WASHINGTON, DC – A new six-country study shows a comprehensive approach for the ultra-poor, the approximately one billion people who live on less than $1.25 a day, boosted livelihoods, income, and health. Published in Science, the research tested the effectiveness of an approach known as the “Graduation model” in six countries by following 21,000 of the world’s poorest people for three years. The data show this approach led to large and lasting impacts on their standard of living.
Previous efforts by governments and aid groups to reduce poverty among the ultra-poor have not been proven to work. Addressing this gap, the new study reports on a six-country evaluation of a comprehensive approach that addresses the many challenges of poverty simultaneously. According to study co-author Dean Karlan of Yale University and the research and policy non-profit Innovations for Poverty Action (IPA): “Being ultra-poor usually means more than just not having an income – like not enough food to eat, no way to save, no information, and low perception of their opportunities to escape their situation,” Karlan said. “We tested an approach that addressed several factors at once, and found significant improvements, even three years after the program did the bulk of the work.”
In Ethiopia, Ghana, Honduras, India, Pakistan, and Peru, researchers tracked over 21,000 people to test how much the Graduation approach improved their lives and their families’ welfare. The program included six components over a two-year period:
• An asset to use to make a living, such as livestock or goods to start an informal store.
• Training on how to manage the asset.
• Basic food or cash support to reduce the need to sell their new asset in an emergency.
• Frequent (usually weekly) coaching visits to reinforce skills, build confidence, and help participants handle any challenges.
• Health education or access to healthcare to stay healthy and able to work.
• A savings account to help put away money to invest or use in a future emergency.
Borrowing from healthcare research methodology, the researchers used a randomized controlled trial, tracking both people invited to participate in the two-year program and a similar group who was not, to compare how their lives changed up to a year after the program ended. Those in the program group had significantly more assets and savings, spent more time working, went hungry on fewer days, and experienced lower levels of stress and improved physical health.
“Not only is it effective, but it represents a significant return on investment,” according to Kate McKee of the Consultative Group to Assist the Poor in Washington, DC, which helped implement the project. “The hope is that we can next learn how NGOs or governments can better integrate this approach into their programs effectively.”
The program is cost effective, with positive returns in five of six countries, ranging from 133 percent in Ghana to 433 percent in India.
In other words, for every dollar spent on the program in India, ultra-poor households saw $4.33 in long-term benefits. “The Graduation approach has led to broad improvements in key dimensions of economic and non-economic well-being in most countries where it was tested. Policymakers seeking a program to sustainably improve the lives of the very poor should consider investing in this approach,” according to study co-author Esther Duflo of MIT’s economics department and Director at the Adbul Latif Jameel Poverty Action Lab (J-PAL).
A key factor for decision-makers using the model is how comprehensive the evaluation was: “The positive results across such a range of different settings is highly encouraging, and gives us substantial confidence that this approach works for individuals, can be an effective strategy for governments, and can be a tremendous guide to improve the livelihoods of poor families,” said Frank DeGiovanni, a director at the Ford Foundation, which helped build and fund the effort.