The Rocky Climb out of Extreme Poverty

Giving cash to low-income households is a great first step to help them toward self-sufficiency and improved life outcomes. However, for some time it has been clear that those in extreme poverty need more. For these families, as stated in a recent report by BRAC Development Institute and the Mastercard Foundation, government support “only succeeds in keeping [households] afloat – managing to avoid starvation or even death.” However, “in the absence of exit strategies, such as wealthy, influential families to draw productive resources from [or] adequate economic opportunities…these extremely poor households have been unable to ascend out of their poverty.”

The New America Foundation's Global Savings and Social Protection Initiative has been exploring how encouraging savings behavior can enhance the impact of cash transfers and help poor households graduate from poverty. Requiring savings is one component of BRAC’s Targeting the Ultra Poor (TUP) Program, which is the model for 10 pilot programs that the Consultative Group to Assist the Poor (CGAP) and Ford Foundation are running to explore how to enable cash transfer recipients do more with the money they receive. In addition to savings, recipients are provided with enterprise development training, a transfer of productive assets (such as livestock), health care, and the mobilized support of local elites.

As described by CGAP’s CEO Tilman Ehrbeck, these multi-faceted interventions seem to be working. Ehrbeck points out that the results of an evaluation of the Bandhan Graduation Pilot in West Bengal, India (highlighted by The Economist here) were “significantly greater than the magnitude of the underlying intervention could possibly explain.” At the same time, however, he acknowledges that the main obstacle to such involved interventions are the costs: in Haiti, the cost per participant can be up to $1900.

It is difficult if not impossible to put a price tag on helping a family graduate from extreme poverty. However, one thing is clear: if we hope to one day live in a world without poverty, we will need to devote much more attention and resources to the plight of the extreme poor. Linkages to savings opportunities could certainly be a cost-effective step in the right direction.