The Graduation Project:
Sustainable Livelihoods for the
Reduction of Extreme Poverty
Presented by:
Yves Moury
International Conference:
“Graduation and Social Protection”
Serena Hotel, Kigali, Rwanda
6-8 May 2014
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I D S G r a d u a t i o n a n d S o c i a l P r o t e c t i o n C o n f e r e n c e M a y 2 0 1 4 F o r f u r t h e r i n f o r m a t i o n p l e a s e r e a c h : g r a d u a t i o n @ f u n d a c i o n c a p i t a l . o r g
INTRODUCTION Founded in 2009, Fundación Capital – FundaK is a pioneer in inclusive finance and a testing ground for innovation in asset-­‐building, working to eliminate poverty by expanding access to training, capital and productive opportunities. Our mission is to reduce poverty via the design and implementation of innovative initiatives aimed at generating the conditions that will allow low-­‐
income people to build, improve and strengthen their assets. Under this framework, one of the various initiatives led by Fundación Capital is The Graduation Project, which seeks to create mechanisms that instill the proper conditions under which markets can be leveraged for a sustainable exit from poverty. In practice, The Graduation Project has two objectives: directly supporting governments in strengthening and implementing innovative policies to overcome extreme poverty, and managing knowledge and influencing public policy agendas to incorporate innovative strategies that combat extreme poverty. The term “graduation” has various meanings within the realm of social policy, ranging from an administrative cut-­‐off point, to passing a threshold at which participants are believed to no longer need assistance to be able to progress economically, to a progression through interlinked social programs in a robust social protection strategy. The Graduation Project at Fundación Capital was born out of the necessity to find innovative, sustainable and scalable strategies so that people living in poverty and those living in extreme poverty can stabilize themselves socioeconomically, increase their resilience to shocks, exercise their full citizenship, and continue on the path to development through accumulating productive, financial, human and social assets. The goal is to equip participants who have the ability to work with the necessary tools to enable them to participate more actively in productive activities and to be able to protect their assets (especially via financial instruments) so that self-­‐sustained and self-­‐propelled growth in virtuous cycles of development is likely. In order to revert poverty and inequality, large scale and well-­‐designed solutions led by governments are needed; hence the focus of the Graduation Project on public policies implementation and improvement. In the first part of this paper we argue that is necessary to link graduation with the main social policy in Latin America: the conditional cash transfers (CCT) programs and create synergies between them. In the second part of this paper, we explained why graduation should be considered broadly, as part of transformative social protection, since there are several factors that are not directly related to households that facilitate or constrain graduation. Finally, we addressed that in order to work on large-­‐scale graduation it is necessary to incorporate innovations in social policy such as the introduction of cash instead of in-­‐kind asset transfers that helps to support a demand-­‐focused approach, and the use of information and communication technologies (ICTs). Latin America and Africa can benefit from South-­‐South cooperation and learning from one another in order to face a similar challenge: the eradication of extreme poverty. Creating Synergies with CCT programs The magnitude of poverty means that public budgets are needed to address it. At the global level 1.2 billion people are still living in extreme poverty and in 2010 there were 414 million people estimated to be living in extreme poverty in Sub-­‐Saharan Africa (World Bank). In Latin America and the Caribbean, where 9% of the world population lives, even with a decline in poverty and extreme poverty rates absolute numbers of poverty remained stable in Latin America in 2013 compared to 2012, with 164 million remaining in the ranks of the poor, representing 27.9 percent of the population. Disturbingly, in the same region the numbers of extreme poor rose 2 million to total 68 million in 2013, which is a 0.2 percentage point increase from 2012 up to 11.5 percent of the region’s inhabitants according to the Economic Commission for Latin America and the Caribbean (ECLAC). Inequality in income distribution in Latin America and the Caribbean (LAC) countries is one of the world’s highest outside of Africa with a Gini coefficient of 0.50 on average in the region. In order to revert poverty and inequality, large scale and well-­‐designed solutions led by governments are needed; hence the focus of the Graduation Project on public policies implementation and improvement. States have many budget constraints and pressures as well, so while conditional cash transfers (CCTs) have been an important social program in Latin America in