Key message 2 – Combining large-scale asset transfers and skills training provides the ultra-poor with access to self-employment and increases earnings by 37%
Several programmes aiming to increase the incomes of ultra-poor households by improving access to capital or skills have had disappointing results. It has long been recognised that relaxing capital and skills constraints may alter the occupational choices of the poor and help them exit poverty (Schultz 1979, Banerjee & Newman 1993). However, anti-poverty programmes addressing capital or skill constraints have provided limited evidence of transformative change (e.g. Crépon et al. 2001, Karlan & Valdivia 2010).
In contrast to previous interventions, BRAC’s ‘Targeting the Ultra-Poor’ programme pioneered a ‘big-push’ approach in Bangladesh; combining large-scale business asset transfers and complementary skills training. This comprehensive livelihood programme targets the most disadvantaged women in the selected communities who are receiving neither anti-poverty government transfers nor microfinance lending.
Relative to the initial levels of wealth and skills among participants, the programme represents a large transfer. From the menu of business assets available, all households chose to receive livestock. The combined value of livestock received by each beneficiary was USD1403, nearly double the baseline wealth of the ultra-poor, and far more than these households can access via informal credit markets. A training programme of equivalent value was also provided over two years to train and support recipients in working with livestock and to increase the benefits they reap from the assets.
In response to the programme, targeted women shifted their working hours from casual wage labour towards livestock rearing, increasing both total hours worked and earnings. After four years, the ultra-poor increased hours devoted to livestock rearing by 361%, while hours devoted to maid services and agricultural labour fell by 36% and 17%, respectively. Working 22% more hours and 25% more days, earnings increase by 37%.
This transition into more stable occupations resulted in significant improvements in consumption, savings, and poverty levels. Four years after the initial transfer – and two years after direct programme support ended – the programme resulted in a 9% increase in per-capita non-durable consumption and a decline of 8.4 percentage points in the number of households living on less than $1.25 per day4. Household cash savings increased nearly ninefold, the value of household assets more than doubled and the household saving rate increased by 25 percentage points from an initial value of close to zero. The value of land owned by the ultra-poor rose by 220%, the value of productive assets tripled, and beneficiaries became more engaged in credit markets. As such, the programme initiates a process of self reinforcing growth out of poverty.
The transformative effects of the programme are sustainable. Seven years after the intervention, targeted households continue to escape poverty at a steady rate, as shown below. A survey conducted seven years after implementation found that changes were equal to or larger than those seen after two and four years. This was primarily driven by households accumulating and diversifying asset holdings. The change in spending on non-durables was 2.5 times higher after seven years than after four, and the increase in land access doubled.