Breaking the Cycle of Ultra-Poverty: The Redesigned UPG Intervention

“Poverty is hunger. Poverty is lack of shelter. Poverty is being sick and not being able to see a doctor. Poverty is not being able to go to school and not knowing how to read. Poverty is not having a job, is fear for the future, living one day at a time. Poverty is losing a child to illness brought about by unclean water. Poverty is powerlessness, lack of representation and freedom.” Thus the World Bank once described poverty.

While everyone agrees that poverty has many faces, much debate surrounds how to eradicate it, mainly because it is a complex, multidimensional issue. Some interventions have been more effective than others. Microfinance, for instance, has equipped many poor and marginalized people in Bangladesh with opportunities to develop enterprises and generate income for their households. However, it has failed to cater to the specific needs of the ultra-poor, an extremely vulnerable segment of the population who live under 35 cents a day—a far cry from the global poverty line of USD 1.90. Consequently, though overall poverty levels in Bangladesh have declined, large numbers of the poorest remain trapped in the vicious cycle of poverty.

To help the ultra-poor escape this trap, in 2002, BRAC introduced the Ultra-Poor Graduation (UPG) programme, a grant-based intervention with different kinds of enterprise development support. The graduation model soon proved to be successful in improving income, savings, and food security, and has since been adopted in several other countries.

As a characteristic of the organization, over the years, BRAC continued to gain a better understanding of the ultra-poor and observed heterogeneity among this highly vulnerable population—some are worse off than others and require greater wealth injection. With this insight in mind, BRAC redesigned the programme in 2007, incorporating credit provisions for selected beneficiaries alongside preexisting grants.

In 2017, as the country experienced considerable macroeconomic shifts, these selected credit-plus-grant beneficiaries were further divided into two groups. One group was poorer than the other and received assets directly from BRAC, being required to pay back 30–50% of the initial asset value. The relatively better-off group received interest-free loans to purchase the assets themselves and was to pay back 80% of the asset value.

The redesigned programme also repurposed the consumption stipend from the earlier model to offer a savings match—a mechanism in which UPG contributed an equivalent amount of savings, up to BDT 100 per month, as a participant’s savings with the programme for 18 months—to incentivize savings behaviour, improve resilience, and allow future investments for the participating households.

How effective is this redesigned UPG intervention?

To answer that question, we at the BRAC Institute of Governance and Development (BIGD) partnered with Innovations for Poverty Action (IPA), Northwestern University, University of Maryland, and Yale University and conducted a randomized controlled trial (RCT) among the 2019 cohort of the UPG programme. Between January and April 2022, we surveyed a total of 3,358 randomly selected households from 279 villages where the intervention was provided; of the total selected households, 1,678 were treatment households and the rest were controls.

The impact of the graduation approach can be largely categorized into four pillars, namely (1) livelihood promotion, (2) social protection, (3) financial inclusion, and (4) social empowerment.

1. Livelihood promotion: From our analysis, we found a significant positive impact on labour market outcomes for the programme beneficiaries, as evidenced by increased employment and self-employment rates, working hours, and income. However, between the two ultra-poor groups that received the intervention, the relatively better-off group seems to benefit more from the redesigned UPG programme.

For instance, while the poorer group experienced a 73% increase in their working hours as a result of the new UPG programme, the better-off group’s working hours surged by an impressive 101%. Similarly, the former group experienced a 37% increase in their per capita household income, whereas the latter’s income escalated by an impressive 59%. Thus, it is unsurprising that the better-off group is also less likely to live below the poverty line compared to their less affluent peer group—20 vs 24 percentage points fewer households in the poorer and better-off groups, respectively, lived below the extreme poverty line from the baseline survey.

2. Social protection: The UPG programme aspires to establish a conducive milieu for its beneficiaries to gain improved access to social protection through enhanced awareness and availability of government services and social safety nets. However, we found no significant impact of the programme on the share of households obtaining aid or the average quantum of aid dispensed by the government.

As the intervention was delivered during COVID-19, the need for support was possibly high among all households due to the pandemic-induced economic shock. Nevertheless, by creating more secure and productive employment opportunities, higher savings, and greater access to formal financial markets, the programme appears to have bolstered the resilience of participating households against external shocks such as the COVID-19 pandemic.

3. Financial inclusion: We found a large positive impact of the programme on the share of participants with savings. The amounts saved are also significantly higher for the UPG beneficiaries—while treatment households had an average of BDT 5,391 in savings, control households’ average savings was BDT 2,418. Moreover, the proportions of households with loans and the average amounts of loans per household increased in both treatment and control groups, with the former group showing a greater surge in loan uptake.

However, the most notable dissimilarity between the two groups lies in the nature of their loans. While the treatment group gravitated towards availing formal loans, the control group resorted more to informal loans.

Regarding digital financial services (DFS), the proportion of digital account holders increased significantly in the treatment group. Nevertheless, the use of these accounts did not follow suit, which is not surprising given the low level of digital literacy among the participants.

4. Social empowerment: As seen in the livelihood promotion pillar, the UPG programme significantly increased the employment and income of its participants. This also holds true for female household members, indicating the programme’s positive impact on women’s economic empowerment. But economic empowerment alone does not guarantee social empowerment. Hence, the social empowerment pillar of the UPG programme places particular emphasis on community mobilisation. Additionally, coaching, mentorship, and peer-to-peer learning are provided through the programme to increase participating women’s household-level decision-making power, confidence, and community integration.

Nonetheless, the outcomes of these efforts in augmenting the household-level decision-making aspect of women’s empowerment are somewhat mixed. Although most respondents from both treatment and control households claimed to have some influence on various household-level decisions, significantly fewer women across all groups responded in the affirmative concerning everyday purchasing decisions.

While these findings are clear indications of UPG’s effectiveness in addressing poverty in Bangladesh, there remains a discernible disparity in the outcomes between the poorer and the relatively better-off ultra-poor households, where the latter seemingly benefits more from the programme redesign.

This reinforces previous findings on the notion of threshold asset endowment level, which posits that it is difficult for a household to escape poverty below a certain asset threshold. Thus, the programme should consider bringing further variations of assets/loans depending on the initial asset base of the participants, which could not only significantly increase programme impact but also address the potential increase in intergroup inequality caused by the programme.

Finally, the anomalous results on women’s empowerment highlight the illusive nature of such indicators and the importance of developing more sophisticated tools for measuring these crucial outcomes. It also underscores the tenuous relationship between women’s economic and social empowerment. This raises fundamental questions about the balance between the programme’s efforts for economic vs social empowerment, how to improve the latter, and how best to measure it.

There might not be a silver bullet for poverty eradication, but we can find the next best solution by rising up to the challenge and learning from our actions, as BRAC’s UPG programme does.

Tanvir Ahmed Mozumder is a Senior Research Associate and Mehid Hasan Munna is a Copy Editor at the BRAC Institute of Governance and Development (BIGD)

[The original report this article is based on was authored by Nusrat Jahan, Tanvir Ahmed Mozumder, Sam Hsu, Md. Raied Arman, and Akmam Binte Arif]