recent decades with ample evidence as to their effectiveness in raising living standards and fostering human development, it is necessary to create strategies for strengthening the productive capacities of the families that are naturally exiting those programs, so they do not fall back into extreme poverty again. According to the World Bank, one in four Latin Americans receives a conditional cash transfer, totaling 129 million people (almost a quarter of the population) in 18 countries, and worldwide CCTs now reach somewhere around 0.75 to 1 billion people. Analysis of Latin American CCT programs commonly reveals a lack of strategies for those people that exit the program naturally, that means their children conclude the educational program, reach the age limit, or reach the programs’ specified maximum number of years for providing the transfer. That is the case of Paraguay, where the government can only provide 72 transfers of six years’ length each. In other words, the structuring of the exit mechanisms has often been postponed, which means that while CCTs temporarily bring households’ income above the extreme poverty line, once the subsidy is removed households are directly and immediately at risk of again falling into extreme poverty. The next step is to create pathways to lift the poorest households out of poverty in a sustainable way, making exit from social protection programs meaningful and not just administrative. FundaK engaged in dialogue with policymakers from the region about the coincident need for suitable exit strategies for CCTs and policies for the sustainable reduction of extreme poverty. Because of their focus on stocks (assets) graduation policies are a key complement to flow-­‐based policies such as CCTs (income-­‐based) and food aid. Assets are important not only for their role in increasing the productivity of a household but because they also help it to cope with shocks, making the household more resilient, and enabling it to work its way forward out of poverty instead of spiraling back into a poverty trap once assistance is removed. This theory is supported by increasing evidence, particularly that coming out of Bangladesh and Ethiopia, which shows complementary interventions such as vocational skills training, micro-­‐credit services, nutrition programs, social development, skills training and market enterprise programs which are developed to accompany CCTs increase the probability of graduation from poverty (DFID, 2011). Through dialogue with policymakers, The Graduation Project at FundaK emerged, whose focus is on the assets necessary to pursue productive livelihoods so that households may continue a virtuous cycle of asset accumulation which increases resilience to shocks, protecting the ability to self-­‐generate economic and social growth so that incomes can be stabilized and increased for the long term. The Graduation Project promotes the perspective that “a livelihood comprises the capabilities, assets (stores, resources, claims and access) and activities required for a means of living: a livelihood is sustainable which can cope with and recover from stress and shocks, maintain or enhance its capabilities and assets, and provide sustainable livelihood opportunities for the next generation; and which contributes net benefits to other livelihoods at the local and global levels and in the short and long term” (Chambers and Conway, 1992). The Graduation Project aims to strengthen livelihoods to the point of sustainability. We see this as the key to the sustainable reduction of extreme poverty and inequality. Working on graduation methodologies is a way to strengthen well-­‐established CCT programs, either by linking existing social protection programs to create sustainable solutions or creating the missing programs. Coordination of state programs can in this way create important synergies that help accomplish the goals of both programs more effectively1. To be cost-­‐effective, a comprehensive social protection agenda should take advantage of such synergies. Where economic growth engines can be fostered on the household or community level governments’ investments change from an expense into an investment because the result is at once a more active economy of a previously depressed sector of the population and less government spending in long-­‐run relief assistance and welfare. In response to international dialogue on the issues and emerging research, governments in the region are increasingly interested in and working on strengthening graduation strategies in their public policies. While some countries, such as Peru and Mexico, are testing a “one-­‐time” exit mechanism from their CCT programs into sustainable livelihoods, other countries such as Chile and Colombia, bet on a “continuous” graduation process within a broader social protection system. Finally, the previous considerations should take into account several factors at different levels beyond household that enable and/or constrain graduation, such as market conditions, the initial resource conditions and efficiency of assets, the scale of transfer and coverage, household level incentives and the environmental context. All of them are related to the effectiveness of graduation and have been studied in depth by Devereux et al (2011); “Social transfers can be effective in smoothing consumption and protecting existing assets, but complementary interventions are needed to increase incomes and assets to the point were participants are ready to graduate from the programme.” 1
