By: Dianne Calvi, President & CEO of Village Enterprise; Avnish Gungadurdoss, Co-founder and Managing Partner of Instiglio; and Jeff McManus, Senior Economist at IDinsight.

Part one of this series on results-based funding was originally published by the Center for Effective Philanthropy on February 14, 2023.

The world, and the international development sector, are facing more uncertainty and volatility than it has in living memory. This state of ongoing fragility — stemming from the pandemic, climate change, the war in Ukraine, and related humanitarian emergencies — appears to be the new normal. At the same time, the economic fallout from these crises is putting pressure on aid budgets, and progress on reducing poverty has come to a halt, according to recent data from the World Bank. How should the international development sector adapt, and specifically, how should funders ensure program effectiveness in this new context of volatility and budget constraints?

As leaders at organizations that have been involved in results-based funding from different vantage points — design and management (Instiglio), evaluation (IDinsight), and as an implementer and co-designer (Village Enterprise) — we believe funding based on results offers an opportunity to do more with less. Yet, the approach needs to be adapted for this new, less predictable context.

In part one of this two-part post, we put forth recommendations on adapting results-based funding for crisis and uncertainty. These recommendations come down to a couple of basic principles: first, recognizing crisis is inherently risky, be sure to carefully balance risk and reward to service providers. Second, expect the unexpected by having emergency funding available and preparing to verify results remotely. In part two, we discuss what should not be lost along the way as funders and their partners adapt results-based funding models. But first, we address the underlying need for adaptation.

To read the full article, visit the Center for Effective Philanthropy by clicking here.

The Future of Results-Based Funding, Part Two: What to Keep

By: Dianne Calvi, President & CEO of Village Enterprise; Avnish Gungadurdoss, Co-founder and Managing Partner of Instiglio; and Jeff McManus, Senior Economist at IDinsight.

Part two of this series on results-based funding was originally published by the Center for Effective Philanthropy on February 21, 2023.

In part one of this post, we shared two key principles for funders to keep in mind as they adapt results-based funding models to the volatile and rapidly shifting “new normal” of international development funding. These insights are based on the authors’ own experiences with results-based funding from various vantage points. If you haven’t yet read that post, we suggest you start there.

However, even as the need for adaptation is clear, we believe users of these models should be sure to retain three critical elements that not only work, but work well in a crisis: flexibility, accountability, and rigorous measurement.

In making adaptations and getting creative with results-based funding, it’s critical that projects not lose sight of crucial elements that make results-based funding instruments effective vehicles for social impact. For one, results-based funding commits funders and implementers to participant welfare and ensures it is at the heart of the problem-solving process as stakeholders navigate and adapt to the crisis. Second, implementers need the flexibility to chart their course when plans change. Last but not least, rigorous measurement is the only way to know whether a program is making an impact in a context where everyone may be negatively impacted, making it particularly critical in a volatile context. We explain these points in more detail below.

To read the full article, visit the Center for Effective Philanthropy by clicking here.

The post The Future of Results-Based Funding appeared first on Village Enterprise.

We’re proud to report that the study showed overwhelmingly positive results, and a sustained and often increasing impact for our entrepreneurs and their families. In fact, both household consumption and savings continued to rise after the end of our program with an 83% increase in consumption and a 933% increase in savings over five years. You can read the full report here.

“We’re thrilled to share our new longitudinal study results, which show sustained or improved results for the households we serve five years after participating in the Village Enterprise graduation program,” says Celeste Brubaker, Chief Impact Officer at Village Enterprise. “These findings are complemented by our recent external RCT results, which found no evidence of declining program impact over time. Results from both studies are especially remarkable given that final data collection for both took place in 2021 when millions of households in Africa were being pushed back into poverty due to the impacts of the Covid-19 pandemic. The data builds a compelling case that Village Enterprise graduates first-time entrepreneurs into a state of resilience.”

Building resilience is extremely important in Sub-Saharan Africa, as the negative impacts of climate change, inflation, and the pandemic all have the potential to be catastrophic for families living in extreme poverty. The results from the longitudinal study provide more strong evidence that our program equipped entrepreneurs with the skills they needed to adapt to the negative economic impacts of the Covid-19 pandemic, suggesting their ability to adapt to future crises, or global and local shocks. Of note, 88% of the entrepreneurs in this study also reported the skills they learned through Village Enterprise helped them cope with the economic shocks of Covid-19. 

