Making Microcredit Charities Better

In many rural villages in Northern India and Nepal, long-standing cultural norms have relegated women to subordinate positions in marriage and minimal educational opportunities, stifling the social, agricultural and economic development of entire communities. But with the NGO World Neighbors' work to increase female literacy and help initiate locally-controlled savings and credit groups, these areas' female residents have become a more empowered component of local development and progressive change.

BRAC, the largest NGO in the world and one of the leaders in microfinance as an approach to combating poverty, discovered that despite its successes, microcredit did not always reach what are called the Ultra-Poor in effective, sustainable ways. So they formed partnerships and launched a new, comprehensive initiative that involves consumption support, technical and financial literacy training, and asset management to create a pathway to prosperity called the "graduation approach."

Development work is evolving beyond short-term mission trips and one-off donations into a more comprehensive, in-depth model that addresses long-term sustainability of a solution paired with empowerment of those being served. MicroConsignment is a unique branch of micro-enterprise being implemented by non-profit SolCom in Guatemala that provides individuals in rural villages the skills and resources needed to start sustainable businesses.

The approach of giving cash straight to poor people - rather than funneling goods or services indirectly through the slow, diluted, and complex systems of charities or governments - is nothing new, but evidence of long-term success and sustainability are few. That's why many NGOs and governments are now coupling cash transfers with more comprehensive programs such as job training and financial counseling, as well as addressing some of the root causes that keep people poor, like lack of infrastructure and market access.

For years, policymakers have debated different approaches to helping the poor , but new data offers resounding evidence for a strategy that works: an approach known as a “Graduation” program. This method offers participants a “productive asset” to generate income with training on how to use it, as well as the resources (such as healthcare, food, loans, and coaching) to maintain the asset while building a pathway out of poverty.

Too often socially useful businesses end up failing because they get ahead of themselves and end up not being profitable. Companies now can select from an 'opportunity map' of ventures that serve the poorest individuals, and are more likely to be profitable and sustainable.

Two columns on microconsignment, a new variation on microcredit that helps poor people living in developing countries - particularly women in rural villages - start small social businesses without taking on debt or requiring previous business skills. The organization, Soluciones Comunitarias, partners with a non-profit and a university student program to manage the supply chain and other components of the business necessary to support the social entrepreneurs in successful micro-ventures.

After Nepal's 2015 earthquake, many village women were left in financial devastation and struggled to support their families. The earthquake destroyed up to 90% of small enterprises and markets, so the United Nations Development Programme trained women how to weave. As a mode of recovery, the weaving industry has helped rebuild the economic and social structures through the Panchakanya group.

Though the overall poverty rate has been dropping in recent years, rural communities in Uganda still lack many basic resources, including access to healthy food, toiletries, and economic opportunity. The Network of Women in Agribusiness and Development was founded by women to empower and support their sisters through educational initiatives, agricultural training, and the provision of items such as pigs and fruit trees to help them break the cycle of poverty.

For the superrich and the biggest U.S. charitable foundations, donating to universities, hospitals and cultural institutions is the norm. Less common are donations targeted at "social change" such as alleviating poverty or tackling global warming - but that is beginning to change. An in-depth study from the Bridgespan Group is showing how big bets in philanthropy are paying off, as well as what factors - such as a close donor-recipient relationship - are key to success.