Microenterprise graduation leads to higher consumption, asset ownership

Kampala, Uganda | THE INDEPENDENT | A one-year microenterprise graduation program targeting the ultra-poor in rural Africa offers a cost-effective way to tackle extreme poverty, according to preliminary results of a new study released in Kampala on Thursday.

These preliminary results suggest that Village Enterprise’s integrated “graduation” model—comprised of targeting, training, mentorship, savings groups, and a modest cash transfer—increased assets and consumption, as well as subjective well-being and nutrition, with a full cost-recovery of the program estimated at three to four years.

“Helping the ultra-poor escape extreme poverty is a global priority, but policymakers are faced with competing ideas about the best way to accomplish this,” said Village Enterprise’s CEO Dianne Calvi. “Despite decades of development work and billions of dollars poured into the region, over half of the world’s extreme poor—a staggering 389 million people—reside in Sub-Saharan Africa. The results of this study confirm what we have observed for some time at Village Enterprise – that this model is impactful and cost-effective.”

The randomized controlled trial (RCT) was carried out by Innovations for Poverty Action (IPA) to test the impacts of diverse components and variants of Village Enterprise’s program. Researchers worked with Village Enterprise to identify 6,378 of the poorest households across 138 villages in rural Uganda, and then randomly assigned eligible households to one of six groups: the full graduation program, the graduation program minus the savings group, unconditional cash transfers, unconditional cash transfers combined with a behavioral/mindset intervention, a variation of the full program called Business in a Box, and a control group for comparison purposes.

Researchers ran comparisons to evaluate effects of the components of the program on households’ consumption, occupational choice, assets, access to financial services, and savings. The preliminary findings indicate that overall, the Village Enterprise graduation program led to an annual per capita increase of US$23.82 in consumption, US$14.94 in assets and US$12.32 in productive cash inflows.1

Given that Village Enterprise works at the household level with an average size of six people, this translates to an increase of US$142.92 in consumption, US$89.64 in assets and US$73.92 in productive cash flow per family.

Higher consumption included both greater food security and dietary diversity. The subjective well-being of participants improved, and appeared to increase over time. The unconditional cash transfer programs did not appear to have meaningful impacts on poverty outcomes, but these results are somewhat ambiguous and more research is needed.