Poverty, and efforts to escape it extend beyond income earned. The Multidimensional Poverty Peer Network (MPPN) captures this in its introduction to the concept of multidimensional poverty, stating that a person can suffer from poverty due to the buildup of a variety of factors that lessen quality of life, including but not limited to a lack of clean water or electricity, poor quality work or limited access to quality education.

For this reason, foreign aid in the form of transfers of cash or goods, while extremely useful in combating global poverty, might not always provide a comprehensive enough approach to ensure that as many people as possible are reached with long-term sustainability in mind.

Graduation Programs as a Solution

A solution exists in the form of graduation programs, defined by the Abdul Latif Jameel Poverty Action Lab (J-PAL) as programs that provide people living in extreme poverty not just cash assistance, but also business assets and vocational training so that they may have the chance to build financial independence and break existing cycles of poverty.

Graduation programs, according to J-PAL, were first pioneered by a nongovernmental organization (NGO) named BRAC in 2002. They are reported to yield positive societal outcomes after one to two years of funding and have been implemented in at least 20 countries.

How the Approach Works

As previously mentioned, the approach starts with providing business assets, such as livestock and supplies for trade, followed by skills training to manage those assets and consumption support. J-PAL states that consumption support consists of regular cash or food assistance for several months to one year.

These programs also provide recipients with access to savings accounts and health support in the form of health education, health care access and life skills training. To ensure participant success, frequent home visits are conducted by staff members to provide accountability and needed coaching.

The name “graduation program” is derived from the idea of “graduating” from dependence on foreign assistance within one to two years and transitioning toward financial self-reliance.

Evidence and Measured Returns

J-PAL shares empirical data showing that long-term returns generated by the graduation program approach can outweigh short-term costs. Studies measuring outcomes 18 months to three years after graduation indicate that beneficiaries saw income growth ranging from 7% to 65%, while consumption increased between 11% and 30%.

Additionally, Innovations for Poverty Action (IPA) reported results from a 2015 study consisting of randomized evaluations in six countries where graduation programs were implemented. The evaluations followed 21,000 people across Ethiopia, Ghana, Honduras, India, Pakistan and Peru over three years:

• Ethiopia – Program cost: $1,054; Returns: 260%.
• Ghana – Program cost: $2,135; Returns: 133%.
• Honduras – Program cost: $1,406; Returns: -198%.
• India – Program cost: $358; Returns: 433%.
• Pakistan – Program cost: $1,160; Returns: 179%.
• Peru – Program cost: $2,697; Returns: 190%.

Looking Ahead

In summation, data collected in countries where graduation programs in developing countries have been utilized demonstrate positive effects in providing more sustainable pathways to financial independence for households living in extreme poverty. The reported returns on investment also present a financial case for continued funding of graduation programs in developing countries within broader global poverty reduction efforts.

– Luca Hanlon

Luca is based in Brooklyn, NY, USA and focuses on Good News and Politics for The Borgen Project.

Photo: Flickr