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The Transformative Power of Financial Inclusion

 November 3, 2021 • 5 minute read

As one of the core foundational pillars of the BRAC-pioneered Graduation approach, financial inclusion sits at the center of our program design and interventions.

By Bobby Irven | Manager of Communications, BRAC Ultra-Poor Graduation Initiative

Building strong practices around financial literacy, income management, and savings is essential for creating a pathway out of extreme poverty for the millions of individuals reached through economic inclusion and social protection programs around the world. 

Evolved from BRAC’s wide-reaching microfinance program in Bangladesh, the Graduation approach was founded from the realization that our existing programs were not adequately reaching or serving people in the deepest forms of poverty. This was because financial literacy was not at the level necessary for participants to properly manage microloans and a general lack of familiarity with the formal systems of processing and repayment. 

Through regular coaching and training, Graduation introduces participants to the fundamentals of financial literacy and empowers them to make sound financial decisions and plan ahead for the future. This builds economic resilience, which is a key indicator for success and required for participants to ‘graduate’ from the program.

Financial literacy training remains a key component of all programming and can take the form of group lessons or one-on-one coaching provided by a dedicated mentor during home visits. Such lessons benefit participants as well as immediate family members, or even neighbors and community members. In countries or regions where established mobile money platforms exist, like bKash in Bangladesh, and M-Pesa in Kenya, savings and livelihood practices may be built around these innovations which require basic technology and little training. However simple in practice, their adoption can completely transform the spending and decision-making power of an individual, a key aim of the social empowerment foundational pillar. 

A woman holds a mobile phone showing the M-PESA program which is used to send digital payments.
A participant uses M-PESA, a mobile payment platform to receive money from a customer at her produce stand. (BRAC/CARE 2019)

Financial literacy training remains a key component of all programming and can take the form of group lessons or one-on-one coaching provided by a dedicated mentor during home visits. Such lessons benefit participants as well as immediate family members, or even neighbors and community members. In countries or regions where established mobile money platforms exist, like bKash in Bangladesh, and M-Pesa in Kenya, savings and livelihood practices may be built around these innovations which require basic technology and little training. However simple in practice, their adoption can completely transform the spending and decision-making power of an individual, a key aim of the social empowerment foundational pillar. 

Another key component of financial inclusion within Graduation programs is cultivating best practices around establishing and maintaining savings. This usually takes the form of the time-honored practice of savings groups, which brings together small numbers of participants who jointly deposit small amounts of cash into a collective “pot” which can be used for things like school fees for their children or during a health or economic shock. Depending on the context, savings groups also come with a variety of other practices like mini lessons, testimonials, or even songs or dance related to best practices. Participants find these informal savings practices so useful that many join multiple groups and continue them long after the formal program interventions end. In Bangladesh, Kenya, and many other places around the world, these groups go by the name of Village Savings and Loan Associations (VSLAs) and have resulted in financial security for many millions of individuals and families. 

A typical scene at a VSLA as part of Kenya’s PROFIT Financial Graduation pilot (BRAC/CARE 2019)

As participants grow their financial literacy and become more comfortable and confident around tracking business expenses, savings, and money management, connections to more formal financial services can be made in the latter parts of the programming. Many participants cite misconceptions around banking and loans, such as bank accounts can only be used by the wealthy or that they are ineligible for any type of loans, and it is the aim of the Graduation program to set them up for success as a new chapter of social integration begins. In places where BRAC has established microfinance services, participants who successfully complete their programs then become eligible for small, formal loans, and can continue to build their credit and skills in a safe, supervised environment. After almost twenty years of Graduation programming in Bangladesh and beyond, millions of women now own their own businesses, have purchased land, and even employ staff, some of which includes their own husbands or family members. 

BRAC’s Ultra-Poor Graduation Initiative remains steadfast in its commitment to build upon the success of the Graduation program in Bangladesh, foster financial inclusion for the world’s poorest people, and reach millions more in its endeavours to end extreme poverty by 2030. 

Read More: How Coaching Enables Success in Poverty Graduation

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