health and microfinance
  6. Mobile platforms linked with agent networks

While these six pathways are not the only financial inclusion interventions, they are some of the more effective interventions currently in use. (This post from April outlines why each of these six pathways matter to the overall picture.)

Mapping target populations and successful programs

So the question becomes, how do we as diverse stakeholders work together to develop strategies that can address the “access gaps” in By the Numbers? Stakeholders working with data, such as the Campaign, World Bank, Microfinance Information Exchange (MIX), IFC, Finclusion Lab, and others, should begin mapping where these population segments live. We can then layer onto the map those stakeholders, projects, and partnerships that are successfully reaching the hard-to-reach. New collaborations should be created to expand work where populations are not being served.

On the flip side, we should also identify existing programs that are not reaching the hardest-to-reach and ask why they are not. What are the constraints holding back progress in these areas? Is it a misalignment of the regulatory framework? Is the program or intervention failing to use a reliable metric to target its activities? Are there critical stakeholders missing from the implementation equation?

Mapping the location of populations who face more and more challenging obstacles to using appropriate financial tools to support their movement out of poverty is an important step to understanding whether interventions are working in the right places. More specifically, it will also help identify programmatic challenges and, therewith, more relevant solutions to those challenges.

This is a process that will take time, and 2020 is only five years away. Ensuring access is an important first step, but that step must be taken in a way that looks and plans several steps ahead. Moreover, the Campaign is deeply invested in ensuring that the hardest-to-reach not only have access to appropriate financial services, but that those services have a demonstrable effect in support of those individuals’ movement out of extreme poverty. Therefore, if we are to ensure that financial inclusion indeed includes the hardest-to-reach and that it is a major step to ending extreme poverty, we must begin to intentionally develop strategies that work towards these goals in tandem now.

This will require that global players in this movement learn from those who are having success in reaching the poorest and most marginalized, support their efforts, and replicate their strategies. More importantly, we must learn together how we can provide the sort of services that will help those at the bottom of the economy reduce vulnerability and take advantage of opportunity. We look forward to working with CFI and others to make this happen. We invite you to get inspired by our coalition of Commitment makers, set your own goal to help end poverty, and make a Campaign Commitment.

Related reading

World Bank report documents progress on poverty reduction and path ahead for Ethiopia

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>>Authored by Jesse Marsden, Research and Operations Manager

The World Bank released a report in January about the progress made on poverty reduction in Ethiopia between 2000 and 2011, and it described what will be needed to end extreme poverty by 2030. Given our program with MasterCard Foundation in 2014 (see this post summarizing the “Innovations in Social Protection” program) this was of particular interest to us.

The Campaign is also increasingly focused on understanding how 6 key financial inclusion pathways are showing great promise in contributing to the end of extreme poverty.

The report suggests that Ethiopia’s concerted, collaborative, and well-supported poverty reduction effort has been a success story with remarkable results. In 2000, 56 percent of the population lived below the World Bank extreme poverty line of $1.25 a day PPP. By 2011, that rate had fallen a dramatic 25 points to 31 percent of the population. It is good to see too that the Bank report also covers non-income indicators, noting that as compared to 2000, by 2011 most Ethiopians had better health, education, and living standards as well as improved life expectancy. Access to basic services improved by double (meaning electricity and water in the home).

The report notes that this rate of progress is uncommon on the continent and is second only to the rate of poverty reduction seen in Uganda over the same period. It also seems that the right places received the attention needed. That is to say that regions with higher rates of poverty saw some of the most dramatic declines, particularly citing Tigray where the Campaign visited during our field visit in 2014.

In places where dramatic growth like this takes place, one of the oft noted concerns is that the gains from improvements are being felt by a limited segment of the population (usually those who were better off already). One of the most impressive statitstics concerning the poverty reduction seen in Ethiopia is that during this period the already low inequality level was maintained.

