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Growth Brief FIRMS December 2015Transforming theeconomic livesof the ultra-poorClare Balboni, Oriana Bandiera, Robin Burgess, & Upaasna KaulA livelihood programme providing productive assets and skills training tothe poorest women in Bangladesh village economies helps them move into morestable self-employment and achieves significant reductions in poverty.Despite considerable progress in recent decades,nearly 1 billion people worldwide live below theinternational extreme poverty line of 1.90 per day.A group that has been particularly hard to reachwith anti-poverty programmes are the ‘ultra-poor’.With low assets and few skills, the ultra-poor worklargely in insecure wage labour, do not participatein modern economic growth and have been difficultto target with credit and human capital policies.The importance of improving outcomes for the ultrapoor is emphasised in the Sustainable DevelopmentGoals (SDGs), whose first target is to eradicate extremepoverty for all people everywhere by 2030.An intervention showing promise in helping theultra-poor move onto a sustainable trajectory outof poverty, is a comprehensive livelihood programmeproviding a ‘big-push’ with complementary investmentsin productive assets and skills training. First pioneeredby the NGO BRAC in Bangladesh, the programmehas been replicated in 20 other countries.This brief describes key findings from a rigorousseven-year evaluation of the first of these livelihoodprogrammes, BRAC’s ‘Targeting the Ultra-Poor’programme in rural Bangladesh. Targeted householdsincrease earnings by 37% and improve theirconsumption, savings, and asset accumulation.Results from Bangladesh are consistent with evidencefrom randomised evaluations of pilots in six othercountries, that suggest BRAC’s approach improvesoutcomes for the ultra-poor across diverse contexts.Longer-term evaluations (four and seven years later)suggest long-run impacts may be even larger thantwo-year effects.KEY MESSAGES:1Job choices available to women inpoor rural villages are limited and relatedto poverty levels.Wealthier women can access more stableand productive work, while the ‘ultra-poor’work irregular, poorly-paid jobs.2Combining large-scale asset transfersand skills training provides the ultrapoor with access to self-employmentand increases earnings by 37%.Seven years after implementation,earnings, consumption, and savingsgains are sustained or increasing.3Benefits for the ultra-poor do not comeat the expense of other households.4The poorest face barriers – rather thanbeing unwilling or unfit – to engage insimilar jobs as wealthier women.Within programme villages, householdsthat do not receive transfers maintainedconsumption and savings and increasedbusiness assets.Average benefits of the programme are5.4 times its cost. High internal rates ofreturn suggest the poorest face barriersto accessing more productive jobs.5BRAC’s approach can be scaledup and successfully adapted todifferent contexts.Results from similar programmes suggest‘big-push’ livelihood programmes can helpthe ultra-poor onto a sustainable path outof poverty.

KEY MESSAGE 1Job choices available to womenin poor rural villages are limitedand related to poverty levelsFor the 896 million people1 living below theinternational poverty line worldwide today productiveemployment activities are essential for increasingincomes and moving poor households out of poverty.Yet, the choice of jobs available to the poor is oftenlimited. Even within poor communities, often onlywealthier individuals have the most stable andproductive jobs, while the ‘ultra-poor’ depend on jobswith lower and more irregular incomes.This study of BRAC’s ‘Targeting the Ultra-Poor’2programme (Bandiera et al. 2015) considers theemployment opportunities and choices of womenin different wealth classes in 1309 villages acrossBangladesh’s most vulnerable districts. In thesevillage economies, the choice of jobs is limited1. World Bank estimate of global poverty as of 2012.2. BRAC implemented two variations of the ‘Targeting the UltraPoor Programme’ in Bangladesh (an asset transfer and a soft creditmodel). All references to the evaluation or study contained herein,refer to the asset transfer model.and women effectively choose between casual wagelabour in agriculture or working as a domestic maid,and self-employment in livestock rearing.Before the intervention, there is a clear division inemployment activities by wealth class. As shown below,the poorest women are far more reliant on casual wagelabour, while women from wealthier households arepredominantly engaged in livestock rearing.This division is important for two reasons. Firstly,hourly earnings for wage labour are lower than thosefor livestock rearing – while there is variation acrossspace, on average hourly earnings in livestock rearingare more than double those for wage labour. Secondly,those engaged in livestock rearing work consistentlythroughout the year, whereas demand for agriculturallabour is seasonal. As a result, women in poor villagecommunities are constrained in the employmentopportunities they can access, and it is the poorestwho work in the lowest-paying jobs and face irregularincome streams throughout the year.SHARE OF HOURS SPENT ON ACTIVITIES, BY WEALTH CLASS100%ULTRA-POORNEAR POORMIDDLE CLASSUPPER CLASSPERCENTAGE OF WORKING HOURS80%Other60%40%Livestockrearing(cows/goats)20%Casualwage labor:domestic maidCasualwage labor:agriculture0%2Transforming the economic lives of the ultra-poorIGC Growth brief