The longitudinal study results are especially meaningful as they build on the results from the Village Enterprise Development Impact Bond. Independently evaluated in a randomized controlled trial (RCT) by IDinsight, our program achieved a projected lifetime benefit-cost ratio of 540%. In other words, for every $1 invested in the communities, over $5 of new income is generated by our entrepreneurs. The social benefits far exceed what it cost Village Enterprise to implement the program, including training entrepreneurs, awarding seed capital grants, and providing ongoing business mentoring and support during the first year. This showcases the immense power of our graduation program to sustainably and cost-effectively increase the income of our entrepreneurs, putting them on a sustainable path out of extreme poverty. Just like our longitudinal study, the RCT results were achieved despite the onset of the pandemic and the subsequent market closures and country-wide lockdowns.

On top of these achievements, we have made significant improvements to our program since 2017. These improvements include the implementation of a powerful adaptive management system, a streamlined and more interactive training curriculum, and the use of digital technologies—such as videos and mobile cash transfers—to maximize our efficiency and overall impact. Since these improvements were implemented after entrepreneurs in the longitudinal study graduated from our program, we hope to see even greater results for our entrepreneurs in future studies.

To further magnify our impact in the years to come, we plan to continue testing the latest technologies and methods for training, coaching, and evaluating. Most importantly, we will continue to keep our entrepreneurs at the forefront of everything we do. In an era of increased global shocks from Covid-19, conflict, and climate change, it is imperative we make sure the most vulnerable families have access to our program, equipping them with the skills and resources to adapt and thrive. To learn more about the Village Enterprise longitudinal study, read the full report using the link below. 

“In addition to confirming the persistent and often growing impact of our program in the communities we serve, the report contains important insights on outcomes for different population segments and the mediating influencers of impact,” Celeste says. “This is a fantastic read for anyone interested in learning more about fostering entrepreneurship and resilience among women living in extreme poverty in rural Africa.”

Read the full report here.

The post Results from the Village Enterprise Five-Year Longitudinal Study appeared first on Village Enterprise.

IDinsight found that households participating in the Village Enterprise program had about a 6% increase in consumption. What is important about these increases?

In general, solutions that have been rigorously proven to sustainably improve the wellbeing of the extreme poor have been elusive. However, a 2015 article in Science featured results from RCTs that evaluated graduation programming across six countries. These results offered groundbreaking evidence that the graduation program is an approach that can cost-effectively improve the well-being of the extreme poor. The consumption effect seen in that paper was 5% of the control group’s mean. That impact over time is meaningful for extremely poor families as it could mean being able to have enough to eat for their family daily, purchase basic necessities, and increase their overall well-being. Village Enterprise wanted to study the impacts of our graduation program to scientifically improve its effectiveness, use the results to better our programs for our entrepreneurs, and push the entire poverty alleviation sector forward to drive accountability and impact for those living in extreme poverty.

The RCT from IDinsight found that the Village Enterprise program outperformed the RCTs that generated tremendous excitement in the famous six country RCTs published in Science with a consumption effect that is 6.3% of the control group mean (compared to the 5% of the six country control group mean). As mentioned above, this increase is meaningful for extremely poor families and it could mean they have enough food to eat, including healthier and more nutritious meals. In Kenya, this meant increases in green maize, beef, fish, maize flour, and chicken for participating households. In Uganda, households increased consumption of chicken, fish, and tomatoes.

These results were achieved in the context of a significantly lighter touch graduation program, which shows that a lighter touch model when implemented extremely well can match and even outperform the costlier earlier models. This has significant implications for benefit-cost ratios, with Village Enterprise’s RCT now demonstrating the highest benefit-cost ratio when compared to the Science RCTs. The highest benefit-cost ratio in the Science article was 88% from a graduation implementation in India. Village Enterprise achieved a benefit-cost ratio of 140%.

Why is increasing cost effectiveness important?

Increasing cost effectiveness is important as many countries are resource constrained. In fact, even before the pandemic, lower-income nations faced an average annual funding gap of USD 2.5 trillion to reach the Sustainable Development Goals. We view our results and the three-year benefit-cost ratio of 140% as significant progress in terms of the direction the poverty alleviation sector needs to be heading in to improve the wellbeing of the extreme poor at scale. We also believe that we will improve the cost effectiveness of our program in the years ahead as we continue to innovate with the explicit goal of increasing its impact for families living in extreme poverty.

When did the RCT take place? Was it during the pandemic?

