The Success of Graduation Programs for the Ultra Poor, Microcredit, and Fonkoze

Yesterday there was an important article in the New York Times by Nicholas Kristof about the graduation model, which is the generic term used to describe Fonkoze’s Chemen Lavi Miyò (CLM) program for the ultra-poor of Haiti.  Kristof comments on the fact that early research has shown significant and sustained positive impacts on the clients of these programs in multiple countries.  One of his themes is that reducing the stress the poor face and giving them hope-infused pep talks can actually help them a great deal – insights that are woven into CLM and similar programs, and also into behavioral economics based analyses of poverty which are becoming increasingly influential.

Unfortunately, Kristof comments negatively, in passing, about microcredit.  This despite the fact that unlike graduation programs, microcredit is now being provided sustainably and on a massive scale globally by a network of microfinance institutions such as Sèvis Finansye Fonkoze (SFF), the financial services arm of Fonkoze.  (The sustainable part has been a long time in coming for SFF, but based on recent performance, it has made substantial progress and making a profit this fiscal year is within reach.)

This tendency in the humanitarian sphere to pit innovations against each other in a kind of unhelpful “horse race” – rather than seeing how they can synergize and complement one another – is unfortunate as well.  My view is that it is much less about graduation programs versus microcredit but rather, how these two social innovations can work together.

I wrote to Kristof and urged him to think in a more balanced way about microcredit, and directed him to my blog and this helpful article on microcredit research.  He wrote me back and said he agreed with my blog on several key points.  (The fact that he immediately read my long blog speaks well of his curiosity, which is a key character trait of great journalists.)

I think there is an important opportunity for SFF and the Fonkoze Foundation to show what they have learned and achieved in terms of actually graduating CLM clients to something that allows them to continue to make progress.  This is important because even after achieving increased economic security, the formerly ultra poor “graduates” are still living precarious lives with minimal — albeit enhanced — assets and options.

SFF’s Ti Kredi and solidarity loan products and related services (some provided by the Fonkoze Foundation) have, in some cases, offered ways for CLM graduates to continue their forward progress and integrate into a heterogeneous and supportive social network (i.e., solidarity centers).

I have recently finished Walter Isaacson’s new book, The Innovators, about the people who brought us the information revolution – of which a surprising and unheralded number were women.  As this blog has at times been used as a book review for titles that address or have implications for poverty alleviation efforts in Haiti and beyond, I will be posting some comments about it in the days ahead.

One of the themes that Isaacson cites again and again is the power of collaboration in spurring innovation – thereby bursting the bubble of the iconic images of Thomas Edison working alone in his lab or Steve Jobs in his garage, which purport to show that innovation often happens as part of a solitary pursuit.  My own experience with Fonkoze and Grameen Foundation reinforces the power of well-constructed teams to drive waves of innovation that build on earlier discoveries and have the potential to reach scale sustainably.