For more on synergies between social protection policy and economic development see Sabates-­‐Wheeler et al. 2009 or Devereux et al., 2008. Graduation and Transformative Social Protection FundaK since its founding has promoted interventions which support transformative social protection. There is growing recognition that transformative social protection is functional for meeting development goals, as it prioritizes strengthening individuals’ capabilities rather than recurring to assistentialism, and moves them from playing a passive role to a much more active one. The graduation concept as the construction of an environment which facilitates a sustainable exit from extreme poverty is therefore closely related to transformative social protection, as both approaches seek to help those who cannot access contributive social protection by supporting the generation of income and growth of productive assets and/or guarantees of employment and services for the unemployed and poor workers, as well as ensuring access to essential social services in the areas of health, water, sanitation, education, food security, housing, and others as defined by national priorities. This paper recommends that graduation be seen as one component of transformative social protection and be thought of from a human rights perspective. Similarly, conditional cash transfers and other social programs should be seen as only one component of graduation and not as a “magic bullet” for reducing poverty. Graduation is not a once and for all outcome, nor a one-­‐time event. It is process, a path towards the long-­‐term exit from poverty. Poor and extreme poor households should benefit from a series of complementary and integrated social programs based on their specific needs within the non-­‐contributive social protection system, entering and exiting such programs based on rigorous criteria, until they are considered to have exited poverty in a sustainable way and can safely graduate from the safety net as a whole towards contributive social protection, with possible entry points within the non-­‐contributive institutional offer once again in the future as a response to shocks. Furthermore, social protection should be considered in the framework of a broader development planning approach, by which governments would build intra-­‐sectoral linkages, i.e. mechanisms by which social protection will improve livelihoods results, health outcomes, and so forth. This would maximize the likelihood of achieving transformative social protection and graduation objectives while minimizing the cost. Despite the establishment of social protection systems, the enabling environment – such as inclusive economic growth, infrastructure, agricultural productivity, access to land and financial capital markets, among others – will ultimately constrain the scale and speed of graduation. Besides, all governments must face the reality that graduation from the social protection system may never be feasible for some chronically poor citizens, such as the elderly or the disabled. Moreover, graduation is not a standalone or isolated concept. It is highly dependent on several factors such as the strength of the social protection system in a country, the macroeconomic environment, market context, initial conditions at the local and household level (e.g. access to water and public services, human, physical and natural capital), the scale and coverage of cash transfers, incentives for dependency, and environmental conditions (e.g. natural disasters and climate change), among others. With the recognition that poverty is a multidimensional problem there is a need to concurrently address multiple dimensions in order to achieve development coordination (Dorawrd and Kydd, 2004) so that the investment made in the populace is cost-­‐
effective at creating outcomes. Cost-­‐effectiveness is a real possibility in consideration of the long-­‐
term benefits to reducing poverty in comparison of the humanitarian and fiscal costs of the alternatives. Large-­‐scale graduation Since 2011, with a view to turn graduation into a massive extreme poverty reduction program, which implies its insertion into state social investment, Fundación Capital, with the support of the Ford Foundation, has been working with Latin American governments in the adaptation of concepts from graduation initiatives worldwide to fit public policy requirements, including cost reductions as well as simplified implementation processes. While maintaining the building blocks common to many livelihood promotion programs around the world (asset transfer, stipend, personalized coaching, and savings promotion), Fundación Capital incorporates innovations such as the introduction of cash instead of in-­‐kind asset transfers that helps to support a demand-­‐
