Ghana: What lies ahead

Representatives from REST Ethiopia lead a group discussion with a graduation program participant during the Innovations in Social Protection and Livelihoods Development program in 2014.

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

The Microcredit Summit Campaign recently spoke with Mawutor Ablo, director of Social Protection at Ghana’s Ministry of Gender, Children and Social Protection, and also a participant in the Campaign’s Field Learning Program last year, Innovations in Social Protection and Livelihoods Development.

The program invited representatives from Ghana, Malawi, and Mozambique on a trip to observe leading social protection programs in Ethiopia and Mexico. In our discussion with Mr. Mawutor, we spoke about the changes made to Ghana’s social protection programs since we last met and what changes may be made in the future to increase the reach of the programs and strengthen outcomes for Ghana’s poorest.

The Ghana National Household Registry

In May 2014, the World Bank continued its support to Ghana through a credit of US$50 million to Ghana’s Finance Ministry with payments dispersed annually from 2015 to 2017.

The funds are directed to the Ghana Social Opportunities Project, which aims to extend Ghana’s Labor-Intensive Public Works (LIPW) program from 49 to 60 of Ghana’s 216 districts. LIPW also aims to expand the reach of grants from 100,000 to 150,000 poor households through the Livelihood Empowerment against Poverty (LEAP) program.

In addition, the social protection systems will be strengthened through improved targeting and the establishment of the Ghana National Household Registry (GNHR).

Ato Berhanu Woldemichael in a meeting

Mr. Ato Berhanu Woldemichael, as acting State Minister with the Food Security Directorate, oversees much of the government’s role in LEAP and LIPW.

Before the implementation of the household registry system, both LIPW and LEAP screened candidate households in selected districts independently. This has not caused an overlap yet, but with the extension of the Ghana Social Opportunities Project and its intended scaling up of both programs, overlap is inevitable, leading to possible disbursement conflicts between the two programs.

The GNHR will create a database that optimizes methods used in finding and selecting program candidates through a universal survey useful for multiple social protection programs in selecting participating households. Simply put, the GNHR and its universal survey will represent a more efficient and comprehensive method for selecting households for inclusion in the national social protection programs.

Mr. Mawutor expects the registry to improve the ability to target and reach the poorest in Ghana. He compared the registry to that of the successful Cadastro Unico, the national registry of Brazil established in 2001. Three years after Cadastro Unico was created, a study showed that the poorest quartile of the population received 80 percent of all social protection programs’ benefits.

By way of comparison, the cash transfer programs in place prior to the unified registry together distributed only 64 percent of the total benefits to the poorest quartile. This improvement in targeting is something Mr. Mawutor hopes to see take place in GNHR by reducing what he termed inclusion error — the participation of households living above the targeted poverty level — in programs like LEAP and LIPW.

The Move to Mobile Money

Leaders in charge of implementing Ghana’s social protection programs are interested in finding the most efficient way to distribute the cash transfers that are at the center of these initiatives. Currently, the most common method of disbursement is through smart cards. Here, recipients of a cash transfer can go to the post office or another government entity with their smart card to have their payment added to their smart card.

Ghana would like to move from this strategy because of the high transaction costs associated with it. Also, this method does not allow recipients to transfer the money they receive to, for example, a family member in need. Instead, Ghana would like mobile money to be the primary form of receiving cash transfers.

Ghana has already partnered with MTN, a mobile network operator from South Africa, and has thus far reached a point where about 10 percent of its payments are disbursed through mobile systems.

Hoping to expand this number, Mr. Mawutor told us that Ghana would be increasing its total number of providers to four companies this year. With the expansion, Mr. Mawutor hopes to make mobile banking more accessible to poorer areas by increasing the overall number of local branches across the country.

The addition of three new operators would also produce significant returns from the added competition to the market, producing incentives for each company to provide the best service.

Mr. Mawutor Ablo during the Innovations in Social Protection, along with the Hon. Dela Sowa, Deputy Minister of Gender, Children, and Social Protection. Together they have great responsibility for the social protection programing in Ghana.

Growth by Efficiency

Social protection programs in Ghana have made many changes in the past few years and they all seem to focus on efficiency. Both the establishment of the Ghana National Household Registry and the move to mobile money aim to cut the costs associated with these programs. The registry intends to better target those among the poorest in Ghana for participation in the social protection program and reduce the costs to serve them by removing redundancies between the various initiatives.

The move to mobile money aims to make funds more accessible to beneficiaries, increasing the potential for positive outcomes resulting from the programs. With these changes, it is clear Ghana is dedicated to maximizing results.

We look forward to continuing to follow new developments from Ghana over time and continuing to be a close supporter of the work of Ghana’s Ministry of Gender, Children, and Social Protection.


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

Beehives

Beehives

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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.

Social protection: innovative programs deliver financial services at scale

Participants of the Innovations in Social Protection project

Participants of the 2014 Innovations in Social Protection and Livelihoods Development initiative

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Pathway

Agricultural value chains that reach to small scale producers


>>Authored by Jesse Marsden, Manager, Research and Operations

April is the Month of MicrofinanceLearn more

April is the Month of Microfinance
Learn more

We at the Microcredit Summit Campaign have advocated for scaling up the full range of microfinance services (savings, credit, insurance, and beyond) as one sector’s contribution to a broader effort to end extreme poverty. Experience of the development community suggests that ending extreme poverty will take a multifaceted approach that matches and sequences the right combination of financial and non-financial services with an ever-varying set of binding constraints faced by individuals living in extreme poverty.

