Alvarez ultra poorplenary_presenter3-final

SEEP 2012 Annual Conference Building Inclusive Markets: Impact Through Financial and Enterprise Solutions

Microfinance and the Ultra Poor:

Are they compatible?Can they work together?

The Graduation Programin Honduras

Washington DC, November 2012


Project Objectives• To evaluate the social and economic impacts of different

interventions – donations of livestock and agricultural inputs and tools, capacity building, appropriate follow-up and monitoring, and entrepreneurship training.

• To examine the feasibility of using microfinance to “graduate” households living in extreme poverty and of the resulting impacts of this approach.

• To contribute to improvements in the quality of life of children and youth in families living in extreme poverty by strengthening their households’ capacities to access and pursue economic development opportunities.



Who were the ultra poor households?

• Households without productive assets (cows, pigs, goats, chickens, etc.)

• Households with incomes below the cost of the basic food basket (USD$30.75/person/month)

• Households with a maximum of 1.75 acres / 0.8ha of cultivable land

• Households who are not participating in any structured development project aimed at poverty alleviation

• Households with boys or girls (12 to 18 years old) working outside their homes to generate income


How to reach the Ultra Poor? Initial steps

Selection of Households• Implementation of the Participatory Poverty Wealth Ranking Analysis

(PPWR)

Households training (All participant households)• Use of transferred assets, • Use of microfinance services (savings, credit, & financial literacy)• Microentrepreneurship• Food Production• Social development (leadership, gender, conflict resolution)• Basic health• Child rights and protection

04/10/2023 Building Inclusive Markets: Impact Through Financial and Enterprise Solutions 2012

Initial steps, cont.

Assets transfer process• Provide assets (e.g., groceries to sell, seeds, livestock,

etc.) to start income generating activities• Households that failed the first attempt were given a

second chance• Consumption suppor to meet food and health deficit

(Year 1)• Stipend converted to Savings as an incentive to begin a

savings program (Year 2) – with financial literacy as the main component of the program


Obstacles to working with the ultra poor

• Live in isolated areas, hard to reach• Unwillingness to participate in the program• Lack of information at the community and

municipality (county) levels about who are the ultra poor

• Only one MFI willing to become partner in the microfinance component of the program


What worked and what did not?Worked

• Intensive financial literacy training

• Follow up visit to the participant households

• Community-level savings committees

• Individual savings and loans

• Income generation activities to save

• Field visit from the MFI officials

Did not work

• Group savings and loans

• Location of the MFI offices

• Provide a cash incentive to save


How do households invest their savings?

• Support children to attend school (10%)• Send children to high school in main towns

(20%)• Buy more food and medicine (30%)• Invest in income generating activities (20%)• Emergencies (10%)• Repair their houses (10%)


What about the MFI’s role?• 2 saving products designed (adults, youth*)• Promotion of the products through local radio & TV• Savings captured source of low cost funds• Good business for the MFI– established a branch (self-sustaining after 3 years)– Increased from 2 to 6 credit officers

• Planning to introduce more technology to reduce transaction cost


Outcomes• 95.4% of the households have a

saving account• 85% of the households are still

saving at the MFI • 15% of the households did not

continue to save, why?– Their businesses failed– Their families suffered diseases– Quit the program


Outcomes, cont.

• 89% of the households had a balance around $55

• Only 3.4% withdraw their savings monthly • 31% of the households have a loan, 61% invest

in agriculture• 52.7% of the borrowers have loan sizes

between $125 and $375 with a period from 7 to 12 months


Results

• A community institution has been established – the project not only helped families change the way they live and work, but also led to the establishment of a full-service MFI.

• Participants now think about and plan for the future.


Microentrepreneurs of the Program



GRACIAS

Documents

Alvarez ultra poorplenary_presenter3-final