Recent research in Ethiopia suggests that a very simple and extremely low-cost approach to development is transforming poverty. And the approach represents a paradigm shift in the way that we deliver aid, by changing our view of the poor from helpless victims to agents of positive change.
The international aid community has recently been asking why our humanitarian aid industry continually responds late to emergencies—especially those that are recurring and known, such as drought in Africa. The industry plays a critical role in saving lives, but struggles to tackle the underlying causes of people’s vulnerability, chasing misery as it moves from one crisis to the next.
The UK Department for International Development (DFID) funded a major study in 2012/2013 to quantify the cost of late humanitarian response to drought and other crises. The study found that, by responding early to drought in Kenya, the international community would save an average of $1 billion per year. Just by responding early. Imagine now if we actually invested in the ability of communities to cope with these events on their own, by supporting income generation and access to markets, water and education (among others).
Currently, by the time the rest of the world has become sufficiently agitated to address a crisis such as drought, most of the damage is already done. The poor have already sold key assets, such as livestock, to buy food, and find themselves even more poor by the time the next drought hits. Referred to as the “CNN effect”—agencies can only raise funds for humanitarian crises with images of starving children with distended bellies and flies on their face. The outside world responds to and therefore perpetuates a model that is built on the image of the poor as victims.
Ironically, agencies then find themselves trying to deliver famine aid, on roads that have become impassable because the new rainy season has already begun. Delays of as many as eight months after the first signs of a crisis are common. And there is a double irony: not only is the aid late, but the opportunity for investing in far more cost-effective activities that could have kept people alive, supported livelihoods, and prevented the crisis in the first place has long passed.
Well intentioned, aid agencies have worked tirelessly to find ways to reduce poverty and reverse the downward spiral of destitution that tends to follow humanitarian crises. I have spent the last 15 years as an economist, helping donor governments like the UN, and other international agencies, to identify those activities that have the greatest potential to deliver poverty reduction.
This year I was asked to assess a development program in Ethiopia, implemented by Tearfund, a UK-based aid agency that uses “Self-Help Groups.” These are groups of 15-20 people, mostly women and girls, who come together to do what they cannot do individually. They save, they invest in small businesses, and they support each other and their communities. Outcomes have included increased financial security, health benefits, full enrollment in school, reductions in female genital mutilation, and improved health care, all at very low cost.
This approach is not new—similar approaches have been used around the globe. However, evidence from 10 years of programming in Ethiopia has only recently demonstrated the potential of this approach in quantitative terms. For every dollar spent on the program, benefits ranging between $58 and $173 are generated. These returns on investment are some of the highest reported in recent literature.
But in a country of 80 million people, where the majority live in absolute poverty, is this approach too small-scale? Not necessarily. Possibly the most impressive characteristic of the approach is its exponential and organic growth. As soon as the first groups form, expansion self-perpetuates as existing groups seed and support new groups. And no external finance is provided (only support and training as the group forms). The groups produce their own capital, creating an internally sustained model for expansion.
This research provides economic evidence that disrupts the dominant paradigm of top-down, expert-led development and aid. The findings suggest that low-input, low-cost programs to seed local social entrepreneurs can succeed in lifting families out of poverty with far-reaching benefits for the wider community. The starting point for the approach relies on a belief that the poorest of the poor are agents of positive change, not victims. This is a radical shift from the ever-increasing aid dependency in Africa and beyond. This model unleashes hope—it empowers people to do things for themselves, eradicating poverty in communities from the inside out.