The study took place from November 2017 to August 2021. As a result, these outcomes were achieved even in the context of the Covid-19 pandemic. While the final three of seven program cohorts received ongoing mentoring during the pandemic, the first four cohorts had graduated from our program before the onset of the pandemic. The end-line data collection took place one year into the pandemic, six months after the last cohort graduated and 2.5 years after the first cohort had graduated from the program. The RCT showed sustained impact, despite the challenges of the pandemic, between that first and the final cohort.

We believe that this is an important finding as the RCT offers new evidence on the ability of graduation programming to sustain impact over many years and build resilience among participants. Especially in the Sub-Saharan Africa context where families are faced with ongoing shocks, successfully building resilience is considered to be a foundational need for creating sustainable impact. IDinsight estimates the lifetime impact of the Village Enterprise program at $21.06 million.

Village Enterprise’s pre-pandemic impact data found annual household per-capita consumption and expenditure increased by 71%. Why is this increase larger than the 6% increase in consumption and the 6% increase in spending that IDinsight found?

There are a number of reasons that could account for the difference in increases in consumption and expenditure measured by Village Enterprise’s Monitoring and Evaluation (M&E) and by the RCT. Here are some of the factors:

-Our RCT used an intention to treat estimates—this means it measured impact amongst everyone who was offered the program (whether or not they accept participation), whereas Village Enterprise’s M&E looks only at those that successfully completed the program.

-Village Enterprise’s pre/post evaluation does not account for external factors that may also contribute to income growth for our program participants. The RCT was designed to exclude external factors and tells us only what the attributable change was.

-Our internal data collection before Covid-19 showed the DIB was progressing well in terms of the goal of elevating the extremely poor in rural Africa out of poverty. We believe that if our results had been evaluated outside of the context of the pandemic— if there had been an evaluation of only the first few cohorts before the pandemic began or if the pandemic had not taken place—our RCT results would have been higher. Our entrepreneurs in rural Uganda suffered from strict lockdowns multiple times with months of closed borders, suspended public transport, restricted cross-district movement, and imposed nationwide curfews. The evaluators noted that “conducting fieldwork during the Covid-19 pandemic exacerbated some technical risks. In particular, it may have affected the generalizability of the findings to a non-pandemic context.”

-We also recognize there could be a response bias that is greater when our entrepreneurs interact with Village Enterprise enumerators than when they interact with entirely independent enumerators. However, to ensure Village Enterprise is following best practices and to control for this possible response bias, the enumerators who work with Village Enterprise are not our Business Mentors or Field Associates or any other staff members who work closely with our entrepreneurs.

Why were the outcomes of the DIB measured through a randomized controlled trial (RCT)?         

This impact bond was meant to reward improvements in income. To approximate income as precisely as possible, the project measured the two uses of income at the household level: consumption and assets. By doing so, and comparing the results with those of a control group as part of the RCT, the impact of the Village Enterprise intervention on income could be approximated.

What do these results mean for the future of results-based financing and the poverty alleviation sector?

These results provide proof of concept that it is possible to commission service provision on the basis of a predefined fixed price-per-outcome, that it is possible to do so even for outcomes directly targeting poverty alleviation, and that doing so incentivizes innovation and accountability, and provides space for the same. Village Enterprise believes this successful proof of concept can provide commissioners, service providers, and investors, where applicable, evidence and inspiration necessary to consider using outcomes based contracting mechanisms in their own portfolios. We believe further growth of the outcomes-based sector will make current development dollars more effective by increasing accountability to impact, incentivizing and providing space for innovation and iteration needed to cost-effectively increase the impact of programming, and channeling dollars to scale solutions that work. We believe more effective use of current development dollars may inspire new funders to enter the sector, and also that the guarantee of predefined fixed price-per-outcomes could achieve the same, thus increasing the overall pool of funding available for outcomes based funding and poverty alleviation. We believe increasing the effectiveness of current aid as well as increasing the total amount of aid available are both necessary to end extreme poverty globally.

How were the outcomes for this DIB selected?

The goal was for the payment metric to be closely tied to the ultimate impact and to be applicable to a wider variety of livelihoods or income-generating projects. For this reason, this DIB rewarded improvements in income as it is closely tied to poverty graduation and is an outcome that a large portfolio of livelihoods, income-generation and workforce development programs share. Measuring income in poor, low-data contexts is difficult and so the two uses of income at the household level, using consumption and assets, were used to approximate income as closely as possible.

How were the outcome prices determined in the DIB?