focused approach, and the use of information and communication technologies (ICTs) (most notably tablets) for training. It is FundaK’s perspective that the poor should be the main actors of their own development. Its graduation methodologies open up opportunities of choice for the poor instead of deciding what is best for them, in accordance with Amartya Sen’s conception of “development as freedom”, and borrowing from the experiences of the International Fund for Agricultural Development (IFAD) in the implementation of five projects in Peru from 1993 until now. Thus participants in The Graduation Project are permitted to invest in whatever productive activity they choose, provided they can argue its potential profitability during the initial business planning stage. The project then transfers cash to the participants through formal bank accounts, achieving financial inclusion and empowering the participants to begin managing their productive activity from the start instead of waiting for materials to be delivered to them in an assistential fashion. Numerous studies now validate the productive use of resources when cash is transferred directly to participants: Give Directly in Kenya; Blattman, Fiala and Martinez at NUSAF in Uganda; Hanlon, Barrientos and Hulme’s Just Give Money to the Poor; and De Mel, McKenzie and Woodruff in Sri Lanka in 2008 are just a very few2, and transferring the cash through bank accounts is incredibly cost-­‐effective for governments, noticeably reducing operational costs. The use of ICTs helps to guarantee the quality of skills training across participants, as it depends less upon the individual teaching abilities of the asset-­‐building coaches who review the lessons with participants, because the material is standardized in tablet-­‐based ludic didactic modules. Taking advantage of ICTs to transmit project trainings also reduces implementation costs. It furthermore helps to bridge the digital gap that has been increasing across socioeconomic classes 2
A much more extensive listing can be found at https://www.givedirectly.org/evidence.php because project participants are instructed in how to use the tablet computers on their own time, and for most people it is their first experience with this technology that otherwise would remain out of reach. The use of tablets furthermore also allows for spillover effects, both in bridging the digital gap and also in sharing the didactic materials of the project, because participants are encouraged to share the materials with their families, and because once the tablet enters the participant’s house it is a magnet for attention. A final benefit of using the tablets is that they allow participants to learn at their own pace. Participants are not forced to leave their homes at inconvenient times for lengthy meetings in uncomfortable arrangements, but rather have freedom in selecting a time that is convenient for their learning, and have the freedom to review the training materials as many times as are needed in order to learn the principles of each lesson. Some of these adaptations have been tested in Colombia, in which a graduation pilot project titled “Producing for my Future” began in two municipalities of rural Colombia in January 2013, with 1000 adults who possess labor power (are of working age and without disabilities) and who were living in conditions of extreme poverty. The project has a 24 month intervention phase and a mixed-­‐methods monitoring and evaluation (M&E) system to evaluate the concepts and processes in the project in order to make any necessary adjustments before iterating the process in preparation of a randomized controlled trial (RCT) to evaluate the impact of the project at the household level. The field staff is working with participants on a self-­‐directed tablet-­‐based ludic learning system that uses rules of thumb to impart important lessons on business development, financial management, and human and social development skills. A further pilot project was developed in 2013 for victims of the armed internal conflict in Colombia, where there are over 6.2 million registered victims, many of which are internally displaced persons (IPDs) and live in conditions of poverty or extreme poverty. The pilot is monitoring and evaluating a methodology developed to promote a productive investment of a state indemnity with 1,050 victims in 2014. This project has the potential to scale up, as it is an urgent priority of the state to provide assistance to the victims in rebuilding their lives and transforming the state’s investment into a productive future. The Graduation Project is also technically advising the governments of El Salvador and Paraguay which will begin implementation of graduation projects in 2014. Additionally, Fundación Capital is designing an initiative for participants of Renda Melhor Jovem, Rio de Janeiro’s conditional cash transfer program for youths in extreme poverty. South-­‐South Collaboration: Building Bridges between Latin America and Africa Latin American governments have pioneered the design of effective social protection programs such as CCTs for the large number of poor and extreme poor households who cannot access the contributive social security system. These projects have in many cases been accompanied