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How a Development Impact Bond is Alleviating Poverty in East Africa

Poverty in East Africa
Village Enterprise, an organization that aims to end extreme poverty in rural Africa, published the results of its Development Impact Bond for alleviating poverty in East Africa in November 2021. A development impact bond is a kind of financial security that is made of funds from private investors to finance development in low-income communities. Village Enterprise implemented the program in households across Uganda and Kenya from November 2017 to December 2020. IDinsight, the program evaluator, documented the success of the program.

Poverty in East Africa

Extreme poverty is prevalent in East African countries, with about 44.2% of citizens living on less than $1.90 per day in March 2021. About 41% of the population of Uganda in 2016 and 37% of Kenyans in 2015 lived below the international poverty line.

Countries in East Africa experience extreme poverty because of consistent droughts, conflicts and unstable economies. Data shows connections in these regions between poverty and a significant lack of clean water services, access to quality education, transportation, housing and energy.

Details of the Development Impact Bond

In Uganda and Kenya, the Development Impact Bond provided aid to 241 villages and gave no aid to 241 control villages in order to measure and compare the effects of the aid on household consumption and amount of assets. Consumption included purchases relating to food, transportation, social activities and other everyday spending and assets included household savings, livestock and business supplies.

Village Enterprise provided two phases of cash transfers and regular entrepreneurial training throughout the duration of the program. The program provided two grants to 13,839 households. The program focused on business skills and cash transfers as a combination of both has shown to be more effective at helping people raise enough money to lift themselves out of extreme poverty.

The results of the study considered various characteristics within each household. Some households started with more baseline wealth than others, about 30% of households had a woman head of household, about 47% of households reported at least one member with a disability and each household also reported their respective business types.

The study also aimed to provide results to aid and encourage similar organizations in designing and implementing future programs to alleviate extreme poverty.

Results of the Development Impact Bond

Results of the Development Impact Bond reported an increase in both the consumption and asset categories across households, with a 6.3% increase compared to the control group in consumption per household and a 5.8% increase in net assets per household. The program exceeded its goals, with a 140% benefit-cost ratio. The Impact Bond initially invested $5.32 million into the program and reports predict that the lasting effects of the program will generate quadruple this amount.

Although the program provided two different amounts of cash transfers to households, there was a similar increase in all household consumption regardless of the transfer amount. Households that received larger cash transfers reported more assets than households that received smaller cash transfers. Households headed by women started out with less baseline wealth than households headed by men but reported a similar percentage of improvement in both consumption and assets. There was no significant difference in the effects in households that had at least one member with a disability.

When comparing business types across households, households that ran crop businesses consumed less on average and households that had businesses that fell under multiple identifying categories consumed more. Households with livestock businesses and multiple-category businesses reported higher asset gains than other business types. Businesses that started with higher success levels reported an average higher in both consumption and asset wealth.

Overall, results from the Village Enterprise Development Impact Bond show significant improvements in the livelihoods of extremely impoverished households across Uganda and Kenya. Recipients all reported positive improvements in consumption and assets and provided data that organizations can use to build and improve similar programs in the future.

Success in Numbers (2017 to 2021):

  • About 4,766 businesses emerged.
  • About 14,100 beginner entrepreneurs received training with women accounting for 75%.
  • Exactly 481 business savings groups began.
  • There was a 6% average increase in household consumption and assets.
  • Estimates determined there was a $21 million “increase in lifelong household income.”
  • About 95,000 people benefited from the program.

It is clear that Village Enterprise has seen substantial success in alleviating poverty in East Africa. Through its efforts, people have been able to start businesses and improve their incomes, subsequently impacting their overall lives.

– Melissa Hood
Photo: Flickr

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Village Enterprise Fights Poverty in Africa

Village Enterprise
There are a plethora of organizations with eradicating global poverty at its center. Many focus on specific continents as there are many poverty-stricken countries across these areas. Africa is one of many continents in need of help. One in three Africans, 422 million people, live below the global poverty line and represent more than 70% of the world’s poorest people. On the bright side, one organization making a tangible difference in these numbers is Village Enterprise. Village Enterprise fights poverty in Africa in multiple ways.

Village Enterprise started in 1987 and is working towards ending poverty in East Africa through various methodologies. It has transformed over 1 million lives throughout its establishment. Its focus is eradication through entrepreneurship and innovation with a focus on women, rural youth and refugees. These three categories tend to be the most vulnerable groups with the least resources for success.