KEY MESSAGE 2Combining large-scale assettransfers and skills trainingprovides the ultra-poor withaccess to self-employmentand increases earnings by 37%Several programmes aiming to increase the incomesof ultra-poor households by improving access tocapital or skills have had disappointing results.It has long been recognised that relaxing capitaland skills constraints may alter the occupationalchoices of the poor and help them exit poverty(Schultz 1979, Banerjee & Newman 1993). However,anti-poverty programmes addressing capital orskill constraints have provided limited evidenceof transformative change (e.g. Crépon et al. 2001,Karlan & Valdivia 2010).In contrast to previous interventions,BRAC’s ‘Targeting the Ultra-Poor’ programmepioneered a ‘big-push’ approach in Bangladesh;combining large-scale business asset transfers andcomplementary skills training. This comprehensivelivelihood programme targets the most disadvantagedwomen in the selected communities who are receivingneither anti-poverty government transfers normicrofinance lending.Relative to the initial levels of wealth and skillsamong participants, the programme representsa large transfer. From the menu of business assetsavailable, all households chose to receive livestock.The combined value of livestock received by eachbeneficiary was USD140,3 nearly double the baselinewealth of the ultra-poor, and far more than thesehouseholds can access via informal credit markets.A training programme of equivalent value wasalso provided over two years to train and supportrecipients in working with livestock and to increasethe benefits they reap from the assets.In response to the programme, targeted womenshifted their working hours from casual wage labourtowards livestock rearing, increasing both total hoursworked and earnings. After four years, the ultra-poorincreased hours devoted to livestock rearing by 361%,while hours devoted to maid services and agriculturallabour fell by 36% and 17%, respectively. Working22% more hours and 25% more days, earningsincrease by 37%.3. All monetary amounts are PPP-adjusted USD terms,set at 2007 prices.Female labourer in Naogaon District, Bangladesh BRACIGC Growth briefTransforming the economic lives of the ultra-poor3

This transition into more stable occupationsresulted in significant improvements in consumption,savings, and poverty levels. Four years after the initialtransfer – and two years after direct programmesupport ended – the programme resulted in a 9%increase in per-capita non-durable consumptionand a decline of 8.4 percentage points in the numberof households living on less than 1.25 per day.4Household cash savings increased nearly ninefold,the value of household assets more than doubledand the household saving rate increased by 25percentage points from an initial value of close tozero. The value of land owned by the ultra-poor roseby 220%, the value of productive assets tripled, andbeneficiaries became more engaged in credit markets.As such, the programme initiates a process of selfreinforcing growth out of poverty.The transformative effects of the programme aresustainable. Seven years after the intervention,targeted households continue to escape poverty ata steady rate, as shown below. A survey conductedseven years after implementation found that changeswere equal to or larger than those seen after two andfour years. This was primarily driven by householdsaccumulating and diversifying asset holdings. Thechange in spending on non-durables was 2.5 timeshigher after seven years than after four, and theincrease in land access doubled.4. 1.25 per day was the international poverty line at the timeof the four year evaluation in 2011. The global poverty linewas updated to 1.90 per day in October 2015.ULTRA-POOR HOUSEHOLD EXPENDITURES AND LAND ACCESSNON-DURABLE EXPENDITURES (USD)1500CHANGE IN YEARLY EXPENDITURES10005000LAND ACCESSCHANGE IN SHARE OF ACCESS TO LAND0.30.20.102007–092007–11PROGRAMME BENEFICIARY OUTCOMESNON-BENEFICIARY OUTCOMES2007–14Please note: In 2011, the programme was scaled up to all eligible study households, including those previously serving as controls.As such, land access and expenditure outcomes from 2011–2014 are illustrated without a control group comparison.4Transforming the economic lives of the ultra-poorIGC Growth brief

