People at the very bottom of the economic ladder are often excluded, or exclude themselves, from microfinance. Their income is usually too low and unreliable to permit repayment of loans or investment in anything but basic food consumption. In some countries the very poor are served by safety net programs, which usually take the form of cash transfers, food aid, or guaranteed employment schemes. Starting in 2006, CGAP and the Ford Foundation have been exploring how a “graduation model” can create pathways out of extreme poverty, adapting a methodology developed by BRAC in Bangladesh.
The graduation model targets the “ultra poor”—people who have no assets and are chronically food insecure. Safety nets usually help these very poor people survive but don’t allow them to build up assets. The graduation program combines support for immediate needs with longer term investments in training, financial services, and business development so that within two years ultra poor people are equipped to help themselves move out of extreme poverty. This Brief discusses early lessons from the implementation of the graduation model.
The term “graduation” refers to participants moving out of safety net programs and “graduating” into income-earning activities that let them sustain themselves without external subsidies. The graduation approach was originally developed by BRAC in Bangladesh. Over the past five years BRAC’s Specially Targeting the Ultra Poor program has reached 800,000 households—over 70 percent of them are currently food secure and managing sustainable economic activities.