Success factors

So what has been at the heart of this progress? The report cites a wide range of factors, accurately reflecting the multi-faceted nature of poverty reduction efforts. It is worth noting however that the report does accredit the greatest share of poverty reduction having resulted mainly from a single sector, namely the rural, self-employed, agriculture sector. While factors such as consistently good rainfall and high food prices have played a positive role, the report notes the importance of some more intentional efforts.

The Productive Safety Net Program (PSNP) launched in 2005 (and a key part of our visit in 2014) has played an important role in poverty reduction by both directly reducing poverty rates by 2 percent as well as contributing indirectly through increasing agriculture input use and thereby increasing productivity. In addition, public investment has been “central” to the government development strategy and “redistribution has been an important contributor to poverty reduction.”

Ethiopia bases public spending decisions on a central and publicly accessible Growth and Transformation Plan. This strategy places primary importance on sectors crucial to poverty reduction including food security, education, health, roads, and access to water. With this plan in place since 2005 (concurrent with the launch of PSNP) public investments in social protection, agriculture and food security, and access to basic services have been key drivers of poverty reduction in Ethiopia.

Getting to zero extreme poverty

Where do we go from here? 31 percent of the population living below the extreme poverty line is still a huge extreme poverty rate. Based on our visits with policymakers and program implementers on the ground in Ethiopia last year, it is apparent that a continued focus on maintaining and expanding the gains seen from 2000 to 2011 in poverty reduction remain a central focus of key actors in Ethiopia now 3-4 years later.

The report says the future of poverty reduction will rest on as many different areas of work as it took to achieve the progress so far. The strategy presented seems to come down to a dual focus on increasing employment and economic opportunity in urban areas, and increasing agricultural production in rural regions. This is a very simplified presentation of a nuanced and complex set of approaches laid out in the report.

We are also encouraged by how well many of the recommendations echo what we saw on the ground in 2014 as well as what we seem to be seeing emerging as some of the key interventions for financial inclusion that will help end extreme poverty. One recommendation of particular note was for programs to move from a geographical approach for interventions (say, targeting a state or region) to one targeting a condition. The PSNP already works in this fashion as the program targets those meeting the definition of “food insecure” rather than organizing its deployment based on location.

Public works under the PSNP

Public works under the PSNP

One of the six pathways the Campaign is focused on is agricultural finance and value chain improvements. The Bank report points to the need for Ethiopia to continue strong support of agricultural production as a key driver of future poverty reductions. The PSNP program which included a public works component to increase access to irrigation and reduce arable land erosion. Additionally, the R4 program addresses weather related shocks and other agricultural risks, mentioned specifically in the report, through both avenues of response to events after they occur as well as preventative measures to mitigate the negative effects of future events.

We think it would be important for operators such as REST, one of the NGO implementers of the PSNP, to increase their activities around building the capacity of female farms managers to generate higher returns from their activities. In addition, the government should investigate how, though national-level programming, it can also support increased attention and support for female farm managers. Citing potential causes such as poor access to land or agricultural inputs, the report points out that female-managed farms produce 23 percent less than male managed farms. Ending extreme poverty will require addressing this gender discrepancy through policies that foster changes in institutional behavior and gender norms. This can be led perhaps by investigating how an add-on benefit to PSNP could be an agent for this change.

The report also supports the continuance and even growth of the use of social safety nets (such as cash transfers). It looks closely at the difference between indirect transfers via subsidies to producers of certain basic needs and direct transfers to the actual individuals. It ultimately recommends that spending on subsidies would have a great impact on poverty reduction if they were converted to direct transfers. The Campaign has pointed to greater use of technology to increase access to financial tools such as savings accounts, and groups like the Better Than Cash Alliance are also showing the power of using digital payments by governments.

