A recent Financial Times article entitled, “Innovators don’t ignore customers” argued that the rapidly dropping share price of Netflix, a DVD rental and online film service could be explained by the fact that the company lost touch with what its customers wanted. Keeping a sharp eye on client demand is thus not only the responsible or developmental thing to do–it simply makes good business sense.
This special Clients at the Center blog series has lined up a broad range of voices to delve into what we mean by understanding client demand and how developing a much more profound understanding can further responsible financial inclusion. We encourage you to read and jump into the conversation.
When we talk about “graduation” or describe the Graduation Model as “helping the poorest find their own path out of extreme poverty,” people often assume that we are being simplistic and mechanistic. They think we are saying that the Graduation Model sets in motion an escalator through which all the poorest can start at the lowest level and mechanically, after a certain period of time, lead sustainable economic lives above the poverty line. However, if we insist that the poorest are a separate segment from the “not so poor,” we also believe it is crucial to identify the many disparities within this group. We know many of the poorest will reach “graduation” faster than others, while quite a few will never make it at all. To understand the graduation process, we must understand the differences among the group we call the “poorest.” We need a better understanding of who the individuals are, in order to gauge whom the Graduation Model works for, which people may be better off in other trajectories (as in labor employment), or to assess who will require on-going safety net support.
The CGAP-Ford Foundation Graduation Program works with ultra-poor people in a handful of the poorest nations. Ten Graduation Pilots are underway, in Ethiopia, Ghana, Haiti, Honduras, India, Pakistan, Peru, and Yemen. Several of the pilots are measuring the program’s effects on people’s lives through rigorous randomized impact evaluations. We are also conducting qualitative research to better understand the lives of the poorest. Already we are realizing how varied their stories are, and how much context matters. For example, impact assessment baseline surveys in Honduras andPeru show that Peruvian households who enter the program are in better economic shape than those in Honduras, despite living in far more remote locations. But among those identified as ultra-poor in Peru, the poorer households tend to live higher up in altitude, with more children, and considerably younger heads of households.
The experience from implementing the pilots, combined with thebaseline surveys results in Ethiopia, Ghana, Honduras, India, Pakistan, Peru, and Yemen, point to some overall characteristics of extreme poverty, while still emphasizing the importance of local culture and environment. Food insecurity, unreliable incomes, lack of asset and land ownership, and isolation are shared characteristics of extreme poverty. But, if food insecurity is a solid indication of poverty in Ethiopia and Haiti, in Peru even the poorest are relatively food secure. Lack of access to productive land is a good indicator of poverty in South Asia, but not in Ghana where villagers can farm communal land. The absence of productive assets is often a key indicator of poverty, but it is not always easy to differentiate between actual ownership of an asset and leasing of livestock in places like Pakistan, where poor people often take care of animals in return for a small fee. Strict adoption of national poverty indicators or strict means testing can be misleading: qualitative research, listening to communities, and bringing in program staff’s local knowledge helps reach a more nuanced and relevant understanding of what constitutes extreme poverty locally.
The Graduation Program’s qualitative research conducted so far, suggests that beyond “measurable” household characteristics such as dependant–earner ratios, family dynamics and access to social networks strongly influence participants’ success within the pilots. In South Asia, a married woman in a household with interfering in-laws is less likely to succeed than a female-headed household. A woman who has been able to cultivate social networks with the local political leaders for example—even if they are poor—has a greater chance of making it out of extreme poverty. Qualitative research allowed the Fonkoze Graduation Pilot in Haiti to show that households with more dependents and uncooperative men tend to perform worse than others. So the program tailors interventions to provide extra support to those who are likely to be “slower climbers.” At Trickle Up in West Bengal, qualitative research pointed to the particular importance of fieldworker performance in helping “slow climbers” transform their trajectories. As a result, Trickle Up has increased training and support of fieldworkers, and the program gives its staff clearly-defined goals to meet such as making sure participants are on track with their savings goals.
By getting to know the poorest people better, and by closely monitoring their progress, the Graduation Program is trying to apply all the lessons learned from the pilot implementation and research conducted so far to boost participants’ chances of success.
–Syed M. Hashemi and Aude de Montesquiou
Dr Syed Hashemi is the founder and Director of the BRAC Development Institute at the BRAC University. In this capacity, he provides strategic and management guidance on the Institute’s Development Studies Masters Programme and other certificate courses; the Institute’s research programme covering poverty, livelihoods, social accountability, etc; and on building South-South partnerships to build practical economic transformation programs. He is a professor of economics and an established microfinance expert with over 15 years of senior experience working in this field. Prior to his role at BRAC, Dr. Hashemi spent nine years working at CGAP. As a senior microfinance specialist, he initiated a number of innovative tools and structures including the global Social Performance Taskforce. Before CGAP, Syed was the Director at the Grameen Trust and managed the Programme for Research on Poverty Alleviation and started a $3 million programme to promote research on issues of the poor and the powerless. He has also been a University professor of economics and is widely published in academic journals on a range of economic development issues including microfinance, social safety nets, poverty, empowerment, and accountability.
Aude de Montesquiou is a microfinance analyst at CGAP. With over six years of experience in microfinance, Aude is the task team leader for the CGAP-Ford Foundation Graduation Program, a global effort to understand how safety nets, livelihoods, and microfinance can be sequenced to create pathways to help the poorest out of extreme poverty. In close collaboration with project partners, Aude supports the overall coordination of the program and helps shape its research agenda. She also provides technical support to pilot implementation, facilitates global knowledge sharing, and distills lessons through various publications. For the past several years, Aude has also been the relationship manager for the Microinsurance Network, a leading platform for insurers, funders, and academics to promote valuable insurance products for the poor. Before joining CGAP, Aude completed internships with PlaNet Finance and microfinance institutions in Lebanon and Togo. She holds a master’s degree summa cum laude from The School of Political Science in Paris, with a major in development studies, and also holds a bachelor’s degree in history from the University of La Sorbonne. Aude is fluent in English and French, speaks Portuguese and Spanish, and has rudimentary German.