Ending Extreme Poverty: New Evidence on the Graduation Approach

The United Nations’ Sustainable Development Goal (SDG) 1 is as exciting as it is daunting: End extreme poverty. Worldwide, around 700 million people live on less than US$1.90 per day, the World Bank’s international poverty benchmark. But the challenges that ultra-poor households face extend beyond low income alone.

Many of these families depend on insecure and fragile livelihoods, including casual farm and domestic labor. Their income is often irregular or seasonal, putting households at risk of hunger and limiting people’s ability to cope with unexpected shocks, such as an illness in the family. Poorer households are also less likely to be banked, another factor that can contribute to their being stuck in a poverty trap. While financial inclusion is one part of the solution, the array of challenges facing ultra-poor households requires a multi-faceted approach to foster a sustainable transition to more secure livelihoods and an exit from poverty.

The Graduation Approach

In 2002, the Bangladeshi nonprofit organization BRAC turned this idea into a program called the Graduation Approach, which combines complementary interventions into a comprehensive, coordinated, two-year “big push” designed to help ultra-poor households transition out of unstable wage employment and into more secure self-employment. Past research has shown the powerful impact of the Graduation Approach, while the latest findings from India are even more promising in terms of the lasting impact the program can have.

The program includes six components, three of which directly address financial exclusion and constraints:

Financial components

1. Productive asset: One-time transfer of a productive asset such as a cow, goat, or supplies for petty trade
2. Consumption support: Regular cash or food support for a few months to a year
3. Savings: Savings account access or encouragement to save

Non-financial components

4. Technical skills training: Training to manage the productive asset
5. Home visits: Frequent home visits by implementing partner staff to provide accountability, coaching, and encouragement
6. Health: Health education, health-care access, or life skills training

Encouraged by evidence from initial findings in Bangladesh, CGAP and the Ford Foundation supported the launch of ten Graduation pilots in eight countries. BRAC and implementers of many of the pilots partnered with Abdul Latif Jameel Poverty Action Lab (J-PAL) affiliates to conduct randomized evaluations of the Graduation Approach. To date, researchers have rigorously evaluated the Graduation Approach in Bangladesh, Ethiopia, Ghana, Honduras, India, Pakistan, and Peru.

Across a diverse set of contexts and implementing partners, the Graduation Approach resulted in large and cost-effective impacts on ultra-poor households’ standard of living. Three years after participants received the asset transfer, researchers found that they had increased basic entrepreneurial activities and spent more time working each day, ultimately increasing their consumption, asset holdings, income, savings, and food security. The approach also led to some improvements in psychosocial wellbeing.

Temporarily exiting poverty? Or ending it?

Ending extreme poverty requires more than a temporary escape. Did the impacts of the Graduation Approach persist after program support ended? In India and Bangladesh, where researchers have conducted seven-year follow-ups (five years after all program support ended), the impact of the Graduation program grew even stronger over time.

In India, J-PAL affiliates and co-authors released new findings in September that show participants have consumed increasingly more over time. At the three-year mark, Graduation households consumed 12% more than a comparison group; seven years after the asset transfer, they were consuming 25% more than comparison households. In real terms, Graduation participants were consuming an average of US$0.50 (2014 PPP) more per day than comparison group households at the seven-year mark. Participants also reported average total savings of around US$33, more than double that of non-Graduation households. In Bangladesh seven years after the transfer, Graduation households’ consumption had increased an additional two-and-a-half times — on top of the already improved rate measured four years after the initial transfer. (For more details on how this was measured, see the full paper.)

These new results provide further evidence that the Graduation Approach may be a sustainable and cost-effective tool to achieve SDG 1. Both programs cost around US$350 per participant. A cost-benefit analysis conducted at the four-year mark in Bangladesh and three-year mark in India found consumption gains equivalent to 240% and 430%, respectively. This new evidence suggests that Graduation’s long-term benefit may be even greater. In India, where the original implementing organization, Bandhan, is pursuing a variety of scale-up partnerships with state governments, foundations, and NGOs to reach 100,000 households by 2020, these new, long-term results make the case for expanding the Graduation Approach more compelling than ever.

Expanding, embedding, and further evaluating

Eradicating extreme poverty is a multi-faceted problem that requires a multi-faceted approach. Today, the approach is being adapted in over 50 sites in close to 40 countries, with governments implementing around one-third of these interventions. 

There are still many open questions, including which program components drive results, which households benefit the most from participation, and whether governments can scale the approach while maintaining quality. As researchers and implementers work to answer these questions, we already have at least one evidence-based approach to help achieve SDG 1. For the 700 million poorest of the poor, the Graduation Approach provides a promising opportunity provides a promising opportunity for households to get out — and stay out — of poverty.

Submitted on behalf of the Abdul Latif Jameel Poverty Action Lab (J-PAL).