Given Ethiopia’s still-limited mobile network infrastructure, making use of a digital payments platform to more accurately and cost-effectively deliver direct transfers may still be years away. However, we feel that building this infrastructure as a means to utilizing technology in its poverty reduction strategies will be important and should have received some attention in the report. Such a platform would support the report’s dual urban-rural approach since transfer programs exist both in urban and rural areas. Farmers can also receive information on market prices through mobile devices, thus enabling them to sell their products at the optimal profit. This can positively impact areas the report considers important, namely agricultural production, payment for inputs, and access to employment opportunities. We think this is an area missed by the report.

The report also places a great deal of emphasis on fostering employment in urban areas, noting that urban poverty in Addis Ababa tracks employment rates. While the report notes that employment won’t fully address urban poverty on its own, increasing such opportunities for the urban poor and self-employed is important. The report recommends decreasing the costs and barriers to migrating from rural to urban centers and supporting the entry and growth of firms who have the capacity to hire many employees.

Where the report suggests increased support will contribute to poverty reduction is in supporting self-employment in non-agricultural work. BRAC’s graduation model, one of the six pathways we recommend as a financial inclusion intervention key to ending extreme, can help. We spoke with graduates of REST’s graduation program in 2014, and it was clear to us that the program has had positive impacts. Now those anecdotes are backed up by evidence of the effectiveness of the graduation approach, not least of which are the recent set of studies published in Science a few weeks ago. They demonstrate the positive outcomes from the graduation approach, highlighting its importance as a financial inclusion pathway that is working well.

REST supports positive outcomes for its graduation participants by providing access to market research. Participants thus understand what kinds of income-generating activities have a better likelihood to succeed in their given location. Moreover, the graduation model concludes with a direct transfer that does not require a participant to choose self-employment over employment, allowing for perhaps the kind of flexibility the report might recommend — particularly in an urban setting.

The fifth financial inclusion intervention that the Campaign sees as key to ending extreme poverty is savings (and savings groups in particular as they are often able to reach persons banks can’t or won’t.) However, savings is markedly absent from the report. There is some discussion of addressing the ability for individuals to more easily liquidate assets such as land in order to facilitate urban migration, but little is mentioned concerning savings as a means to build an asset base and whether this can be a driver of poverty reduction in the future for Ethiopia.

We know from our visit that REST graduation participants are connected to formal savings accounts as well as financial capacity building resources to support them in making the most of those accounts. So we were surprised to see a discussion of asset building — savings in particular — so absent from the report. We think this should be an additional area of focus for poverty reduction strategies going forward.

Savings as a strategic element could be important to pursue in tandem with supporting the growth of the mobile network infrastructure since there are cost savings to be realized with providing mobile-based savings platforms. Savings incentives and programs could also be tied to the cash transfers of PSNP or the other safety net initiatives in Ethiopia. Savings accounts could become the landing point for those transfers on a future digital cash transfer platform.

Our recommendations

As a whole, we find the report extremely thorough concerning the approaches it covered and very much tied to the experience seen on the ground — as least in so far as our limited view into programs in Ethiopia from our Innovations in Social Protection program affords us. Of the six financial inclusion areas the Campaign sees as key to ending extreme poverty, three (agricultural finance and value chains, conditional and cash transfers, and the graduation approach) are mentioned in detail in the reports assessment of what will be needed to end extreme poverty in Ethiopia. We think that graduation programs can be a key response to the report’s recommendation to build opportunities for self-employment in non-agricultural activities.

Further consideration, however, should be given to the potential for digital technology platforms to play a powerful role in facilitating and improving the cash transfer programs. Though, Ethiopia will need to improve its telecommunications infrastructure to make this a possibility. Savings also has a role to play in supporting individuals’ ability to build an asset base which will help them seize opportunities and resist vulnerabilities. By linking cash transfers on digital platforms to savings accounts, this also can be an important part of Ethiopia’s financial inclusion strategies in the future.

Ecuadorian Government commits to support entrepreneurs with disabilities

The Technical Secretariat provides financial inclusion support to entrepreneurial projects led by persons with disabilities. Says Alex Camacho Vásconez, Technical Secretary, “This commitment will allow us to take part in an international movement that seeks to reduce extreme poverty all over the world.” Read the full press release.

