“On a certain level, it seems intuitive that doing more for people — giving assets and training and cash — will produce better outcomes than just giving one thing, like cash. But the downside is that it takes more time, effort, and money to run a more complex intervention.
So a major question looms over the graduation program: Is it worth spending that money on the program or is it more efficient to just give all the money directly to people in need? In other words, is it really useful to teach the person to fish or should you just give them the damn fish already?”
“In recent years, development experts have moved toward an important idea called “cash benchmarking,” which basically says that cash is the benchmark against which all other anti-poverty interventions should be judged. Since giving people cash is easy, efficient, and respectful of their autonomy, aid agencies should only run a different type of program if testing shows that it works better than cash would.
Nowadays, when studies come out showing positive results for graduation programs, there’s a tendency to think that this particular combination — cash plus assets plus training — does work better than simply giving cash. But just because the graduation approach works great in some scenarios doesn’t mean it’s always the most efficient approach.
For starters, though, let’s look at the evidence suggesting that cash-plus programs work better than simple cash programs. Three studies have run this sort of comparison.
In South Sudan, a study looked at what happened to 250 households that got a full graduation program, compared to 125 households that got only cash and 274 households that received neither. Both graduation and cash increased consumption, but only the graduation group saw a significant increase in assets, a sign of more durable wealth. Although the cash group shifted a bit from agriculture to other types of work, they didn’t set up their own lasting businesses that may have been higher-paying.
In Uganda, researchers evaluated a graduation-style program run by a group called Village Enterprise. It offered training and a capital grant to extremely poor people so they could start a small business. The researchers found that it worked well, increasing self-employment income and consumption. In fact, it outperformed cash on these measures. The authors speculate that, “left to themselves — without training and mentorship — beneficiaries [of cash transfers alone] struggled to make productive investments, maintain them, and derive sustained value from them.”
In Niger, a new randomized study has highlighted the benefits of taking a multifaceted approach to extreme poverty. The study evaluated women who were already enrolled in a government cash transfer program. The goal was to understand how psychosocial issues — like feeling depressed or disconnected from your community — might make it harder to seize economic opportunities. The study found that the women who got psychosocial support showed rates of returns that were higher than those who got only cash. Offering psychosocial support was the most cost-effective route 18 months after the intervention.”
“while graduation programs appear to work great in some places, they’re dependent on the market — and they can run into problems in places where the market is either too dysfunctional or, ironically, too functional.
One randomized trial in India, published in 2012, is an example of the latter. It found that a graduation program yielded no net impact. Although it shifted participants away from agricultural jobs to other sorts of work, they could’ve earned just as much in their original agricultural jobs. While those original jobs were far from big money-makers, wages for agricultural labor had been improving in India, thanks to programs like the ambitious National Rural Employment Guarantee, so adding in a graduation program didn’t really help.
Dysfunctional markets produce their own obstacles. Abed told me about his experience trying to run a graduation program in Balochistan, an extremely dry, desert-like province in southwestern Pakistan, where participants were taught how to run a small business. One problem: There wasn’t a functional market for the businesses to thrive in. “Once they graduated, there wasn’t much to go to,” said Abed. “And there wasn’t microfinance available. So it was very, very difficult.””
“Another way a graduation program can flop is if it fails to be cost-effective. In the huge 2015 randomized study that looked at graduation programs in six countries, Banerjee and his co-authors note that although the program proved extremely cost-effective in some places, easily paying for itself within 10 years, other countries don’t have such low costs and high benefits in the short run. In Peru, for example, such a program wouldn’t break even.”
“Abed is convinced that graduation is the best approach for the ultra-poor, but he acknowledges that what makes the most sense for the moderate poor is a somewhat open question. Also, while graduation may be best for ultra-poor people who are young and healthy enough to go start businesses if given half a chance, it may not work for those who are elderly or disabled. For those groups, the answer may well be cash transfers.”