Some 40 years have passed since modern microfinance got underway with micro loans to villagers in Jobra, and innovation and learning have helped micro-financial services and interventions greatly evolve to now include a wide array of forms and functions. Last August, the Microcredit Summit Campaign led a learning tour to deeply investigate some of the newest and most promising innovations in delivering micro-financial services to those living in extreme poverty.

Six delegates representing ministries that oversee social protection programs in Ghana, Malawi, and Mozambique took a twelve-day journey with us across two continents in advance of the 17th Microcredit Summit. They observed innovative approaches for social protection programs to address the causes and symptoms of extreme poverty.

The learning and exposure visit, called “Innovations in Social Protection and Livelihoods Development,” was an initiative led by our 100 Million Project in partnership with The MasterCard Foundation. Delegates to the program from participating learned first-hand what is working well and what challenges exist for program implementers in Ethiopia and Mexico.

Policy makers then developed innovation plans for 2015 to act on lessons learned from their trip after returning home. In one example, the Malawi delegation, based on their innovation plan, fully redesigned their social protection plan (which they were preparing before their trip) to include savings schemes and digital transfer technologies to support implementation. This will have an impact on some 860,000 households (or more than 4 million individuals) living in extreme poverty served by the program.

Rainy season roads

Rainy season roads in Ethiopia

Ethiopia’s Productive Safety Net Program

The Ministry of Agriculture oversees the implementation of the Productive Safety Net Program (PSNP) in Ethiopia which is designed to address food insecurity, a key development and poverty issue in the country. PSNP uses a cash transfer process in combination with participation in a public works scheme, generating water and soil related improvements in remote areas of the country in order to build the capacity of drought stricken areas to endure weather related shocks. In return for working in a 10-person group for a set number of days per month, a monthly cash transfer is granted for six months each year that the individual participants.

These groups of 10 people select a public works improvement project to implement from a set of options developed by PSNP administrators based on the local conditions. Options often include projects to control and prevent the erosion of farming or grazing areas, rain capture systems to mitigate the impact of drought, and even infrastructure improvements such as bridges or access roads. An engineering expert is assigned to each group to ensure quality construction of the improvement and safety of the structure built.

Participants are considered “graduated” from PSNP once her or his status as “food secure” is verified by the Ministry of Agriculture, which states that “A household will be graduate when, in the absence of receiving PSNP transfers, it can meet its food needs for all 12 months and is able to withstand modest shocks.”

The Relief Society of Tigray

The delegates traveled to the northern Tigray Region of Ethiopia to visit public works completed or underway as part of PSNP outside the city of Mek’ele. The Relief Society of Tigray (REST), one of the largest NGO microfinance implementers in the country, hosted the delegation and our visits to sites where REST acts as the local partner to PSNP. Ministry and REST representatives highlighted this effective government-NGO partnership as a key to the program’s success.

The delegation visited a number of key water-related improvements and some of these images depict the massive amount of work conducted over the last seven years since the initiation of the program.

Mexico’s Conditional Cash Transfer Program

The learning program continued in Mexico where the delegation enjoyed a day of briefings, exploring the Oportunidades program (now known as Prospera), Mexico’s conditional cash transfer program (CCT) overseen by PRONAFIM in the State of Yucatán.

The briefing focused on the structures and relationships necessary within the policy framework to make Prospera work under the national-level Ministry of Social Development (SEDESOL). The delegates learned how the national development bank, BANSEFI, plays an integral role as a facilitator of cash transfers and an accounting hub for the program, and how important it is for the national government and regulatory authorities to be involved throughout the implementation of the program.

The delegation also met participants of the program Jovenes con Oportunidades (“Youth with Opportunities”), which provides higher education scholarships to youth of families participating in other social development programs of PRONAFIM. The families we met were participating in a health clinic through SEDESOL, enabling their college-age children to receive scholarships to attend universities or polytechnic schools. In this way, the program contributes to improved health while it supports access to higher education among low-income families.

The delegation spent the next day visiting the Cristo Rey Cooperative in the town of Izamal. Cristo Rey is a CCT distributor, partnered with BANSEFI, for the Prospera program. The delegation learned about their operations including a deep dive into the structure and aims of the child savings program that serves over 3,000 children. The presentation also included a look at the IT infrastructure Cristo Rey requires to be an effective partner in Prospera.

What we learned

The purpose of the learning tour was not to learn everything there is to know about successfully using social protection interventions to end extreme poverty. Not everything is known yet. But, it was an opportunity for the six members of the delegation — all of whom work with similar financial and social interventions in their home countries — to develop new ideas based on evidence of success in order to help reshape or improve the programs they oversee. As mentioned, Malawi has completely re-envisioned their program. Others have also begun asking how they can access a new learning tour looking at the use of digital solutions to help deliver programs.

The picture of microfinance is one of innovation and creatively combining services in very intentional ways to meet a huge variety of binding constraints faced by those living in extreme poverty. Agricultural financial tools, cash transfers, graduation model programs, and technology all featured prominently in the learning tour, and these are showing exciting promise in meeting the needs of the extreme poor at scale and in ways that still remain flexible. We look forward to exploring these pathways more!

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