To determine the specific price per unit of outcome, there were two key considerations:

1. Capturing the social value generated: the price paid for an outcome should not exceed the social benefits created. In this case, a conservative view on social benefits would correspond to the incremental income generated for the treated households, as captured by the payment metrics ($1 of outcome payment for $1 of incremental income). This is a conservative estimate because the poverty Graduation Model’s theory of change also aims to build social capital, increase financial literacy, and build business skills in a way that the monetary gains do not necessarily capture. Therefore, the outcome funders were confident that the payment formula was reasonable from this perspective.

2. Sufficient incentives to encourage progress and compensate for risks: The price per unit determines the intensity of incentives and the effort required of investors and service providers to achieve results. The outcome funders wanted to ensure that the price is such that with the expected results and the planned program size, Village Enterprise and its investors would receive sufficient compensation for the risk being taken and sufficient incentives to improve performance. During design, the group built several simulations using the past RCT and a financial model that confirmed–using the proposed payment formula–that Village Enterprise and the investors could earn a reasonable return when compared to relevant benchmarks of other impact bonds and impact investing opportunities.

Accounting for these considerations, and the intention to pay for the overall increase in income, there was a predefined fixed price-per-outcome of one dollar payment for every one dollar increase in household consumption. Since the program’s impact in consumption may continue, the impact in assets was used as a proxy of the capacity of the household to continue to generate income and, therefore, consume into the future.

How were the targets set for the DIB?

Household targets: The minimum number of households Village Enterprise committed to serving during the project was 12,660 and based on internal capacity assessments we set the target number of households that we would serve at 13,830. Village Enterprise ended up exceeding this target by serving 14,100 households.

Consumption targets: At the onset of the project, Village Enterprise believed it was realistic that we could increase consumption impacts from our first RCT conducted in Uganda by 15%. We outperformed this target by 10X, as DIB project-level consumption impacts were 151% higher than the first RCT. This increase was driven by impacts in Kenya.

Where can I learn more about the Village Enterprise DIB? 

See the full report from IDinsight and learn more on the Village Enterprise DIB results web page. The DIB results were also featured in Devex, and IDinsight has produced their own FAQ.

The post Frequently Asked Questions about the Village Enterprise Development Impact Bond appeared first on Village Enterprise.

In Uganda, nearly half of the population lives on less than $1.90USD per day, a trend that back-dates multiple generations. Individuals living in extreme poverty are given limited access to credit, healthcare, and education, all of which impede their ability to lift themselves out of poverty. Exacerbated by the global food crisis, economic repercussions of the global pandemic, and climate change, escaping the intergenerational cycle of poverty is more difficult than ever.

This was the case for Agnes Alepo of the Onyorai village in Uganda when she was selected to join the Village Enterprise poverty graduation program* in November of 2019. After four months of rigorous business training, she received a seed capital grant to start a business with her friends Adongo and Amodoi. The future appeared bright for Agnes until when, less than a month later, the government of Uganda reported the country’s first confirmed case of Covid-19. None of their business training could have prepared the women for what followed: months of closed borders, suspended public transport, restricted cross-district movement, and imposed nation-wide curfews.

With fear on everyone’s minds, the team’s Village Enterprise business mentor, David Eseru, reached out by telephone. Under normal circumstances, David would travel to each business group’s village to provide his mentorship. With a country-wide lockdown in place, telephone mentoring became the only option, but it also became a lifeline for Agnes, Adongo and Amodoi.

Over the phone, Agnes and her business partners were able to voice all of their concerns and receive advice in real-time. Together, the four of them brainstormed ideas to adapt to the circumstances. Noticing a trend in population migration from cities to villages, the women saw an opportunity to earn money baking and selling cakes directly in their village. However, with transit restricted from the lockdown, they worried that they wouldn’t be able to travel the necessary distance to gather supplies. There was one silver lining: bicycles were not included in the restricted transportation list.

Every week, sometimes twice a week, Agnes rode her bike more than 25 kilometers in search of raw materials. While she was away, her business partners took care of the sales. Through this efficiency, they were able to keep their prices relatively low and villagers started buying their cakes in droves.

With help from their Village Enterprise business mentor, David, the team set weekly targets, motivating them to remain focused on their goals. Through this iterative process, they were able to identify another opportunity to diversify into a new business by setting up a retail shop selling sugar, soap, salt, and other basic necessities.

In under a year, Agnes went from having no economic means to owning not one but several businesses bringing in an income of UGX 200,000 ($57 USD) per month. Supported by her husband, who also contributes to her savings, she has become a trailblazing example in her community, putting away at least UGX 31,000 ($9 USD) per week into her local business savings group. In a time when hospitals were overloaded with Covid cases, Agnes and her business partners were able to provide their families with the necessary means to keep them safe and healthy. One year later, she had saved up UGX 1.4M ($400). She was also able to purchase a cow, something a woman rarely does in her village, as well as chickens and turkeys.

