Whole Planet Foundation is committed to investing in entrepreneurs and entrepreneurial solutions to alleviating poverty, now and for future generations. Since the beginning, we’ve remained focused on supporting microfinance organizations that target the most marginalized, excluded, or poorest entrepreneurs. But in some cases, households trapped in extreme poverty aren’t able to start businesses or borrow start-up capital even from the most socially focused microfinance organizations. Rural areas are often more expensive for microfinance services to operate, and in turn microfinance loans are often too expensive for very poor households living on less than $1.90 a day that have few or no assets.
Introduction to the Graduation Model
To continue to support the financial inclusion of households living in extreme poverty, WPF has recently added two projects focused on the “graduation model”. In an effort to identify and review opportunities and barriers around the graduation model, the WPF field team compiled the latest research focused on this growing sector, connected with leaders in the industry, and consolidated our findings as a team. There’s strong evidence that the graduation model’s targeted and multi-faceted approach helps the extreme poor become economically active and improve their well-being.
Just as in microfinance, there are variations of the graduation model practiced in different parts of the world. But most of them share a few common elements. They are structured as sequenced, intensive interventions which often include a careful selection process with community participation, business training and mentorship, and an injection of business start-up capital. The one-time intervention is designed to help a poor household build assets, engage in income generating activities, as they develop resilience in the face of the unpredictability that often comes with poverty.
An Ultra-Poor Program with Fonkoze in Haiti
In 2011, the Fonkoze Foundation piloted Chemen Lavi Miyò (CLM), an ultra-poor program, to support those women who were not ready to access credit. Through CLM, Fonkoze serves Haiti’s ultra-poor: those that are not able to meet basic needs. In general, these women experience food insecurity, have few (if any) assets, lack education and have health issues. Modeled after BRAC’s Graduation Model, CLM uses specially trained case managers to work with the CLM members over an 18-month period. During this time, women are taught the skills necessary to create a better life. At the start of the program each member is provided with materials to construct a 9×9 meter home with a roof, floor, latrine and a water filter. Then, each member chooses two income-generating activities: goat rearing, pig rearing or pig fattening, poultry and/or other fowl, small commerce (shop) or agriculture. The members receive the assets needed to start the activities for a total value of $155, a small stipend for 24 weeks and free health care through a partnership with Partners in Health.
After 17 months, each member undergoes an evaluation that determines whether she is ready to graduate. This will be the fourth evaluation throughout the course of the program. She must meet certain criteria focused on her income generating activity, productive assets, savings, health of herself and her family and the status of her home.
By the end of 2017, Fonkoze had supported 6,845 (graduated and currently in the program) ultra-poor families in the CLM program. According to Fonkoze’s criteria ninety-six percent of the members that have completed the 18 months have graduated and 30% have then accessed a loan through SFF (Fonkoze’s microfinance program). In addition to providing access to credit through SFF, Fonkoze Foundation also supports Village Savings and Loan Association (VSLAs). VSLAs provides the members living too far from a Fonkoze branch to open a savings account in their community and eventually the ability to take out a loan within the VSLA.
In 2017, Whole Planet Foundation approved a one-year, $62,000 grant to support CLM. Through the WPF grant, the Fonkoze Foundation will support 400 new members over the course of year. WPF funds will be 100% directed to support the productive asset component of the program ($155/member).
Village Enterprise Supports the Graduation Model in Uganda
Village Enterprise launched their current graduation model in 2011, and currently works with rural communities in Uganda and Kenya. Village Enterprise’s one-year program includes microenterprise formation and business savings groups, which help to improve participants’ incomes and access to savings.
Village Enterprise focuses on districts and villages with the highest rates of poverty. Participants are then selected through a multi-part targeting process with community participation and using a poverty assessment index. Village Enterprise prioritizes participants who are estimated to live with less than $3.10/day, prioritizing those who live with less than $1.90/day.
Participants of the program form savings groups of up to 30 members and engage in regular financial management and business trainings. Participants then subdivide to form three-person business partnerships. By week 6 or 7, each three-person business selects an enterprise to start and receives an initial business start-up grant of $100. Village Enterprise staff visit and mentor the businesses throughout the rest of the year. After two and a half months, if the participants are managing their business well, the 3-person group will receive an additional $50 capital grant. Businesses are chosen based on market viability and risk level. Some common businesses are goat rearing, bean farming and drying, and maize collection and storage.
In the meantime, participants continue to save regularly through the business savings group. They can request business loans from the savings groups; these loans are managed according to the groups’ rules. Throughout this program, participants are practicing group, financial, and business management. They are building assets and generating income. At the end of the year, Village Enterprise helps groups connect to more formal financial services, such as Village Savings and Loans Associations. Participants come out of the program with increased income and assets, as well as improved well-being in access to food, education, and nutrition.
To date, Village Enterprise has implemented this model in 177 villages in Uganda. They have worked with a total of 87,000 participants, of which an estimated 70% are women. In 2017, Village Enterprise savings groups mobilized on average $44 per member (or $1,324 per business savings group of 30 members).
In 2017, Whole Planet Foundation approved a three-year, $225,000 grant to support Village Enterprise’s work in northern Uganda. Through this grant, Village Enterprise will support 1500 new three-person businesses over the course of three years, in an estimated 32 villages in northern Uganda. WPF funds will be 100% directed to support the start-up capital grant component at $50 per member, or $150 per three-person enterprise.