From micro-finance to cash transfers, nonprofits and governments have tried hundreds of solutions for poverty. But a nine-year, six country study says it has conclusive evidence to support a strategy that works.
Researchers from Yale and MIT conducted six randomized trials in Ethiopia, Ghana, Honduras, India, Pakistan and Peru with a total of 10,495 participants, along with non-profit Innovations for Poverty Action, to test solutions for the 1 billion people the world who live on less than $1.25 a day.
Different programs were tested using randomized trials and control groups — the gold standard of impact evaluation. By comparing groups that received help from a particular program with groups in the same community that got no help, researchers were able to glean which progress came from the program instead of outside factors.
What they found is that some popular programs that are thought to work — like microfinance — don't work all that well. Microloans, which are a staple of college campus philanthropy education and bolstered by a Nobel Peace Prize, did not prove especially effective in long-term poverty alleviation. In fact, new research from the Center For Global Development has called the value of microfinance into question, claiming that it might even increase debt over time.
Often, solutions didn't come in the expected forms. Dozens of nonprofits dole out scholarships and school supplies in Kenya, but researchers found that a simple anti-parasite pill that kept kids healthy and in school was 20 times as cost-effective as school uniforms in improving education outcomes and 51 times as cost-effective as scholarships, according to Reuters.
Years later, researchers found that kids who received anti-parasite pills went on to earn 20 percent higher wages as adults. Now 95 million children in India and Africa are receiving the medication.
But the programs that had the highest impact on extreme poverty were "graduation" programs that gave people a "productive asset" like a goat, chickens or livestock, but that's not all. They also received training on how to care for and market the asset, healthcare to keep them strong enough to work, and a small amount of cash or food to keep them on their feet while they were getting better at making a living so that they didn't have to resort to eating their asset, for example.
Graduation programs also gave participants access to a savings account so that they would have a cushion for future emergencies.
Researchers started tracking graduation programs in 2006 in six countries with more than 21,000 adults and saw better health, income and asset acquirement across three continents. Participants reported more happiness and less hunger, even a year later.
The message is that aid can relieve poverty — but it's not easy. Researchers found that the poorest people have "multiple challenges at the same time" and require more than one intervention to "graduate" from poverty.
The graduation projects were intensive, requiring home visits and personalized coaching. Future versions might try to accomplish the same outcomes at a lower cost.
“The results show that three years after the intervention, hunger is down, consumption is up, and income is up,” Abhijit Banerjee, professor of International Economics at MIT, and a co-author of the paper published in Science, told MIT News.
“We wanted to show it’s a battle that could be won,” Banerjee said.