March 10

Manuel Bueno

Reversing the Cycle of Poverty: Targeting Early Childhood Development

Early childhood development (ECD) is a term used to describe the personal growth of a child until the age of 6. During this period the brain of a child continues to develop and form neural connections – a process that started during the pregnancy. Adequate nutrition, cognitive stimulation and care strongly influences the extent to which a child’s health may develop to their fullest potential, as well as her cognitive and social and emotional abilities (Young, 2002).

Unfortunately, in many low-income countries, poverty also begins at birth. Children from low-income families are much more likely to be malnourished, live under unhygienic circumstances and receive low levels of education. A shortfall in early childhood development will have irreversible consequences on individuals’ future lifetime opportunities. This will reverberate later in life in the form of lower quality jobs, lower wages, shorter life-spans, worse health and lower cognitive abilities, thus perpetuating an intergenerational cycle of poverty.

Return on investments in early childhood will be higher than returns to investments made later in life. Firstly, because beneficiaries have a longer time to enjoy the rewards from these investments; secondly, because investing on, for instance, better health or education has a stronger impact on young children than on any other population segment, even if the amount of years was the same. Therefore, supporting ECD generates a positive impact that will have a stronger impact on the individual’s wellbeing than at any other later stage of her life (Recent Nobel laureate James Heckman, has studied this topic extensively, see for instance, Heckman, 2006).

To assist ECD, the child’s family environment is pivotal, hence ECD interventions should at least also consider the child’s mother (as I suggested in a previous post) or at least the child’s primary caretaker. The parental environment and family income of a child are, moreover, far more decisive in promoting human capital and school success during early childhood than in later years (Vegas and Santibañez, 2010).

Although ECD is a very multifaceted concept (at the end of the day everything may have an impact on the child’s development), a recently published book by the World Bank suggests prioritizing 3 goals:

  1. Enhancement of a child’s development early in life, including her cognitive and social and emotional development, physical growth, and well-being;
  2. Enhancement of a mother’s antenatal care with services and information to strengthen the probability of delivery of a healthy baby;
  3. The education of parents and/or caregivers in better parenting, health, and hygiene practices, as well as providing them the opportunity to participate in the labor force.

In other words, at the child’s level there are three main and interdependent needs: nutrition, education and health. At the family level, and especially for mothers, health and education about how to take care of a baby are essential. Therefore adequate ECD programs should ideally be multi-sectorial (straddling more than one industry) and target the child and her family. Along these lines, the most successful ECD programs are:

  1. Conditional Cash Transfer (CCT) programs: CCT programs transfer money (in cash or in kind) to families in exchange for them to comply with certain conditions. These conditions normally revolve around children’s education and health, such as school attendance or regular vaccinations. In Latin America, where CCTs have been successful, it is estimated that they have benefited more than 15 million poor families and over 60 million low-income people.
  2. Parenting Programs: These programs try to educate parents in childrearing and child stimulation techniques and often also include child preschool programs that have been found to significantly affect long-term educational attainment.
  3. Nutrition and supplementation programs: This third type of programs have been mainly geared to improve the children’s physical wellbeing and growth as well as stimulating better cognitive outcomes. For instance, subsidized milk and milk fortification programs for children and lactating women have been massively popular and successful in places like Colombia, Mexico or Guatemala.

Unfortunately, the role played by the private sector in ECD is minor at best. Such a state of affairs stems partly from the belief that nutrition, education or health for infants and young children are sectors better taken care of by the public sector rather than by private enterprise. Moreover, scandals such as in Nestle’s baby-feeding formula have not encouraged BoP firms to try to tackle this set of unmet needs for fear of a public backlash.

This represents a missed opportunity for BoP businesses. I believe that businesses operating in low-income markets would have three main advantages over state–run programs as far as ECD programs are concerned. Firstly, many BoP businesses have accumulated a very high degree of trust and legitimacy at the local level. This high status enables them to more convincingly sway families into changing the way many children are brought up and improving their health and hygiene standards.

Secondly, most BoP business are hierarchically flat in order to decrease operational costs to a minimum and be financially sustainable. This means that a smaller portion of investments in ECD programs would be devoted to the maintenance of business structures and a greater portion would end up on the hands of those who need it most. This is a serious problem in many state-run programs where often a big percentage of the money devoted to development is diluted after passing through the hands of several public organizations (even when there is no corruption).

Thirdly, the integrated nature of ECD programs, and the fact that the most effective interventions include components that are usually the domain of different government sectors (such as education, health, welfare, and labor), makes it complicated to implement and sustain them at the public level. However, most of the most successful low-income businesses exploit hybrid business models. The fact that they straddle more than one sector often represents a strength rather than a weakness or a source of difficulty in their business model.

As I have argued before, it is time to extend the focus of BoP businesses beyond male adults and try to develop products and services targeted to other comparatively hidden population segments such as women and, as I have argued in this post, small children. By refocusing and growing our field of vision, private sector development will achieve increased legitimacy vis-à-vis other more traditional forms of aid and realize higher social impacts.