BRAC?s TUP Program: When Base of the Pyramid Approaches Might Not Work
Photograph above: A northern Bangladeshi (Netrokona) tea stall owner who started his business with a $260 loan from ASA, another prominent Bangladesh MFI.
BRAC, a Bangladesh-based NGO, is just giving stuff away to the poor. One of the world’s largest and most innovative poverty alleviation organizations has decided that aid, and not profit, is the way forward to help the very poorest.
As an intern this past summer at BRAC, I was told this in our orientation right before the program coordinator happily proclaimed BRAC to be a social business (think sustainable). The coordinator said that 80% of BRAC’s funds are self-generated and that its goal is to become fully sustainable.
BRAC is no foreigner to market-based approaches to poverty. It was one of the pioneers in microfinance (banking for the bottom of the economic pyramid); it has established BRAC Dairy to sell milk to the poor; and its successful chain of handicraft stores sells the cultural products of villagers to wealthy urbanites. It seemed odd that with all its experience in business applications, BRAC was turning to a handout. Not only that, but this program was funded entirely by donations. What led them to the conclusion that BoP methods just wouldn’t cut it? And could this be sustainable?
Gunendu Kumar, Program Head of the Ultra Poor Program, explained to me “BRAC has realized that in 34 years, one type of people [is] avoided in poverty alleviation. If they get [a] loan, they can’t repay…Since 1998 BRAC has been thinking about how to do something for them.” After much thinking and experience with the World Food Program, BRAC realized that health, education, and social support weren’t enough. “There needs to be an investment”, said Kumar. This “investment” that BRAC has settled on is known as the Challenging the Frontiers of Poverty Reduction: Targeting the Ultra Poor (TUP for short).
In a village outside of the northern city of Netrokona I met a former member of the TUP program. A 20 year-old mother of six with no education, Shuzana talks openly and without hesitation. She is humble yet outgoing. The cubicle-esqe one-room home she welcomes me into has tin siding and a mud-packed floor, a common arrangement in rural Bangladesh.
She explains that as a part of the TUP program she received two cows and three sheets of tin siding. The tin was used to extend her house for her new livestock, which would form the first stage of her micro business selling milk. Not only that, but she received ongoing enterprise training, free health care, legal support, help from a formal organization of local elites, and a weekly stipend of about 2.50 USD to boot. To be a member of the TUP program, Shuzana had to meet a series of requirements to prove she was the poorest of the poor.
Rohima, a villager widowed 16 years ago when her husband died from dysentery, shows off the cattle she received from the TUP program.
BRAC’s theory is that because the hard-core poor are living day to day, often begging or practicing subsistence farming, they require a period of intensive support. Once they progress to a point where they can start investing in their future, the payback begins. And this is the key to sustainability.
After Shuzana completed her two years in the TUP program, she became a member of BRAC’s Dabi microfinance program, taking out three loans totaling $290 to strengthen her family’s tea stall. She has also started saving with BRAC. With an entire cohort of ultra poor Bangladeshis like Shuzana moving off BRAC’s TUP aid and into its income-generating activities like savings and loans, the path to sustainability for BRAC should become easier and easier.
At the weekly Village Organization meeting, BRAC loan officers meet with microfinance members, many of whom previously graduated from the TUP program.
During my trips into the villages, I saw some situations in which the theory didn’t seem to quite match the practice, such as the TUP members who weren’t even aware of the local support groups or members who lamented that even after graduation, they would still be too poor to pay the loan installments. However, there will always be flaws with any program, and overall there seems to be some positive signs. An independent study by economists at George Washington University earlier this year found the TUP program to be positively impacting members’ net income, food security, and ownership of household durables such as tube wells, among other aspects. In The End of Poverty, scholar Jeff Sachs argues for debt cancellation and grants rather than loans for the poorest countries. And organizations in other countries are following BRAC’s lead, like Bandhan in India with “Chartering into Unventured Frontiers: Targeting the Hard Core Poor”, or Fonkoze in Haiti with its “Road to a Better Life” program.
Going forth, it will be interesting to see the long-run results of this approach to the hard-core poor that is spreading so fast and still relatively untested. Are BoP approaches appropriate for this extremely poor population? At least at this point, the answer for BRAC is “No”.