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The Microcredit Summit Campaign welcomes the Government of Ecuador as the first government to make a Campaign Commitment, joining a global coalition of 54 partner organizations working to help 100 million families lift themselves out of extreme poverty.

The Technical Secretariat for the Inclusive Management on Disabilities (Secretaría Técnica de Discapacidades) of the Vice-presidency of the Republic of Ecuador is developing the “Productive & Financial Inclusion Model” through public-private partnerships. The model provides financial capacity building and training in support of enterprises run by persons with disabilities, and the Technical Secretariat has supported 257 enterprises to date. The Technical Secretariat commits to support 500 entrepreneurial projects led by persons with disabilities through the Productive & Financial Inclusion Network by December 31, 2015.

Furthermore, the Technical Secretariat understands the vital importance of measurement indicators to assess progress in meeting its objectives in serving persons with disabilities. It is currently working with partners to identify and assess the relative strengths of available poverty measurement and other indicators. The Technical Secretariat commits to implement a set of measurement indicators, including indicators to assess poverty levels, during the first half of 2015.

Alex Camacho Vásconez, explains why they have joined the Microcredit Summit Campaign and this global coalition:

“Our commitment to advise more than 500 entrepreneurs with disabilities in 2015 and to implement tools for the assessment of poverty levels of the members of this priority group directly supports the objectives of the 100 Million Project,” said Alex Camacho Vásconez, Technical Secretary. “The signature of this commitment will allow us to take part in an international movement that seeks to reduce extreme poverty all over the world. This strategic partnership with a global actor such as the Microcredit Summit Campaign is of great value as it constitutes a guarantee for the beneficiaries of the Productive Inclusion model and international recognition as a good practice for the global eradication of poverty.”

Read the Government of Ecuador’s Campaign Commitment letter.

The Microcredit Summit Campaign looks forward to welcoming our new partners to the global coalition and sharing their progress towards achievement of their Commitment at the 18th Microcredit Summit. The Campaign’s 100 Million Project is building a movement among financial service stakeholders committed to helping to end extreme poverty through: public statements of commitment to action, expanding practices to reliably measure movement out of extreme poverty, and promoting innovations and best practices to accelerate movement out of poverty.

The Technical Secretariat for the Inclusive Management on Disabilities was created in 2013 to coordinate the transfer of programs and projects from the Misión Solidaria Manuela Espejo to the guiding ministries; following Executive Directive No. 547, enacted January 14, 2015, this was transformed into the Technical Secretariat forthe Inclusive Management on Disabilities.

Among its roles are the coordination of  cross-sector implementation of public policy in matters concerning disabilities such as development and enactment of policy, plans, and programs to raise awareness about persons with disabilities within the initiative of Participatory and Productive Inclusion and Universal Access under the national program Ecuador Lives Inclusion (Programa Ecuador Vive la Inclusion).


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E-Workshop Recap: Helping Clients to Prepare for their Old Age

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On June 9th, the Microcredit Summit Campaign co-hosted with the Center for Financial Inclusion (CFI) an E-Workshop focusing on financial inclusion for the elderly. This is part of their 2014 Campaign Commitment to bring greater attention to the issue of aging and financial services and to further support the inclusion of those with disabilities. HelpAge International and Micro Pension Foundation helped make it a great discussion about opportunities for organizations (specifically microfinance institutions) to help clients prepare for their old age. The conversation looked both at the supply and demand sides of financial inclusion to better understand what is happening in clients’ lives and how best to approach these issues.

Watch the session recording:

Review the panelists’ slides:

Recap of the E-Workshop

Sonja Kelly from CFI introduced the focus of the session:

“Financial services needs change throughout the lifecycle, and if a client of microfinance services reaches their old age without having developed a plan to meeting their expense needs, it will be too late. Almost all participants in our webinar reported that they knew someone who had inadequately prepared for their older age. This common issue is one that microfinance can help to address by developing longer term savings products and pensions either in-house or through partnerships.”

