Tackling Psychosocial and Capital Constraints to Alleviate Poverty

Tackling Psychosocial and Capital Constraints to Alleviate Poverty

Template G Content Blocks
CB30 Flex Block
Sub Editor

Many policies attempt to help extremely poor households build sustainable sources of income. Although economic interventions have predominated historically1,2, psychosocial support has attracted substantial interest3,4,5, particularly for its potential cost-effectiveness. Recent evidence has shown that multi-faceted ‘graduation’ programmes can succeed in generating sustained changes6,7. Here the researchers show that a multi-faceted intervention can open pathways out of extreme poverty by relaxing capital and psychosocial constraints. The researchers conducted a four-arm randomized evaluation among extremely poor female beneficiaries already enrolled in a national cash transfer government programme in Niger. The three treatment arms included group savings promotion, coaching and entrepreneurship training, and then added either a lump-sum cash grant, psychosocial interventions, or both the cash grant and psychosocial interventions. All three arms generated positive effects on economic outcomes and psychosocial well-being, but there were notable differences in the pathways and the timing of effects. Overall, the arms with psychosocial interventions were the most cost-effective, highlighting the value of including well-designed psychosocial components in government-led multi-faceted interventions for the extreme poor.

1 Fiszbein, A. et al. Conditional Cash Transfers: Reducing Present and Future Poverty (World Bank, 2009).

2 Banerjee, A., Karlan, D. & Zinman, J. Six randomized evaluations of microcredit: introduction and further steps. Am. Econ. J. Appl. Econ. 7, 1–21 (2015).

3 Ridley, M., Rao, G., Schilbach, F. & Patel, V. Poverty, depression, and anxiety: causal evidence and mechanisms. Science 370, eaay0214 (2020).

4 Haushofer, J., Mudida, R. & Shapiro J. P. The Comparative Impact of Cash Transfers and a Psychotherapy Program on Psychological and Economic Well-Being. Working Paper no. 28106 (NBER, 2020).

5 Lund, C. et al. Poverty and mental disorders: breaking the cycle in low-income and middle-income countries. Lancet 378, 1502–1514 (2011).

6 Banerjee, A. et al. A multifaceted program causes lasting progress for the very poor: evidence from six countries. Science 348, 1260799 (2015).

7 Bandiera, O. et al. Labor markets and poverty in village economies. Q. J. Econ. 132, 811–870 (2017).