To 'graduate' from poverty, they can borrow to build a business. So why aren't they?

"The program applies a method known as the Graduation Approach. Its basic logic: You need money to make money. Participants are typically given a grant of about $200 plus coaching to build a small business. It might be raising crops or animals, hairstyling, even selling secondhand clothes. Graduation programs have had notable success in some 20 countries. A U.N. report calls them a "promising ladder from poverty.""

"Instead of individual grants, block grants of around $4,000 were given to groups of about 20 people to manage jointly. They could borrow larger sums than $200 and when they paid back the loan with interest, the interest would be distributed among all members. Each group comes up with its own rules for the grant, including borrowing limits, the interest rate and deadlines for repaying loans."

Economist Dean Karlan visited Kyegegwa, Southwest Uganda to evaluate a poverty program using the Graduation Approach, which gives small grants plus coaching so people can start businesses. The Uganda adaptation provided block grants of about $4,000 to groups of roughly 20 people to manage jointly, allowing access to larger loans with interest redistributed among members. Each group establishes rules on borrowing limits, interest rates and repayment deadlines. At a two-year check-in, half the grant funds remained untouched in the bank and participants were not borrowing as much as available, revealing multilayered challenges facing the ultra-poor. One participant named is Jacquerin Kabanyana, a refugee.

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