Facts About Village Enterprise

The Village Enterprise Graduation program is the primary way they aid Africa. It started over 48,000 businesses and trained over 185,000 East Africans through its program. It targets individuals who have no prior business experience, live on less than US$1.90 a day and are unable to provide for their basic needs.

Village Enterprise fights poverty in Africa by providing groups of three entrepreneurs with cash as seed capital, training and mentoring. These groups filter into Business Savings Groups (BSGSs) of 10. This allows them further access to growth capital, safe savings and social capital. These businesses have included farming, restaurants, beekeeping and small retail stores. Additionally, studies have shown that this program has led to increased consumption, assets and income, and improved nutrition and well-being.

Women Empowerment in Africa

One of its main focuses is empowering women. In fact, 75% of its business owners are women, which is essential because seven out of 10 of the world’s hungry are women. Additionally, in East Africa, women are more likely to be illiterate, underpaid and provided with food than men.

However, with the help of Village Enterprise, financially-empowered women can prioritize these areas to benefit their families. They can do this to benefit their communities as well. The Village Enterprise program analyses show that households with female participants reported increased standing in the city and subjective well-being. This includes improved mental health and happiness, which all work towards ending global poverty.

Empowerment for the Youth of Africa

Regarding empowering the rural youth, over 75% of East Africa’s population is younger than 35. Therefore, investing in youth unlocks economic opportunities in the future. Most rural youths are unemployed because of a few economic opportunities.

By stepping up in places like Kitgum, Uganda, the rural youth can start providing for themselves and their family. Village Enterprise adapted its Graduation program for youth. This created the Mastercard Foundation-funded DYNAMIC (Driving Youth-led New Agribusiness and Microenterprise). It allows children to have agricultural opportunities for economic activity.

Providing Help for Refugees

Finally, Village Enterprise fights poverty by focusing on empowering refugees through another adaptation of its Graduation program. The refugee population in Uganda is at nearly 1.5 million people, so helping the community economically is vital in Africa.

It worked with other organizations to conduct assessments for its programming in the West Nile refugee settlements of Bidi Bidi, Rhino Camp and Palorinya. Following these assessments, it paired refugees with community members to small businesses. Doing this promotes resilience and reduces aid alliance, improving outcomes for the refugees.

Overall, the work of Village Enterprise is inspiring. It demonstrates how vital aid is for other countries, and how a little help goes a long way. By enabling opportunities for economic growth, Village Enterprise has begun a long-standing economic boost for many people in East Africa. With expansion across the continent, it can continue towards its mission of ending global poverty.

– Kiana Powers
Photo: Wikimedia Commons

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Four Ways to Donate by Saving Money

Donate by SavingThere are countless efforts around the globe working to improve living conditions for those in extreme poverty. While per capita, Americans are the biggest charitable givers on Earth, charitable contributions can be increased. By cutting back on everyday living expenses, it is possible to donate by saving money.

Alternatives to Buying Bottled Water

Drinking water is a healthy habit, but bottled water is costly and creates single-use plastic waste.

One way to donate by saving is buying a reusable water bottle. For instance, the reusable Dopper bottle donates 5 percent of every purchase to the Dopper Foundation, an organization working to improve water resources in Nepal.

Upon saving money on single-use bottles, the amount saved can be diverted to a charitable cause. The average American spends around $266 on disposable water bottles, which can add up to over $17,000 in a lifetime. Those savings could be donated to support the work of organizations like Water is Life which pledges to provide clean drinking water to a billion people by 2020.

Water is Life helps communities around the world gain access to clean water through many means, including filters and wells. After Hurricane Maria devastated Puerto Rico, the organization sent filtration straws and portable filtration systems to the hardest-hit parts of the island. Currently, it is working on installing 40 solar-and-wind-powered water filtrations stations in the northwest part of the country. The stations are capable of providing 20,000 liters of drinking water a day.

Credit Card Fee Avoidance

A recent survey of 200 U.S. credit cards found that credit cards average 4.35 fees per card. Furthermore, every card in the survey charged at least one fee.

No-fee cash-back cards are available. Card issuers will also offer a cost break to customers with a long series of on-time payments by lowering their interest rates, waiving the very occasional late fee, or both.

