Fighting poverty through entrepreneurship training
What you need to know:
- The difference. Programmes that have been used to fight poverty fail to sustainably pull people out of poverty unlike the conditional cash transfers
Anna Grace Omoding was until last year, a peasant in Teso, one of Uganda’s perennially hunger-prone sub-regions.
She depended on crops from her family land and tilling other people’s gardens to earn between Shs9,000 and Shs18,000.
With an income of less than a dollar per day, Ms Omonding was among Uganda’s 10.1 million absolutely poor people.
As peasants in Uganda depend on rain fed agriculture, the wide spread drought, which led to hunger in 2017 meant that Ms Omoding’s household, was among those that needed food aid in 2017.
Then in May 2017, she and her business partners Henry Okello and Sam Odongo were trained alongside 27 others in Agurut village.
The entrepreneurship training was conducted by Village Enterprise, which works on innovative ways to end poverty.
They were later asked to form groups of three and tasked with coming up with ideas for business.
Each group (10 in number) was then given about Shs315,000, as a conditional cash transfer to start a business.
Ms Omoding and her two partners, each contributed an additional Shs5,000 and started a baking business, which produces doughnut-like bread called otumberu.
According to locals, while one will need several pieces of cassava to get satisfied, one otumberu is good enough to take you through breakfast.
The three people who make up the group each make a minimum of Shs250,000 in profit every week, which means that Ms Omoding makes 13 times more than the income she used to earn when she was still a farmer.
Out of poverty
She also has enough money to save, a requirement of Village Enterprise and she has bought a cow to supplement her earnings.
The cow is being raised to later work as an ox, which she will then hire out.
Ms Omoding and many others, according to Winnie Babra Auma, the Village Enterprise Uganda country director, have gone through the process and attained graduation.
The programme trains people living in extreme poverty on how to become entrepreneurs and given conditional cash transfers as capital.
They are required to save and acquire assets, after which (in one year) they are left to work as individuals.
This graduation programme, according to Damien Kirchoffer, the country director Innovations for Poverty Action, helps to get rid of the poverty trap, a major contributor to people’s failure to cross into the middle class.
He explains the poverty trap, as a situation where people who can’t afford basic needs work in poorly paying casual jobs.
Poverty, he says, “has physiological consequences”, one of which is impaired decision making, where by some people will instead of investing the little money they have resort to drinking.
To eliminate the effects of being too poor, development experts are experimenting with unconditional cash transfer after the failure of other alternatives.
Dr Sulaiman Munshi an expert in evaluating the impact of poverty alleviation in South Asia and Africa, says that while studies have shown that unconditional cash transfers will improve things like ability to take children to school and access to healthcare, this is only true, as long as the money taps remain open.
“Entrepreneurship training is core to the success of the unconditional cash transfer. Without it the decision making is ineffectual,” he says.
According to Mr Kirchoffer, organisations such World Vision which have poverty alleviation programmes were increasingly going back to implementation of the less efficient livelihood programmes, where poor families are given things such as free seeds for planting or animals for rearing. Studies of the cost benefit analysis found that livelihood programmes are the least efficient, when compared to unconditional cash transfers and the graduation programmes.
The graduation programmes are the most efficient, but are expensive, which has affected their popularity in the development circles.
However, Dr Sulaiman says, Village Enterprise’s work in Uganda could have finally delivered a programme that is affordable.
His study on Village Enterprise programme found that the total cost of training amounts to $200 and people who have been part of the programme are less likely to fall back into poverty.
“The rate of falling back is much lower because the programme ensures participants get financial services, health insurance and livestock insurance,” he says.
Abarata Keere Business Savings Group, is composed of 30 villagers who barely had money to afford decent meal a year ago.
However, they now say they will, before the end of March share out Shsh17m which they have saved.
As a result of this success, in reducing cost and empowering poor households such as Ms Omoding, Village Enterprise has now floated a Development Impact Bond, to help the organisation expand in Kenya and Uganda.
“We can’t end poverty alone. We are looking at the development impact bond to help us scale,” says Ms Auma.
Investors in the $5.28m bond will receive up 9.5 per cent in interest for their investment with a requirement a minimum investment of Shs906m by the end of this month.
The fund is managed by Global Development Incubator and the payment depending on results delivered by Village Enterprise will be made in July 2020 and 2021.