Monday, December 28, 2015

Giving cattle to the poorest was the best strategy after all

The Economist points to a recently released evaluation of a large program by the non-profit BRAC in Bangladesh which gave the poorest people a small stipend for food, followed with a cattle asset (a cow or a few goats) coupled with extension services to help them graduate from 'extreme' poverty to 'normal' poverty. It writes, 
We combine data from 21,000 poor and non-poor households in 1309 villages in Bangladesh with the randomized evaluation of a program that provides a large, one-off, transfer of assets and skills to the poorest women. The evidence suggests the poor face imperfections in capital markets that keep them in a low asset-low employment poverty trap where they are only able to engage in low return and seasonal casual wage labor. The transfer of assets and skills allows them to address this misallocation of labor by undertaking more productive capital-intensive work activities, thus increasing total labor supply, earnings, savings and asset holdings. The improved earnings capacity and resource base of the poor allows them to engage in financial intermediation that benefits non-poor households and leads to village-wide increases in savings, saving rates and capital accumulation. Lifting the poor out of the poverty trap therefore sets in place a virtuous cycle that improves the allocation of labor and places the entire village economy on a trajectory out of poverty. 
The paper finds that since agriculture labor is seasonal, the poorest, especially the women, have considerable idle time. So, any asset like cattle immediately gives them an opportunity to utilize their idle time and earn additional income. But such assets require large investments, which may not be forthcoming for the poorest from standard credit sources like microfinance. 
In this context, India's decades-old experience with self-employment programs for rural poor is instructive. Income generation support to poor people by way of providing milch cattle was the centerpiece of India's flagship rural poverty alleviation programs, starting from the earliest IRDP to the more recent SGSRY. Animal husbandry related components formed more than three-quarters of all income generating schemes administered by the District Rural Development Agencies (DRDAs) across the country. 

In fact, the old IRDP documents had exactly the same mechanism logic - more effective utilization of spare time - to justify the disproportionately high spending on milch cattle. The later versions of such self-employment programs, especially those funded with multilateral assistance, in states like Andhra Pradesh even made the distinction between the poor and the poorest of poor to target such assistance. There exists a rich literature on the advantages of cattle rearing for the poorest and evaluations of such programs across different states. But, while cattle formed the major share of aggregate spending, there were regional variations in this focus within the state itself depending on the climate, water availabilty, and social acceptance.  

It then constantly faced criticism for this bias towards cattle with arguments about whether it was financially viable enough or not. In any case, the findings of this study come as an evidence-based endorsement of the existing policy priority. But, as I blogged earlier here, it is questionable as to whether a long-drawn and expensive RCT was necessary to draw this policy inference. This would all the more be so since atleast some of these studies are likely to throw up inconclusive findings, thereby raising red-flag on the evidence-based adoption of what is arguably one of the best interventions to assist the poorest among the poor.  

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