Trading in a big-annual-fee card, asking for late waivers and lowering interest rates can save cardholders $100 – 200 per year. The amount saved is almost enough to fund a grant to a Kenyan or Ugandan entrepreneur through Village Enterprise, which can transform the lives of a family living in poverty.

Since its founding in 1987, Village Enterprise has trained more than 154,000 owners who have gone on to create 39,000 businesses. One such success story is Angela Adeke, a Ugandan woman who was denied the opportunity to attend school due to her family’s extreme poverty. After her own children were denied entry to school because they could not afford uniforms, Adeke took action. With the help of a $150 grant, she invested in fabric and sewing machines for her tailoring business. Adeke sewed her own children’s uniforms and made uniforms for more than 4,000 Ugandan children. She now trains disenfranchised young women to become tailors.

Household Maintenance

The average family spends $6,649 on home maintenance. From major repairs to even the price of lawn mowing, it all adds up. A recent survey from Homeadvisor shows that 72 percent of new home buyers are learning how to do their own repairs. Video tutorials are now available online for most projects, enabling families to save on expenses.

The savings can be donated to a charity like Heifer International, an organization that helps families help themselves. The organization has been active in 25 countries, helping more than 32 million families to overcome poverty and hunger. In Nepal, projects targeting women have contributed to improved gender equality. Nine out of 10 of the families in Nepal interviewed say they had increased their income as a result of Heifer International projects, and it is possible to donate by saving on expenses as manageable household maintenance.

Trimming the Food Bill

Most Americans spend nearly half of their monthly food budget on eating out. By preparing more meals at home and packing a lunch more often, these funds can be diverted to donations. A conservative estimate is that preparing one meal per week instead of eating out will save more than $800 per year. These savings can fight worldwide hunger when diverted to an organization like The Hunger Project (THP).

The Hunger Project works to end hunger through strategies that are sustainable, grassroots and women-centered. Mozambican citizen Moises Fenias Malhaule is an example of a THP success story: Malhaule joined THP education and microfinance programs, and in ten years, he has expanded his farm and paid for his children’s education. Malhaule has also taken many courses in development and construction and shared his knowledge with his community. Donations to organizations like this not only help individuals but often have ripple effects, making entire villages more resilient and self-sufficient.

Organizations like Water is Life, Village Enterprise, Heifer International and The Hunger Project are making a considerable impact in global poverty reduction, but their work relies on financial contributions.  While finding the extra money to donate can be challenging, with a few lifestyle tweaks, it is entirely possible to donate by saving money.

– Francesca Singer 
Photo: U.S. Air Force

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Mon(k)ey Problems: Fighting Extinction and Alleviating Poverty in the DRC


On May 18th, the non-governmental organization (NGO) Village Enterprise announced that it would be forming a coalition with the African Wildlife Foundation as part of its ‘graduation program’ in the Democratic Republic of Congo. The new partnership will focus on alleviating poverty in the DRC while simultaneously conserving the Bonobo population in the area.

Bonobos

Bonobos are a type of great ape that can only be found in the DRC and are the closest living biological relatives to the human species. They are known for their peaceful lifestyles and female-led societies; unfortunately, Bonobos are currently endangered and on the brink of extinction.

You may be wondering, what does alleviating poverty in the DRC have to do with the endangerment of Bonobos? Surprisingly, quite a bit. The reason Village Enterprise and the African Wildlife Foundation decided to cooperate on this issue is because the alleviation of poverty in the DRC may very well be a saving grace for the Bonobo population.

Threats and Risk

The primary threat to Bonobos’ survival is poaching. As of 2018, 90 percent of the people living in the DRC can only afford to eat one meal per day; as a result, many people turn to hunting wild animals for food. Even though it is technically illegal to hunt Bonobos under current DRC law, many are so desperate that they are willing to do whatever it takes to keep from starving to death.

Impoverished people have also taken to selling Bonobo meat in the marketplace. As they are increasingly rare, Bonobo meat is becoming increasingly more valuable, meaning people who are in a tough financial situation may find law-breaking and Bonobo extinction worth the risk if it means providing for their families.

Since there are so few Bonobos already — and they have a relatively slow reproduction rate of 4-5 years — the population is decreasing rapidly and will continue to do so if economic conditions in the DRC remain the same.

