It has been noted in various studies on the impact of microfinance that the benefits accruing to borrowers tend to be less apparent among the poorest of the poor (Morduch 1999, Rabbani, et al. 2006). Morduch remarks that this result lends credence to the argument that "poorer households should be served by other interventions than credit."  The expansion of microfinance and its potential to improve the economic condition of recipients suggests that one potentially constructive "other" intervention would be one which prepares the poorest of the poor to successfully participate in regular microfinance programs.

This project is intended to accomplish precisely this aim. Working with MFI Bandhan, the  Abdul Latif Jameel Poverty Action Lab (J-PAL) will conduct an impact assessment of a program designed to improve the economic situation of the poorest of the poor, or "ultra" poor, and prepare them to become microfinance clients. The initial phase of this intervention will be to provide grants of 100 U.S. dollars to ultra poor beneficiaries to begin or expand a small-scale enterprise. In addition to grants, beneficiaries will be allotted a fund which they may draw upon to cover health expenditures. A benefit of this feature is that it may help to reduce the vulnerability that has been cited as a reason that the very poorest have difficulty participating in regular microfinance programs (Rabbani, et al. 2006)

The selection of beneficiaries is random, with some being offered the program (treatment) and others not (control). Following the grant disbursal, beneficiaries will receive 18 months of regular business training. Upon completion of this training they will become eligible to participate in Bandhan's microfinance programs.