PITFALLS: What goes wrong with projects for OVC Menahem Prywes I.Micro-credit II.Skills training...
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Transcript of PITFALLS: What goes wrong with projects for OVC Menahem Prywes I.Micro-credit II.Skills training...
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PITFALLS: What goes wrong with projects for OVC
Menahem Prywes
I. Micro-credit
II. Skills training
III. Leakage of benefits
IV. Excessive benefits
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I. Micro-credit
Many projects for OVC ignore more than 30 years of experience of the microfinance movement
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Many foster families & OVC cannot benefit from micro-credit
They can’t benefit because they lack:
• A profitable micro-project;
• Any other source of stable income; &
• Experience with building of savings.
In this case, extension of micro-credit and effort to repay will just push then further into debt and poverty!
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Groups that serve OVC should not provide micro-credit
• Microfinance is about building permanent local financial institutions able to mobilize & recycle domestic savings, extend credit, and provide a range of services.
• Social service and charity-oriented organizations should not provide micro-credit because they will not be able to manage the credits and maintain the value of the micro-credit fund.
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Don’t limit interest rates.Most projects for OVC and families that foster OVC
keep interest rates low because the borrowers are poor.
• Yet, it costs more to make many micro credits than a few large credits.
• Unless micro-lenders can charge rates that are well above bank credit rates, they cannot cover their costs.
• The result is usually shrinkage and eventual closure of the micro-credit fund.
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Micro-finance Gateway comment on repayment rates:
• “Credit requires a 98% ‘hit’ rate to be successful. This means that 98% of recent vocational school graduates or returning refugees would need to be successful in establishing a micro enterprise for repayment rates to be high enough to allow for a program's overall sustainability. This is simply unrealistic.
• “Running a program with substantial default rates undermines the very notion of credit and destroys credit discipline among those who could repay promptly but who look foolish given that many do not.”
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Conclusions for OVC & foster families
• Micro-credit targeted to foster families and OVC is a poor idea.
• Any micro-credits should be targeted to foster families with good proposals for micro-projects and a history of savings.
• Therefore, most support to OVC & foster families for micro-projects should be in grant.
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II. Skills training
Most projects for OVC support skills training without evidence that it leads to sustained employment.
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Tracking, evaluation, and learning.• Most programs for adolescent OVC include
skills training to ease the transition off of charitable support and into employment and financial self-sufficiency.
• Most skills training activities for OVC do not track their graduates to see whether they are employed in their area of training a year following graduation.
• The result is a lack of learning and self-correction.
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Types of training that are most likely to fail
• Training in providing services for which there is no international market: hairdresser, seamstress, running kiosks (because the market is limited, supply is large, and incomes marginal).
• Training in government-run vocational education schools (see Johanson & Adams book)
• Training without employer commitment, student choice of vocation, or student contribution.
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Types of training more likely to succeed
• Training in production of goods & services for which there is an international market.
• Training when there is an advance employer commitment to hire
• Apprenticeship in informal skills.
• Training within enterprises (of employees).
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Also consider
• Catch-up education in literacy & numeracy;
• Life-skills training
• Entrepreneurship training
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III. Leakage of benefits
Households often redistribute benefits of programs for OVC away from OVC.
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Household redistribute support
• Typically, heads of households redistribute support for OVC, such as food, cash, school books & uniforms, & income from micro-projects.
• This allows the household to meet urgent needs of other members, and means that the household as a whole benefits.
• The extent of redistribution and choice of beneficiary may depend on the distribution of power within the household.
• For example, redistribution may be to male head of household or to senior wife and her children.
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To limit redistribution of support
• Support delivery of specific services to OVC, for example by paying their school or health fees.
• Make assistance to families as a whole conditional on OVC school attendance, etc.
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IV. Excessive benefits
Moreover, excessive benefits can harm OVC.
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Some programs lift OVC consumption above the level of their peers.
• Some orphanages & group homes run by western NGOs keep high standards compared to what the child can expect later in life.
• Provision of housing to OVC-headed households of a quality superior to that of the surrounding community.
• Secondary school scholarships (esp. 2nd cycle) where secondary enrolment rates are low.
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Some consequences are:
• Jealousy and hostility towards OVC among siblings and other non-beneficiaries, and even violence.
• Disruption of the child’s links with their families and communities.
• Adjustment by the child to an unrealistically high and unsustainable living standard.
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It’s not always possible to limit assistance to OVC to the community standard because
• Their peers are malnourished or don’t receive basic health or education services; and because
• Aiding peers (all siblings, or the entire village) is not affordable within the available budget.
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Unconditional cash transfers promote child labor.
• The transfers defray the costs, in consumption, of ‘fostering’ a child to obtain their labor.
• One result is the Cinderella syndrome: girls ‘fostered’ to do domestic labor.
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Lessons
• Willingness to pay to foster suggests that the household is fostering out of a sense of obligation to extended family.
• So, transfers should be limited so that fostering does not become profitable for the foster family.
• Moreover, transfers should be conditional on school attendance by the foster child.
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More lessons
• OVC consumption should not exceed the community standard, except where the standard falls below an acceptable minimum.
• Projects should provide some assistance that benefits the family as a whole, such as livestock, seeds & tools for gardening, a revenue generating project, or conditional cash transfers
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V. Final thoughts on what to do• Keep the design simple, stick to low-cost basics.
• Avoid complex and expensive interventions such as micro-credit & most skills training.
• Implement through local administration, CBOs, & faith-based.
• Avoid unconditional cash and food transfers
• Set up a supervision using local leaders to protect children & resolve disputes.