The Graduation Model
Microcredit is an excellent tool for poor people with the stability
and skills to operate a microenterprise. But what about those who
are too vulnerable or too insecure to run a business?
The people at the very bottom of the economic ladder are usually excluded from microfinance and served by safety net programs: transfer programs targeted at the poor or those vulnerable to shocks. Safety net programs usually take the form of cash transfers, food aid, or price subsidies. While safety programs are able to alleviate poverty, they are unable to develop income generating activities or build assets to move people out of poverty.
The graduation model incorporates the targeting and transfer elements of safety net programs, and introduces entrepreneurial activity through training, an asset grant, and credit. The key to the graduation model is the careful sequencing of several development services to facilitate consumption stability and, subsequently, enterprise development.
BRAC pioneered the graduation methodology over a period of ten years. Their current program, Targeting the Ultra Poor, began in 2004 and today, over 800,000 households have “graduated” out of safety net programs to become successful microentrepreneurs. While their businesses are small and their income is still small, moving poor people from dependence on hand-outs to becoming independent earners is a gigantic leap in development terms.
The people at the very bottom of the economic ladder are usually excluded from microfinance and served by safety net programs: transfer programs targeted at the poor or those vulnerable to shocks. Safety net programs usually take the form of cash transfers, food aid, or price subsidies. While safety programs are able to alleviate poverty, they are unable to develop income generating activities or build assets to move people out of poverty.
The graduation model incorporates the targeting and transfer elements of safety net programs, and introduces entrepreneurial activity through training, an asset grant, and credit. The key to the graduation model is the careful sequencing of several development services to facilitate consumption stability and, subsequently, enterprise development.
BRAC pioneered the graduation methodology over a period of ten years. Their current program, Targeting the Ultra Poor, began in 2004 and today, over 800,000 households have “graduated” out of safety net programs to become successful microentrepreneurs. While their businesses are small and their income is still small, moving poor people from dependence on hand-outs to becoming independent earners is a gigantic leap in development terms.
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