KEY MESSAGE 3Benefits for the ultra-poordo not come at the expenseof other householdsA potential concern might be that the interventionhas negative impacts on those who do not receive theprogramme in targeted villages. To test for potentialnegative effects, the research design tracks over 21,000households, 6,700 of which are ultra-poor and 15,100of which come from other wealth classes.Gains to beneficiary households are not obtainedat the expense of other (non-targeted) householdsin the same communities. The programme doesnot reduce consumption expenditure or savingsof households ineligible for the programme, in fact,business assets of non-targeted households actuallyincrease over time. This may be because beneficiaryhouseholds are sharing some of their new resourceswith others or requiring less support from others.Findings are consistent with wider evidence thatincreasing savings amongst the poor has positivespillovers (Dupas et al. 2015). The value of landowned by the upper classes does fall, as the valueof land owned by the ultra-poor increases, but thedrop accounts for only 2% of the value of landowned by the upper classes.Regular meetings with BRAC staff members BRACIGC Growth briefTransforming the economic lives of the ultra-poor5

KEY MESSAGE 4The poorest face barriers –rather than being unwilling orunfit – to engage in similar jobsas wealthier womenOn average, the programme benefits are 5.4 timeslarger than its costs; the estimated internal rate ofreturn ranges from 16% to 23%.5 Working fewerhours in poorly-paid casual wage labour, beneficiariesnow spend more time in livestock rearing. Returnsto this occupational shift are sizeable, and suggestthat ultra-poor women are willing and able to worksimilar jobs as wealthier women, but that wealth classdifferences may require a ‘big-push’ to overcome.One important barrier may be in credit markets.The programme’s internal rate of return exceedsboth formal and microfinance (MFI) lendingrates for a sizeable share of households, as shownin below. This suggests that the ultra-poor areunable to borrow, even to finance highly profitableinvestments. Another constraint may be their inabilityto acquire the skills needed to move into moreprofitable jobs.5. Estimated internal rate of return varies by the assumedopportunity cost of time.PROGRAMME’S INTERNAL RATE OF RETURN (IRR)INTERNAL RATE OF RETURN80%Assuming no casual jobs availableoff-peak, 5% or less of ultra-poorhouseholds will generate anegative net present value.60%40%20%IRR exceeds 22% MFI lending rateIRR exceeds 5% bank lending rate0%20406080100QUANTILEIRR (ASSUMING NO CASUAL JOBS AVAILABLE OFF-PEAK)6Transforming the economic lives of the ultra-poorIGC Growth brief

KEY MESSAGE 5BRAC’s approach can be scaledup and successfully adapted todifferent contextsThe programme impacts have proven highlyscalable. BRAC has reached 1.6 million households6in Bangladesh via its Targeting the Ultra-Poorprogramme. Similar livelihood programmes based onBRAC’s approach have reached over 7000 householdsin Ethiopia, Ghana, Honduras, India, Pakistan, andPeru (J-PAL and IPA Policy Bulletin 2015).Randomised evaluations of these programmeshave found broadly similar positive impacts,despite the differences in cultures, market accessand structures, subsistence activities and scopeof government safety net programmes (Banerjee et al.2015). The long-run benefits of the programmesoutweigh their upfront costs in all countries exceptHonduras.7Across the studies, the interventions helpedbeneficiaries to move into more stable selfemployment activities and spend more time workingeach day. Savings increased significantly, particularlyin programmes that incorporated mandatory savings.Most positive economic impacts were still observeda year after programme activities had ended.The similarity of findings suggests that the poorestface similar constraints across countries, and providesconfidence that the BRAC model can work acrossdifferent contexts and with different implementers.Taken together with the longer-run effects estimatedfor the Bangladesh intervention, the results suggestthat comprehensive livelihood progr

with anti-poverty programmes are the ‘ultra-poor’. With low assets and few skills, the ultra-poor work largely in insecure wage labour, do not participate in modern economic growth and have been difficult to target with credit and human capital policies. The importance of improving outcomes for the ultra-poor is emphasised in the Sustainable Development Goals (SDGs), whose first target is ...

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