More than one fifth of the world’s population lives on less than US$1.25 per day. Many of these families depend on insecure and fragile livelihoods, including casual farm and domestic labor. Their income is frequently irregular or seasonal, putting laborers and their families at risk of hunger. Self-employment is often the only viable alternative to menial labor for the ultra-poor, yet many lack the necessary cash or skills to start a business that could earn more than casual labor.
In the past, many programs that have provided ultra-poor households with either credit or training to alleviate these constraints have not been successful at raising household income levels on average. However, in recent years, several international and local nongovernmental organizations have renewed their support for programs that foster a transition to more secure livelihoods. Combining complementary approaches—the transfer of a productive asset, training, consumption support, and coaching— into one comprehensive program may help spur a sustainable transition to self-employment. To better understand the effect of these programs on the lives of the ultra-poor, researchers conducted six randomized evaluations in Ethiopia, Ghana, Honduras, India, Pakistan, and Peru.
In Ghana, researchers partnered with implementing organizations Innovations for Poverty Action and Presbyterian Agricultural Services (PAS). The study took place in in the Northern and Upper East regions of Ghana, a region that is disproportionately poorer than the coastal south. Fifty-three percent of households in the study were living on US$1.25 a day or less when the study began, compared to 29 percent in Ghana as a whole.
To select the poorest members of the communities, the project team conducted a Participatory Wealth Ranking, in which villagers collectively ranked households according to their wealth during a community meeting. PAS conducted a short survey afterwards to verify the results of the ranking.
Researchers conducted a randomized evaluation to test the impact of a two-year comprehensive livelihoods program (“the Graduation approach”) on the lives of the ultra-poor in northern Ghana. The approach was first developed by the Bangladeshi NGO BRAC in 2002 and has since been replicated in several countries. The Graduation program consisted of six complementary components, each designed to address specific constraints facing ultra-poor households:
In Ghana, researchers first randomly assigned villages composed of a total of 2,606 households, to one of two groups. One group served as a pure comparison group and was not offered the program. In the other group, 666 households were randomly assigned to receive the program. The other half of the households in that group did not receive the program, and served as a sub-comparison group to measure “spillover” effects on non-participating households living nearby. The program consisted of six complementary components, each designed to address specific constraints facing ultra-poor households:
1. Productive asset transfer:One-time transfer of a productive asset valued at GHS 300
(2014 PPP US$451). Forty-four percent of participants chose goats and hens, roughly a quarter picked goats and maize inputs, and small number picked shea nuts and hens (6 percent).
2. Technical skills training: Training on running a business and managing their chosen livelihood. For example, households who selected livestock were taught how to rear the livestock, including vaccinations, feed and treatment of diseases.
3. Consumption support: During the lean season (14 out of 24 months), households received weekly cash transfers of GHS 4-6 (2014 PPP US$6.02- 9.03), depending on household size.
4. Health: Households were enrolled in the National Health Insurance Scheme and received health and nutrition education. 5. Savings account: Half of the Graduation households received savings accounts through the Savings Out of Ultra Poverty (SOUP) program, also implemented by PAS. When PAS staff made their weekly visits, they collected deposits and households logged deposits. 6. Households visits: Weekly visits by PAS staff to provide to provide accountability, coaching, and encouragement.
In order to test the relative effectiveness of the savings and asset transfer component, the researchers also randomly assigned a portion of households (733 households) to only receive the SOUP program, while another portion (329 households) only received the asset transfer component of the program. Half of those in the SOUP program (362 households) received a 50 percent match on their savings to test the impact of incentives to save.
Researchers conducted the first endline survey immediately after the two-year program ended, as well as a second endline survey around one year later.
Note: Results forthcoming from the relative effectiveness of the savings component (with and without incentives) and an asset transfer-only treatment.
Across all six countries, researchers found that the program caused broad and lasting economic impacts. Treatment group households consumed more, had more assets, and increased savings. The program also increased basic entrepreneurial activities, which enabled the poor to work more evenly across the year. While psychosocial well-being improved, these noneconomic impacts sometimes faded over time. In five of the six studies, long-run benefits outweighed their up-front costs. In Ghana, households that received the Graduation program saw similar effects one year after the program ended:
Economic impacts: Average total monthly consumption among treatment households was 2014 PPP US$33.62, an 11 percent increase over households in the comparison group. They spent $22.41 on food every month on average, 12 percent more than the comparison group.Households saw significant increases in asset holding and borrowed 58 percent more than those in the comparison group (2014 PPP US$35.60 monthly average), They also saved 2014 PPP US$16 a month on average, which was three times more than households in the comparison group.
Self-employment:Households experienced a 91 percent increase in non-farm income, earning 2014 PPP US$12.86 on average, as well as significant gains in livestock revenue, earning 2014 PPP US$40.60 a month on average, or 50 percent more than the comparison group.
Psychosocial wellbeing:Households that participated in the program did not report feeling significantly less stressed or happier than households in the comparison group.
Political involvement:Women in treatment households did not experience significant gains in empowerment in Ghana, and in fact experienced significantly less power in decisions about food in the household. However, treatment households did participate in more community meetings than those in the comparison group.
Cost-benefit analysis:. Researchers calculated total implementation and program costs to be US$1,777 per household (2014 PPP US$5,408). However, estimated benefits of consumption and assets growth amount to 2014 PPP US$7,175 per household, representing an overall 133 percent return on investment.
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