As the new school year approached in Paraguay last year, Gladys Romero’s sewing workshop was humming with activity. She was working flat out to meet the demand for uniforms, her husband was working as a mason, and their three daughters were also pitching in. When schools near their home in Capiíbary reopened after the summer break, the girls went to class dressed in uniforms they helped to make.
“My dream has always been to own a tailoring business and clothing store and to put my daughters through school,” Romero says. Thanks to her flourishing enterprise, she was able to add a sewing workshop and small store in their house, lay a new floor, and keep their daughters in school.
Romero took part in a program that has provided 28,000 families in four Latin American countries a chance to “graduate” out of extreme poverty. Now that the COVID-19 pandemic has slowed economic activity everywhere, these families, like so many others, are facing financial hardship and are stretching their resources to meet their basic needs. However, with the training that families like Romero’s received in financial education, their ability to save increased, and so has their resilience to deal with critical moments such as the pandemic.
Graduating out of poverty
Originally developed by the international non-governmental organization BRAC, in Bangladesh, the graduation approach has been replicated in more than 40 countries. These anti-poverty efforts have often met with success, but on a relatively small scale, and finding ways to expand their reach was urgently needed.
Fundación Capital, a social enterprise that works with governments and the private sector to fight poverty and build decent livelihoods, has adapted the original concept in important ways. Working alongside partner governments, it integrated the graduation approach into large public sector social programs, fine-tuning each scheme in line with a country’s needs and priorities.
Despite progress in recent years, 165 million people in Latin America — about one-quarter of the population — live in poverty. With support from IDRC and the Ford Foundation, Fundación Capital’s adapted graduation model has started to make a difference. About 150,000 people in Colombia, Honduras, Mexico, and Paraguay have benefited from country-specific programs over the past five years, testing innovations that could lend themselves to being scaled up.
Coaches and app lend crucial support
The original graduation model involved distributing physical assets to support the launch of a small business. By contrast, the Fundación Capital version gives participants up to $500 in cash and the freedom to decide how to spend it. “You have to trust people,” says Tatiana Rincón, vice-president of social and livelihood promotion at Fundación Capital. “Instead of giving them assets, give them cash. It’s easier and cheaper, and you empower them and build trust.”
Romero used the seed money to buy her first sewing machine and later reinvested profits back into the business. She now has five machines with specialized functions for sewing straight lines, seams, and hems.
Fundación Capital also developed a fun and educational app, called AppTitude, that is narrated by a cartoon parrot who provides clear explanations and a cartoon character named Maria, who asks smart questions. The tool is customizable and uses short videos and other accessible content to teach basic financial literacy and lessons on running a small business.
Local people with entrepreneurial experience were engaged as mentors to offer technical and interpersonal support. They brought participants a tablet loaded with the app and coached them through the lessons during visits every two weeks. Guided by their coach, participants found the app easy to use and understand. “Once I started using [the app], I wanted to learn more,” Romero says. “The part I enjoyed most was learning how to manage my business and customers.”
Improved livelihoods and resilience
Participants’ earnings grew in every country (by 15% in Paraguay and 64% in Mexico), along with their savings, assets, and perceptions of well-being. The program not only boosts incomes, Rincón says, but also builds confidence and changes outlooks.
“People living in extreme poverty are usually surviving one day at a time: ‘What are we going to eat? Can I pay the rent?’ Families forget to dream as they focus on their short-term, daily needs,” she says. “But in the graduation program, families not only began to dream again, their mindsets also started to change. And their financial decisions reflect this change in mentality toward long-term thinking and sustainability.”
One such dreamer is Modesta Flor, who is busy creating new opportunities for herself and her family in the town of Carayaó, where she and her husband live with their eight children. Flor used her seed money to buy medicinal herbs, along with small plastic bags and cardboard for packaging, to sell the packets in the local market.
But this was just a stepping stone toward her goal of starting a home-based bakery. She used earnings from the herb sales to take baking lessons. She also started fulfilling small baking orders at home in the afternoon and selling her cakes in the market on Saturdays. With her plate now so full, her husband has taken over the herb business. To adapt to the COVID-19 crisis, Flor reshaped her business and now delivers to her customers’ homes.
Basic government safety nets can provide a minimum level of well-being and prevent a slide into deeper poverty, Rincón says, but they rarely allow families to escape extreme poverty altogether. “Our goal is not to end the cash transfers, but to add graduation programs to the mix — I’m a huge advocate of both,” she says. “In this way, we can break the intergenerational transmission of poverty. When women have access to economic opportunities, they become more resilient and able to weather crises. If they don’t receive the government stipend in time, they can still provide for their families.”
A force for gender equality
Women make up 80% of graduation program participants because they are among the poorest of the poor, Rincón says. She marvels at the resourcefulness and creativity that is unleashed when people are given a chance.
Research into graduation programs led by the Universidad de los Andes has generated evidence-based lessons that are informing the next phase of work. IDRC is now supporting Fundación Capital and the Instituto de Estudios Peruanos as they test ways of integrating a gender lens into graduation programs.
During the COVID-19 pandemic, initiatives that promote economic inclusion and resilience are more relevant than ever before. Graduation program participants now have access to a virtual assistant called ConHector on the WhatsApp platform. ConHector uses principles of artificial intelligence and automated learning to connect with people, share information about the pandemic, and assist in the recovery of financial health. ConHector also raises awareness about gender-based violence and encourages sharing domestic tasks and responsibilities. In these times of social isolation, technology becomes a fundamental channel through which women can remain in touch with their support networks.
Even during the pandemic, these important anti-poverty efforts can not only support women’s economic empowerment but also address the restrictive social norms, gender violence, and other barriers that stand in their path. The ultimate goal is to further improve the graduation approach so that it can be a strong force for gender equality as it is scaled up to reach millions of the world’s poorest people.