Climbing out of chronic poverty
Success in Bangladesh

As they do not own small income-generating businesses, the chronically poor are excluded from most microfinance programmes. However, services that do target the chronically poor, such as food subsidies, do not offer them any long-term opportunities to improve their household incomes and welfare. Is there another way?

The Bangladesh Rural Advancement Committee's (BRAC) Income Generation for Vulnerable Group Development (IGVGD) programme aims to bridge the gap between food subsidies and microfinance programmes. The IGVGD programme was developed through a partnership between BRAC, a microfinance non-governmental organisation (NGO), and the World Food Programme (WFP). It aims to help chronically poor households develop the skills and capital needed for them to create small enterprises.

The programme identifies the most vulnerable households and provides food subsidies tied to skills training programmes (such as chicken rearing) and requires commitment to a small monthly household saving. When households complete the programme, they qualify for services provided by BRAC's Rural Development Programme - such as microcredit, healthcare and legal advice.

A trial group of 750 households began the two-year IGVGD programme in 1985. By the end of the programme, 80% of these households were using BRAC's microcredit and related services. With the aid of their new skills, savings and access to microcredit, these households were beginning to develop their own small enterprises and move out of chronic poverty. Based on this success, the Government of Bangladesh, the WFP and BRAC expanded the programme: by the year 2000 over 1.2 million households had completed it.

Factors affecting success

However, the success of IGVGD varied over time and from household to household. While most households experienced a great increase in their income immediately after they completed the programme, within three years the average income declined to 58% of this initial peak. A factor cited was the ending of the WFP food subsidy on completion of the programme. Around one quarter of households reported that when they lost the subsidy they sold their business assets and used their microcredit loans to buy food. Thus they were as poor as they had been before starting the programme.

A criticism of the IGVGD programme is that its emphasis on chronically poor households with the capacity to generate their own income has diverted WFP aid from chronically poor households without that capacity.

Lessons learnt

Research by BRAC and the University of Manchester examined the lessons IGVGD provided for developing poverty reduction programmes and policies. Asking how IGVGD could better serve the 25% of participants currently failing to move out of chronic poverty, the research found that:

• Poverty reduction is not a one-way process as it may sometimes involve periods of decline back into poverty. Such periods, typically caused by illness, need to be provided for and protected against within the programme.
• Different households move out of chronic poverty at different speeds. Programmes need to be flexible enough so that they don't fail those whose progress is slow.
• Poverty reduction programmes will be able to aid more of the chronically poor if, in addition to providing food aid, skills and credit, they provide households with the assets or finance they need to start their own businesses.
• Programmes such as the IGVGD cannot hope to be a solution for all the chronically poor. Certain households - such as those of the elderly, the disabled and the homeless - may not be able to be more active economically. Such households require protective welfare programmes such as food subsidies.

Imran Matin and David Hulme
Institute for Development Policy Management
University of Manchester
Crawford House
Oxford Road
Manchester M13 9GH
UK

T +44 (0)161 275 2825
F +44 (0)161 273 8829
David.hulme@man.ac.uk

See also
'Programmes for the Poorest: Learning from the IGVGD Programme in Bangladesh', World Development 31(3), by I. Matin and D. Hulme, 2003

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