Scott Anderson

Weekly Roundup – Nothing Random About It: ‘Graduation’ programs for the ultra-poor get validation through randomized control trials

If we think of inclusive business like a rising tide delivering millions of poor to the shores of the middle class, then the ultra-poor often are the ones left without a life preserver to cling to.

The ultra-poor are the billion or so people who earn less than $1.25 a day. NGOs, most most notably Bangladesh’s BRAC, have developed poverty “graduation” interventions, or a series of services designed to help the poorest of the poor to move on from the most desperate living conditions. Graduation efforts are high-touch programs, providing a multitude of training, health and financial education services for ultra-poor people and their families.

But little research has been done into the long-term effectiveness of these types of 360-degree services for chipping away at extreme poverty. This week, new research from Innovations for Poverty Action (IPA) and other partners, published in Science, appears to validate not only the approach, but also the return on investment. (Disclosure: IPA is a NextBillion Content Partner).

Here are are the six components of the programs provided to recipients over a two-year timeframe:

• 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 health care to stay healthy and able to work.

• A savings account to help put away money to invest or use in a future emerge.

IPA researchers, partnering with their regular teammates at the Abdul Latif Jameel Poverty Action Lab (J-PAL) and the Consultative Group to Assist the Poor (CGAP), followed the lives of 21,000 people in six countries for three years. They used – you guessed it – randomized control trials (RCTs) to monitor success, following graduation program participants in Ethiopia, Ghana, Honduras, India, Pakistan and Peru, and peers who received no interventions at all. Then they compared their lives one year after the programs concluded.

The research appears to validate many of those graduation methods, according to a summary:

“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.”

The research could provide a powerful shot in the arm for NGOs hoping to implement the graduation programs and perhaps to sell them to skeptical boards. The studies found that return on investment was more than sound, delivering positive returns in five of six countries.

The findings and their potential for long-lasting poverty alleviation was the subject of a panel on Thursday involving Esther Duflo of MIT’s economics department and director at J-PAL and Dean Karlan of Yale University and IPA. Here’s a replay of the session:

During the Q&A part of the program, Duflo fielded a question about the charity GiveDirectly. It was a timely query, given this excellent deep dive on the nonprofit, This Startup Gives Poor People A Year’s Income, No Strings Attached, featured this week in The Huffington Post by Executive Editor Nico Pitney. GiveDirectly transfers about $1,000 to very poor families over the course of a year. The nonprofit has been championed among Silicon Valley types and is widely praised for its data-driven transparency. In a recent study of its results:

“Investigators found that, one year after the transfer program, cash recipients had increased their earnings by 34 percent and their assets by 52 percent compared to people who didn’t receive transfers (the new assets were most often livestock, household upgrades and savings). Among cash recipients, the number of people who reported going to bed hungry dropped by 36 percent, and the number of days children went without food fell by 42 percent. Cash recipients had spent more on education, health, food and social goods and activities (though after a year, health and education outcomes had not changed substantially). There was no increase in alcohol and tobacco spending.”

As Pitney points out, other charities have followed GiveDirectly’s lead. The Heifer Foundation recently announced it is conducting an RCT on its own impact and plans to make the results public.

An essay published today by Jason Zweig in The Wall Street Journal puts the spotlight on RCTs. (And although I follow the subject, I must admit that the term “randomistas” is new to me.)

“Many of these poverty fighters call themselves ‘randomistas,’ after the randomized controlled trials that are at the heart of their methods. In such field experiments, people are randomly assigned either to a treatment group that receives an ‘intervention’ or to a control group that does not. The experimenters meticulously collect and analyze data, then try to replicate the results elsewhere to see if they hold up.”

When The Wall Street Journal covers something that’s seemingly as obscure as RCTs, the topic has entered the mainstream. RCTs are not without their critics (including Jeffrey Sachs, who’s quoted in the piece). But it’s clear that RCTs and data-heavy results are starting to outpace the often cherry-picked poverty-to-prosperity success stories that adorn websites and brochures.

That’s a good start.

Scott Anderson is the managing editor of NextBillion.

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graduation approach, poverty alleviation, research