Microfinance is about extending financial access to poor and excluded people. However, apart from a few notable exceptions, microfinance has not typically reached extremely poor people–those at the lowest level of the economic ladder. The majority of the world’s estimated 150 million microcredit clients are thought to live just below and, more often, just above the poverty line. This achievement is not negligible since, for most of these clients, the only other options are informal sources of finances that are often more costly and less reliable.
Some practitioners, governments, and funders, however, are specifically interested in reaching extremely poor people. Whether seeking to foster social protection or financial inclusion, many wish to understand how best to put them on the path toward sustainable livelihoods–a path that increases incomes, expands assets, and provides food security so that the poorest no longer require support from safety nets and can make good use of credit, if they want to.
Successful efforts to reach extremely poor people often have combined access to financial services with a variety of nonfinancial services, such as livelihoods training. In CGAP’s search for models to fight extreme poverty, we were particularly inspired by the innovative and holistic approach developed by the Bangladesh Rural Advancement Committee (BRAC) over the past three decades. We have written about the model and have extensively advocated for it as an important pathway for many of the poorest to escape extreme poverty.
In 2006, CGAP and the Ford Foundation launched an initiative to test and adapt BRAC’s approach in a diversity of countries and contexts. We were intrigued with the idea that, with the right mix of interventions, the poorest could “graduate” out of extreme poverty in a time-bound period. The result of this initiative is the CGAP–Ford Foundation Graduation Program, a series of 10 pilot projects in eight countries involving a broad range of partners and an extensive research effort, to test the universality of BRAC’s approach.
This paper highlights the lessons learned from the Graduation Program first by describing how the model works and how various partner organizations implement it in the field. A subsequent section distills the early findings and is followed by a section on costs. The final section takes stock of the learning to date, including key constraints and outstanding questions.