New Partnerships and New Hope

The new partnership hopes to get to the root of the issue by utilizing Village Enterprise’s expertise in entrepreneurship to train the African Wildlife Foundation how to successfully start businesses throughout the DRC. In a press release detailing the goals for the new alliance, Village Enterprise stated that it expects the African Wildlife Foundation to open 240 new businesses by the program’s end.

If this strategy works as planned, the increased employment opportunities — and subsequent economic stimulation — would mean that approximately 720 less households would live in extreme poverty (surviving on $1.90 or less per day). Alleviating poverty in the DRC could mean creating less of a need to hunt Bonobos to sell or feed one’s family.

Sixty-three percent of the DRC’s population currently lives below the poverty line, making it the poorest country in the entire world. The Congolese people are in desperate need of an intervention such as that done by the Village Enterprise and the African Wildlife Foundation. Though the preservation of Bonobos is undoubtedly important, this program will hopefully have a much broader effect: providing relief to a country in crisis.

– Maddi Roy
Photo: Flickr

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Entrepreneurs May Be the Solution to Rural Poverty in Africa

AfricaRural Africa is one of the most poverty-stricken regions of the world. Half of the global poor live in Sub-Saharan Africa and 389 million in this region live on less than $1.90. While other regions in the world have seen drastic reductions in poverty, progress in Sub-Saharan Africa has been slow. Even though the persistence of rural poverty in Africa is a multi-faceted problem, certain primary factors can be addressed. The extreme poor lack access to resources to achieve economic empowerment. Thankfully, organizations like Village Enterprise have stepped up to the plate to introduce new opportunities.

Village Enterprise provides a graduation program on entrepreneurship and innovation for those living in extreme poverty in Uganda and Kenya. The organization hopes that its simple and cost-effective model can help bring an end to extreme rural poverty in Africa. Village Enterprise stands out from other organizations by using a group-based approach. Each business is started by a group of three people and usually provides support for 20 people in the community. When individuals join the program, they can’t pay for their family’s needs and have no business experience. The program includes training, a $150 grant and mentorship for the aspiring entrepreneurs.

81 percent of the businesses started through Village Enterprise were founded by female entrepreneurs. This is especially important, since women reinvest 90 percent of their income on average to their families and communities, while men only reinvest 30 to 40 percent.

Lucy Wurtz, Development and Communications Director for Village Enterprise, told The Borgen Project that the employees on the ground have tools, including Grameen’s Progress Out of Poverty Index, to determine the level of poverty in a community and who could use their services. Then, every household in the community is invited to join the program. While only 30 entrepreneurs can be working and training in a group at a time, Village Enterprise can reach 90 to 100 households in a community a year.

“The idea is everyone who wants to has a chance to participate,” says Wurtz, “so you are lifting up the whole area.”

When the program is finished, Village Enterprise is able to move on. Once the entrepreneurs learn the skills, they are empowered and able to continue improving their economic standing. The business owners are also able to work together as a group, as each member can pick up different skills. Some become especially adept at finance and can help their fellow entrepreneurs with book-keeping. Others may specialize in marketing or leadership.

“Once you give a number of skills to a group of people,” says Wurtz, “that group starts acting as a support body to disperse the skills within the group members and take on the attributes of what you’re teaching.”

Village Enterprise measures the impact of the program by the increase in the standard of living. The organization recently conducted a randomized trial involving 6,000 households and 138 villages in Uganda. Researchers returned to the communities a year after the program was finished to see if there were still significant improvements. The study will soon be available to view on the Village Enterprise website.

The organization is expanding in several ways. It continues to grow in the countries in which it already works, Kenya and Uganda, and is also looking into expanding into other African countries, with the Democratic Republic of Congo being one potential target. One of the factors driving expansion is a new opportunity for donors. Village Enterprise is now participating in an innovative way to finance development: development impact bonds. These bonds get investors to pay up front for the costs of an intervention that can be measured by predetermined metrics. If the goals are met, then an outcome payor, usually a donor agency or foundation, will pay back the investor based on this performance.

Village Enterprise has started over 39,000 businesses and trained over 156,000 entrepreneurs. With hope, this approach can go on to empower and lift up the over 40 percent of Sub-Saharan Africans living in extreme poverty.

– Brock Hall

Photo: Flickr