Home' Trinidad and Tobago Guardian : August 2nd 2015 Contents SBG16 THE ECONOMIST
BUSINESS GUARDIAN www.guardian.co.tt AUGUST 2 • 2015
The poor do not simply lack money. Often
they also are short of basic know-how,
the support of functioning institutions
and faith in their own abilities. As a result,
Abhijit Banerjee and Esther Duflo of the
Massachusetts Institute of Technology write in their
book, "Poor Economics: A Radical Rethinking of the
Way to Fight Global Poverty" (Public Affairs, 2011) it
takes "that much more skill, willpower and commitment"
for the poor to get ahead. No wonder escaping extreme
poverty, usually defined as living on less than US$1.25
a day, is so hard.
Even the most successful plans to lift people out of
dire poverty and keep them out seem to work only for
some people, in some places, some of the time. For
example, microcredit works best for the relatively enter-
prising, who are rarely the very poorest. Similarly, cash
transfers linked to school attendance are useful, but
require a working educational system.
What succeeds in one country may fail elsewhere,
thanks to different conditions and cultural norms. The
poorest are often the hardest to help.
This dispiriting picture makes a new paper by Banerjee,
Duflo and several others all the more striking. It claims
to have identified an anti-poverty strategy that works
consistently, based on a seven-year, six-country study
of more than 10,000 poor households.
The secret, the economists argue, is to hand out
assets, followed by several months of cash transfers,
followed by as much as two years of training and encour-
That formula seems to have made a lasting difference
to the lives of the very poorest in countries as different
as Ghana, Pakistan and Peru.
BRAC, a big Bangladeshi NGO.that originally came
up with this approach to tackle abject poverty, calls it
a "graduation programme."
Given the many problems of the poor, the logic runs,
it is useless to apply a Band-Aid to one while leaving
the others to fester. For example, various NGOs, including
Heifer International, Oxfam and World Vision, give
cows, goats or chickens to poor people in developing
countries, to enable them to earn an income selling
milk or eggs. What if the recipients are so hungry,
though, that they end up eating their putative meal
BRAC s idea was to give those in the graduation pro-
gram not only chickens but also training on how to
keep them, temporary income support to help them to
resist the inevitable temptation to eat them and repeated
visits from program workers to reinforce the training
and bolster participants confidence. The economists
studied plans along these lines run by local NGOs in
Ethiopia, Ghana, Honduras, India, Pakistan and Peru.
The programs all targeted the very poor: As many as
73 per cent of participants in India and 66 per cent in
Ethiopia lived on less than US$1.25 a day.
In all six places households in the program chose an
asset, typically livestock, as a one-time gift. In addition
they received enough money to buy two pounds of rice
a day for as long as a year. They were given training
not only in how to exploit their chosen asset, but also
in keeping themselves healthy. Lastly the NGO provided
a safe way to save money, along with encouragement
to do so.
Although some details, such as the type of livestock
people received or the emphasis placed on saving money,
varied from country to country, the nub of all six plans
was the same.
The results were promising. At the end of the pro-
grams, roughly two years after participants first enrolled,
their monthly consumption of food had risen by around
five per cent relative to a control group. Household
income also had risen, and fewer people reported going
to bed hungry than in control households. The value
of participants assets had increased by 15 per cent,
which suggests that they had not improved their diets
by eating their chickens. Rather, each person in the
programme spent an average of 17.5 more
minutes a day working, mostly tending to
livestock - 10 per cent more than their peers.
The impact still varied by country, being
weakest in Honduras and Peru and strongest
in Ethiopia. Even more striking, the program
had strong, lasting effects on consumption
and asset values even for the poorest tenth
of households it reached, the poorest of the
Perhaps most important, when the
researchers went back and surveyed households
a year after the program had ended, they found
that people were still working, earning and
Were these gains to persist even longer, as
they have in Bangladesh, where another study
has been able to track people an additional
year down the road, the researchers reckon
that the graduation programme would have
benefits of between 1.33 and 4.33 times what
was spent on it.
The only exception is Honduras, where it
did not break even, in part because the chickens
that many people chose to receive kept dying.
The costs of the plans, which varied from
US$414 per participant in India to US$3,122
in Peru, look daunting.
The help is intended as a one-shot, however,
whereas many anti-poverty drives in the devel-
oping world are never-ending.
That makes graduation programs cheaper
than many of the alternatives. India, for exam-
ple, spends about 0.3 per cent of its GDP
every year on a workfare program that reaches
about 50 million households.
Reaching the same number of households
through a graduation programme.
Graduating from destitution
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