Despite considerable economic progress in Latin America, as of 2012 there were still 66 million people living in extreme poor (close to 30% of the population). This underscores the importance of finding innovative and scalable ways to help people out of extreme poverty.
Despite dramatic advances in technology and means of production over the last ten years, mainstream and governmental approaches to poverty reduction remain almost unchanged. There is a clear need to create, test, transform and evaluate different approaches for lifting people out of extreme poverty. To that end, Fundación Capital is working with the governments of Latin America and the Caribbean to ‘graduate’ the extreme poor. In this context, graduation refers to a sustainable exit from extreme poverty, as households accumulate a level of human, social, financial, and productive assets that allow them to become self-sufficient and cope with shocks without falling back into extreme poverty.
Building on good practices such as BRAC’s Graduation Model, created in Bangladesh and replicated in several countries around the world, Fundación Capital is working with the Government of Colombia to design and implement the world’s first ‘government-led’ graduation model for the extreme poor. Fundación Capital is also working with the governments of Río de Janeiro, Brazil; Guatemala; El Salvador; and the Dominican Republic.
Working with governments to graduate the extreme poor represents a complex – but in some ways advantageous – approach. Governments in Latin America have a constitutional mandate, as well as available resources, to address extreme vulnerability. Nevertheless, there are challenges involved, particularly in terms of implementation and scalability. For example, most governments ‘implement programmes’ through managing contractors. Therefore, institutional capacity and lessons learnt are not necessarily transferred to governments in a systematic way. Changes in budget allocations and high turnover among public servants can also disrupt the continuity of social programmes.
The biggest challenge, however, lies in scalability. A scalable program must have two characteristics: easy implementation, and cost-effectiveness. Lifting people out of extreme poverty requires complex programming, and high costs. In order to overcome this challenge, Fundación Capital has incorporated two important elements to the traditional Graduation Model in the Colombian pilot.
The first is in providing cash instead of assets to the extreme poor. Distributing cash is feasible on a large scale, is less costly, and also empowers families. Experiences in the region, particularly from International Fund for Agriculture Development (IFAD), have shown that families use the cash wisely, and a similar intervention in Uganda shows that beneficiaries’ income has increased by 40%, and hours devoted to ‘work’ increased by 17%.
The second distinguishing feature of the Colombian pilot is our use of technology. Coaching and training are crucial when working with poor communities. Fundación Capital is therefore testing the use of tablet computers to provide training for strengthening social and entrepreneurial skills, including savings, budgeting, and marketing. This helps bridge the digital divide; allows them to learn at their own pace (each lesson can be repeated as often as the participant wishes); enables all family members (including children) to benefit from the training content; and, perhaps most importantly, makes families feel trusted and instills a sense of self-confidence.
The introduction of cash transfers and technological tools could offer insight into improving the way services to the poor are delivered. The results of evaluation will provide the rigorous evidence governments need to fully and convincingly integrate graduation approaches into their social protection schemes and, ultimately, benefit the 66 million people still living in extreme poverty in the region.