Eppu Mikkonen-Jeanneret, head of policy at HelpAge International, began the discussion introducing the shift in populations and subsequently labor markets, noting that there are currently about 800 million people who are over 60 around the world. In 15 years, there will be over 1.3 billion people over the age of 60, of which 60 percent will live in low- and middle-income countries.

The common perception is that the 60 percent in low- and middle-income countries either will not save for their old age or lack the capacity to do so. However, the Global Findex report, which looks at the demand side data of financial inclusion, shows otherwise. According to the report, almost 25 percent of all adults say they have saved for old age in the past year — though it is predominately happening in high-income OECD countries and in East Asia and the Pacific. “Around 40 percent of adults in these two regions reported saving for old age, a far greater share than the roughly 10 percent who reported doing so in all other regions” (The Global Findex Database 2014, page 47).

Eppu explained that 18 percent of the pyramid base reported having saved for old age and 60 percent of the top. Sonja Kelly (CFI) noted that the question now is whether they are doing so in safe and secure mechanisms.

Eppu  expanded on this issue following the session, saying,
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“The world is in the middle of demographic sea change; the global population is growing older. This is a result of hugely successful development. We are healthier and better educated, we have less children and we live longer. As a result, in just 15 years the population of 60 years and over will increase from 800m to 1.3b. Far from being a developed country trend, aging is actually fastest in the low and middle income countries. Where it took the European countries over 100 years to transit to an aging population, countries like Bangladesh will do this in just a few decades. In fact, 60 percent of the 1.3 billion people will live in the developing countries.

“We know that people in developing countries continue to work into old age even though the type of work may change. Many work in the informal sector and women especially carry on providing unpaid labour at home. Yet our thinking is locked in outdated associations with people in the 60s onwards as somehow inherently, homogeneously vulnerable. It’s time we embrace the change and take action. Financial inclusion of people across the life course, facilitating social pensions, linking pensions with other financial instruments, and working closely with older women and men will help us all to adjust to the new world.”

Parul Khanna, associate director of projects for Micro Pension Foundation, continued the conversation. She noted this:

“Globally, rapid advancements in technology, telecommunications, and banking outreach have had a powerful impact on the ability of governments to deliver targeted fiscal transfers to the poor, including pension benefits to the elderly. Simultaneously, technology and telecom are reshaping financial services access and delivery, especially among low income excluded households. Most developing countries have a large young workforce, a predominantly informal labour market with modest incomes and savings capacities, a huge pension coverage gap, low banking and formal finance penetration, and limited capacity for large scale fiscal transfers.”

Parul presented their Gift-a-Pension project, which provides micropensions to low-income domestic workers, and she called on participants and readers to take action:
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“Can we do something for informal workers around us…[those] who touch our lives every day? Our maids, drivers, security guards or our washerwomen? Or the guy who we buy our bread from every day? Or our barbers? That seems feasible, right?

“For example, it is possible for you to imagine going home today, and spending just a few minutes with your maid or driver to tell them about the importance of saving for old age. And then spending just 10 minutes on the internet to open their own pension account for them? If your answer is yes, then you have within you the power to gift 20 years of a dignified old age to your maid or driver. And if all did this, we could collectively, as a civil society, change the lives of 40 million domestic help forever. Which, incidentally, is more than the total population of Canada.

It took India 6 years to get 3 million low-income people to start a pension account. If each of us go home today and gift a pension to just 1 excluded person in our lives, we could reach from 3 million to 43 million by this weekend!  After all, just 10 minutes of your time can change 20 years of someone else’s life. You can be the change! Try now with Gift-a-Pension.


Thank you to all panelists for contributing to this important conversation about the importance of saving for old age and how organizations can simplify the process for their clients. We also wish to thank all participants who submitted thought-provoking questions and comments to help make the session interactive!

Related resources:

Film on the micro pension model

About Gift-A-Pension


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

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

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.


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