Village Enterprise DIB

Global levels of extreme poverty - defined as a person living on less than $1.90 a day (purchasing power parity - PPP) - have fallen significantly from 1.9 billion in 1990 to 736 million in 2015. However, the number of people living in extreme poverty in Sub-Saharan Africa has increased during this same period, from 278 million to 413 million, with current forecasts predicting this trend to continue. This rise is partially explained by the population of Sub-Saharan Africa doubling during this period. However, many other regions of the world have experienced similar population growth and yet have been able to reduce the number of people living in extreme poverty. 

Poverty is not only the deprivation of money, but of food, education and health care, amongst many other indicators. Ending poverty in all its forms everywhere is the Sustainable Development Goal 1, and a 2019 progress update on this goal shows that: 'The decline of global extreme poverty continues, but has slowed. The deceleration indicates that the world is not on track to achieve the target of less than 3 per cent of the world living in extreme poverty by 2030. People who continue to live in extreme poverty face deep, entrenched deprivation often exacerbated by violent conflicts and vulnerability to disasters. Strong social protection systems and government spending on key services often help those left behind get back on their feet and escape poverty, but these services need to be brought to scale.'

Source: United Nations Sustainable Development Goals Knowledge Platform.

The Village Enterprise Development Impact Bond (DIB) microenterprise development programme seeks to improve the income levels of at least 12,660 (estimated 13,830) extreme poor households in rural Kenya and Uganda by creating 4,000+ sustainable microenterprises. The Village Enterprise’s (VE) microenterprise development programme delivers support in the form of a cash grant as well as regular business mentoring and training - an approach that is commonly known as a graduation programme.  

A graduation programme recognises that poverty is complex and multidimensional, and that the extreme poor are generally excluded from social services as well as markets. A graduation approach provides a comprehensive time-bound set of integrated and sequenced interventions with the aim of graduating people out of poverty in a way that is sustainable. This approach was pioneered by BRAC in Bangladesh, 2002, and BRAC have reported positive impacts for the programme recipients as well as the broader economy. 

Village Enterprise DIB graduation programme 

There are 5 components to the programme: targeting, business savings groups, training, seed funding and mentoring. 

Targeting 

Poor households are identified using a hybrid combination of a community-based Participatory Wealth Ranking exercise and a survey using Grameen’s Progress Out of Poverty Index (PPI). Participatory Wealth Ranking uses consultations with community members, usually village elders, to identify the poorest households relative to the rest of the community. PPI attempts to establish a household wealth by using a simple questionnaire about household characteristics. For a detailed discussion of poverty targeting approaches see: Coady, Grosh and Hoddinott (2004). However, it should be noted that the effectiveness of poverty targeting is widely disputed (Sen, 1992; Devereux and Sabates-Wheeler, 2004; and Kidd and Athias, 2019). 

The VE DIB is implemented in remote rural areas of Kenya and Uganda, East Africa where more than 50% of the population live in extreme poverty.  

Kenya: Kitale, Trans-Nzoia, Migori, Bungoma and West Pokot 

Uganda: Soroti, Hoima, Masindi, Kiryandongo, Nwoya, Gulu, Kitgum, Dokolo, Amuria, Katakwi, Kampala 

Business savings group 

Business savings groups (BSGs) are formed at the beginning of training, comprising of approximately 10 businesses (30 entrepreneurs) each. The BSGs create the platform through which VE carries out the training program. BSGs are also used to establish trust and respect between the participating community members. While VE expects programme recipients to participate in BSGs, they are self-generating and self-managed, with a personalised constitution. BSGs are a form of microfinance that allow members to pool savings and access loans. By pooling savings BSGs provide members with ongoing protection against financial shocks, as well as provide access to growth capital.  

Training 

Local mentors deliver a four-month training programme, with modules on financial literacy, business education, entrepreneurial skills, and resource sustainability. The aim of the training programme is to equip programme participants with the necessary knowledge to run a small business. Participants form groups of three and agree a plan for a microbusiness that they will launch together. The Business Mentors support and guide the participants in selecting a viable business. 

Seed funding  

Each group is provided a cash micro-grant to enable them to launch their business. The seed funding is in the form of a grant rather than a loan, meaning the businesses are not expected to repay the seed funding. The rationale for providing a grant and not a loan is that entrepreneurship is by nature a high-risk activity; therefore, a grant reduces the fear of the cost of failure, and incentivises innovative business ideas. In order to test the impacts of grant levels approximately 65% of business (group of 3 individuals from different households) will receive a $150 seed with the remaining 35% receiving $450. This means that each household receives either $50 or $150 

Mentoring 

The local business mentors provide continuous guidance to the participants for one year, coaching them in choosing the focus of their business, as well as how to grow and manage their business and finances, including saving in the BSGs. This is a critical capacity-building phase to ensure the sustainability of the business after the participants exit the programme. 

Source: Village Enterprise.

The VE DIB program seeks to improve the income levels of 12,000+ extreme poor households in rural Kenya and Uganda by creating 4,000+ sustainable microenterprises. Programme outcomes are measured against a Randomised Control Trial (RCT) conducted by IDinsight.  

The project is being implemented, and there are no interim results currently available.