by diligent monitoring and evaluation (M&E) to arrive at best-­‐practices for implementation. Fundación Capital has technically assisted ten Latin American governments in the design of social assistance programs driving financial inclusion, financial education and the encouragement of healthy savings habits associated with CCT programs, with positive results for participants and governments alike. We also have ample experience with qualitative and quantitative research for both project design and M&E purposes. Evidence is now appearing which indicates that CCT programs in themselves are not enough to ensure the creation of sustainable livelihoods that can lead to the sustainable reduction of poverty. As theory around sustainable poverty reduction has evolved FundaK’s activities have expanded to develop The Graduation Project, and we now see graduation as one of the challenges in front of policymakers for the construction of cost-­‐effective transformative social protection policies that lead to sustainable poverty reduction. For this reason FundaK has been of note in advancing the graduation agenda in Latin America and the Caribbean. FundaK is currently focused on the mutual benefits that are to be had by coordinating African-­‐
Latin American South-­‐South cooperation to share and advance knowledge and best practices that can contribute to sustainable solutions for the reduction of poverty and extreme poverty. Africa is home to important pioneering efforts where technological innovations are concerned. Its use of ICTs for transformational development is unparalleled in the world. For graduation projects, ICTs have been indispensable for reducing costs in program implementation while maintaining or increasing project effectiveness and thereby making a public policy graduation model feasible. In addition to ICTs’ usefulness in educational training as didactic instruments, the technological breakthroughs of mobile finance in Africa promise to be important to the advancement and continued cost reductions in the facilitation of savings and other financial management tools which are an essential element of graduation strategies. World-­‐famous initiatives from M-­‐Pesa and Orange Bank (and subsidiary SONATEL) have not been easily replicable in other business environments but offer useful lessons on how they managed such staggering success. Other applications for ICTs as showcased in Africa extend to such diverse uses as the provision of health services in remote areas and assistance with climate change adaptation. “There’s an app for that” is applicable to paint a picture of the diverse wealth of development services that ICTs can assist with which are limited only by the imagination3. FundaK’s own experiences with ICTs in project implementation began with its Colombia LISTA project which leverages ICTs to impart financial education to recipients of CCTs living in rural areas. Sharing these experiences in the use of ICTs to achieve financial inclusion and opening up a dialogue on the topic was the impetus for the organization of a South-­‐South conference in Johannesburg, South Africa hosting 25 policymakers, practitioners and academics in June, 2012. While FundaK works to expand its operations in Latin America it is also preparing to bring its experiences with CCTs, graduation projects, and transformative social protection and ICTs to Africa to encourage collaboration between two regions fighting a similarly persistent problem. 3
See for example the World Bank article “Africa: Using ICTs for transformational development”, available at http://blogs.worldbank.org/ic4d/africa-­‐using-­‐icts-­‐for-­‐transformational-­‐development REFERENCES Blattman, C., N. Fiala, and S. Martinez. (December 15, 2013) Generating Skilled Self-­‐Employment in Developing Countries: Experimental Evidence from Uganda, The Quarterly Journal of Economics. Chambers, R. (1992) Poverty and livelihoods: whose reality counts? Institute of Development Studies: Brighton: Discussion Paper No. 347. Chambers, Robert and Gordon Conway. (1992) Sustainable Rural Livelihoods: Practical concepts for the 21st Century. IDS Discussion Paper 296, IDS, Brighton, UK. Chambers, R. (1994) The origins and practice of participatory rural appraisal. World Development 22: 953-­‐969. Devereux, S., R. Sabates-­‐Wheeler, and B. Guenther. (April 2008) Linking Social Protection and Support to Small Farmer Development. Devereux, S., R. Sabates-­‐Wheeler. (August 2011) Transforming Livelihoods for Resilient Futures: How to Facilitate Graduation in Social Protection Programs. CPS Working Paper Number 023. DFID. (2011) Cash Transfers Evidence Paper Policy Division 2011. Dorward, A. and Jonathan Kydd. (2004) The Malawi 2002 Food Crisis: The Rural Development Challenge, Journal of Modern African Studies, 42, 3, pp. 343–361, Cambridge University Press, UK. Dorward, A. R., J. Kydd, J. Morrison & I. Urey. (2004) A policy agenda for pro-­‐poor agricultural growth, World Development32, 1 : 73–89. ECLAC. (2013) ECLAC’s Social Panorama 2013: Reduction of Poverty and Extreme Poverty Slows Down in Latin America, Available at http://www.eclac.cl/cgi-­‐
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