2012 AC Closing Plenary

1. Microfinance and
the Ultra Poor:
Are they compatible?
Can they work together?
The Graduation Program
in Honduras
Washington DC, November 2012
SEEP 2012 Annual Conference
Building Inclusive Markets: Impact Through Financial and Enterprise Solutions

2. 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.
SEEP 2012 Annual Conference
Building Inclusive Markets: Impact Through Financial and Enterprise Solutions

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

4. 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
SEEP 2012 Annual Conference
Building Inclusive Markets: Impact Through Financial and Enterprise Solutions

5. 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
SEEP 2012 Annual Conference
Building Inclusive Markets: Impact Through Financial and Enterprise Solutions

6. 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
Building Inclusive
12/5/2012 Markets: Impact Through Financial and
Enterprise Solutions 2012

7. 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
SEEP 2012 Annual Conference
Building Inclusive Markets: Impact Through Financial and Enterprise Solutions

8. What worked and what did not?
Worked Did not work
• Intensive financial literacy • Group savings and loans
training • Location of the MFI
• Follow up visit to the offices
participant households
• Provide a cash incentive
• Community-level savings
to save
committees
• Individual savings and loans
• Income generation activities
to save
• Field visit from the MFI
officials
Building Inclusive
12/5/2012 Markets: Impact Through Financial and
Enterprise Solutions 2012

9. 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%)
SEEP 2012 Annual Conference
Building Inclusive Markets: Impact Through Financial and Enterprise Solutions

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
Building Inclusive
12/5/2012 Markets: Impact Through Financial and
Enterprise Solutions 2012

11. 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
Building Inclusive
12/5/2012 Markets: Impact Through Financial and
Enterprise Solutions 2012

12. 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
Building Inclusive
12/5/2012 Markets: Impact Through Financial and
Enterprise Solutions 2012

13. 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.
Building Inclusive
12/5/2012 Markets: Impact Through Financial and
Enterprise Solutions 2012

14. Microentrepreneurs of the Program
Building Inclusive
12/5/2012 Markets: Impact Through Financial and
Enterprise Solutions 2012

15. Building Inclusive
12/5/2012 Markets: Impact Through Financial and
Enterprise Solutions 2012

16. GRACIAS
Building Inclusive
12/5/2012 Markets: Impact Through Financial and
Enterprise Solutions 2012