Agnes speaks about how lessons she learned from Village Enterprise continue to inform and animate her life. “Every day I think about how to make more money. I never want to go back to the life we had before Village Enterprise came to us.” She continues, “I would never have done this without my husband’s support, my two fellow co-entrepreneurs, my Village Enterprise mentor, and the members of my business savings group.”

While the extent of Agnes’ formal education stops at the primary school level, her four children, although still young, now talk of going to university one day. In spite of the ongoing Covid-19 pandemic, Agnes feels confident that her newly founded skills and resilience will allow her to handle whatever life throws at her and her family. For the first time in generations, history will not be destiny.

* Agnes and her business partners were part of Village Enterprise’s poverty graduation program funded by the Village Enterprise Development Impact Bond

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Women and adolescent girls are the most vulnerable group in Kenya, where only six percent of women belonging to the poorest wealth quintile are considered empowered. Contributing factors include gender-based violence, harmful cultural attitudes, and beliefs around gender roles. Women are given restricted control over resources, limiting their ability to participate in the economy. Unpaid childcare and domestic work further limit women’s available time, energy, and mobility needed for economic participation.

Yet there is immense potential for Kenyan women to contribute to their own well-being as well as that of their families, communities, and country via empowerment. 

Empowerment involves a transformative economic and psychological process of change due to one’s ability to make choices. This change is most significantly measured by a person’s ability to make choices and have opportunities, enabling them to stay out of poverty through income generation.

Meet Metrine Kuto.

Village Enterprise’s poverty graduation program powerfully provides a process of such transformation. Just one example of the radiating empowerment we build is the experience of Metrine Kuto, from Safina Village of Kenya. Metrine was targeted into the Village Enterprise program in March of 2019 and graduated in March of 2020.

Here is her story in her own words:

My name is Metrine Naliaka Kuto.

Before I started my business, I had a hopeless life, living in extreme poverty. I relied mainly on the little money my husband sent from his job as a security guard in Nairobi. I could barely afford enough food for my six children which meant that we were often hungry. With empty stomachs, my children would trek long distances without socks or shoes to attend school but were turned away because I could not afford their school fees. If my children were sick, I couldn’t even afford to seek medical attention.

In March 2019, I met Florence, a Village Enterprise business mentor, when she came to my home and introduced herself. She explained that she comes from a nonprofit and they have come to empower us to start our own businesses. This was the first time that an organization came to speak to the common man which I thought was very genuine. She asked me questions and after one week, I learned I was among the people who could join the program.

At the start of training, I had low self-esteem, sitting in the back of the room because I did not know how to talk in front of others. I didn’t think I could start a business because it is something I never thought I was worthy of. Florence encouraged me to sit in the front and called my name frequently until I gained more confidence. I learned to identify my strengths and weaknesses and became comfortable mobilizing other members of my group and encouraging those who wanted to drop out of the program not to give up.

After a few weeks of training, I was elected as the chairperson of Wekhoela Business Savings Group, which is still running to this day. We were taught how to save with a purpose, set aside money for emergencies, and how to keep regular savings Then three of us formed the Inuka business group, and because I had some experience selling secondhand clothes with my neighbor, I suggested secondhand clothing sales as our enterprise selection.

I enjoyed sharing my knowledge with my business partners who did not have experience selling clothes. When we had increased from one bale to three bales (secondhand clothes packed in different types, sizes, and weight), I took an individual loan from our business savings group, which helped me go from retail to wholesale of secondhand clothes.

With the profits from my business, I was able to build a house and fill it with furniture. I was also able to purchase some cows. I can give my family a balanced diet and we can access medication whenever we are sick. My children now have several pairs of shoes and socks. I put my children in private schools and even hired a motorbike to drive them to school and back home.

I am also seeing a change from my husband. He quit his job in Nairobi and now assists me in my business. We now sit together and make business decisions as equals. When I am away on business, he helps around the home with domestic chores. He is proud of me and tells everyone that his wife is a hard-working woman.

The village chief invites me to speak at meetings to inspire women in the community. I am on the management board for three schools and I was elected as a community health volunteer. If I have a problem, I can now take care of it myself. Village Enterprise built my belief that I could rise from zero to hero and helped me change my life from living in extreme poverty to where I am now.

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