Microenterprise graduation leads to higher consumption, asset ownership

While the study’s findings are consistent with previous research on six ultra-poor graduation programs published in Science magazine in 2015, the Village Enterprise model costs roughly a third of the least costly graduation program studied. What differentiates this model is that it is shorter, focused on entrepreneurship, and group-based.

Village Enterprise starts three-person businesses and delivers training through groups of 30.
The program is limited to one year, as opposed to two years in previously studied graduation programs. According to Nathanael Goldberg, director of IPA’s Social Protection Program, and a co-author of the 2015 Science paper, “this research helps fill in an important piece of the puzzle in learning how to design scalable programs, showing streamlined approaches to graduation programming can benefit the extreme poor.”

At a time when donors are pulling back on funding international development, and with approximately 10 percent of the world’s population still living on less than US$1.90 a day (2011 PPP), it’s more important than ever to show that money spent to fight global poverty brings results.

“Village Enterprise has an exceptionally strong record of making iterative changes to its program based on high-quality data. The impact of Village Enterprise has been validated by an RCT, the highest quality evidence in the social sciences,” explained Elijah Goldberg, Chief Operating Officer of ImpactMatters, an organization that conducts ‘impact audits’ of non-profits to rigorously estimate their philanthropic impact, compelling them and their funders to make evidenced-based decisions.

In its recent impact audit, Village Enterprise earned top ratings across all three categories rated: evidence, monitoring and learning.

Based on the strength of the RCT’s evidence that the program is cost-effective, Village Enterprise was recently selected from over 80 organizations as the service provider on a new US$5.28 million Development Impact Bond, the first results-based funding instrument for poverty alleviation in Africa.

Village Enterprise and Instiglio, a pioneer in results-based financing, are partnering with the world’s two largest development agencies, U.S. Agency for International Development (USAID) and the U.K.

Department for International Development (DFID) as outcome funders along with an anonymous donor, with impact investors providing the working capital. Outcome measurements include increases in consumption (as a proxy for income) and net assets.

Larger grant sizes will be tested to see if a higher cash transfer could lead to higher impacts while maintaining program cost effectiveness. Impact will be assessed through an RCT conducted by IDinsight, and the Global Development Incubator (GDI) will serve as the trustee of the outcome fund.

This payment-for-results model provides a 100 percent guarantee that donor money will be linked to
meaningful improvements in poverty alleviation outcomes, and requires funders to pay back Village
Enterprise and its investors the original investment plus a return, but only if outcomes are met.