AILSA CHANG, HOST:
You need money to make money. We have all heard this before, but what are people living in extreme poverty supposed to do with that? How do they make it out of poverty? That is the problem for almost a billion people all around the world. And in response, some programs give people cash to start a business, and they coach people on how to build a sustainable income. But these efforts are dealing with some major global shocks. NPR's Fatma Tanis reports from Uganda on how these programs keep evolving.
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FATMA TANIS, BYLINE: Rolling hills are topped with lush greenery in this remote part of southwest Uganda. Most homes here are one-room huts with sheet metal roofs.
JAKARIN KABANANA: (Non-English language spoken).
TANIS: Twenty-three-year-old Jakarin Kabanana (ph) and his family used to live in a hut like that. They fled here in 2018 from the war in the Democratic Republic of the Congo.
KABANANA: (Non-English language spoken).
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TANIS: But now, Kabanana, the oldest son, is building a much larger and sturdier house.
KABANANA: (Non-English language spoken).
TANIS: It's a big step up for this family of 11. They used to survive on just $5 a week. Sometimes they didn't eat, and they couldn't afford school fees for the children.
KABANANA: (Non-English language spoken).
TANIS: Then in 2022, Kabanana got a grant for $74. He started raising and selling goats. This break came from a $28 million donation from the IKEA Foundation. Fourteen thousand households in this region got the same grant. They can use it to start a steady business like selling secondhand clothes or growing food. They also get coaching. It's called The Graduation Approach. Now Kabanana earns $13 a week from raising goats. It's how he's built this new house.
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TANIS: The people who got the grant meet up twice a month in groups of 20, along with a coach.
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TANIS: This group meets at the school. In the middle of the circle on the floor is a metal box with some petty cash and a ledger.
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TANIS: Today there's other visitors, too.
DEAN KARLAN: My name is Dean Karlan. I'm a professor.
TANIS: Economist Dean Karlan, who designed the program, along with a team of researchers and the NGO that's running it, AVSI Foundation.
KARLAN: And so we want to learn as much as we can from what you've experienced so far.
TANIS: Now, there are programs in many low-income countries that apply The Graduation Approach, but this one is trying something new. Karlan is an expert in poverty solutions at Northwestern University, and he's been wondering, could you get more out of the same pot of money? So instead of giving each household a one-time grant of, say, $200, a group of 20 households gets around $4,000 to manage jointly. They use the pot of money to loan themselves cash for their businesses. If those do well, they pay back the money and keep the profit. They also pay interest to the group on the loans, which then gets distributed to all 20 members. It's called the block grant, and Karlan says it essentially creates a mini bank for the group.
KARLAN: The big picture is about providing a faster on-ramp for households to be able to start up large and having a better and more stable source of income.
TANIS: And funding for global development programs like this is being cut.
KARLAN: If we can find a better way of squeezing more juice out of whatever we're doing, then you can expand and help more people. And instead of going to a thousand communities, we can go to 2,000 communities.
TANIS: But in discussion after discussion, Karlan notices something perplexing. People have not been borrowing from the block grant as much as they could be. In fact, half of the money has been sitting safely in the bank. Karlan asks Kabanana about his goat business. Why did he only take out 500,000 Ugandan shillings, about $140, from the block grant to buy two goats?
KARLAN: Why not have a budget for four goats and say my budget is a million and I - so that I can buy four goats?
KABANANA: (Non-English language spoken).
TANIS: He says, "first, I wanted to see how the market is, and if I'm able to manage it, then I'll borrow more." Karlan then asks him how much he's planning to borrow next time. But it turns out it's even less, 300,000 shillings, about $80.
KARLAN: So I was surprised 'cause now he knows this is a successful business. He knows how to do it. So why is he borrowing less rather than more?
KABANANA: (Non-English language spoken).
TANIS: Kabanana says, "recently, I noticed that when I'm at the market, people have less money to spend." He's referring to the fact that many of the refugees here were getting cash aid to buy food, but the Trump administration cut that earlier this spring.
KARLAN: Because of the cutbacks in aid, there was less economic activity going on. The markets were not as thriving, and they could actually see that difference.
TANIS: Other group members tell Karlan they're not taking out loans because they felt the bank was too far from where they lived. And one woman says she's afraid to take out too much. Her name is Antoineta Justine (ph). She points to the metal box on the floor.
ANTOINETA JUSTINE: (Non-English language spoken).
TANIS: "This money here," she says, "it's where our hearts are. It feeds our families. That's why we're more responsible about it." AVSI's director of programs, Rita Larok, chimes in, saying she appreciates that.
RITA LAROK: However, this money is supposed to help you make more money. Because when you borrow a little, you earn little interest, and you share little.
TANIS: For Karlan, it's a stark reminder of how challenging it can be to address poverty.
KARLAN: What we're seeing today, clearly, from these conversations, is that it's deeper than you need money to make money. You also need to be able to take on risk to make money. And that's a double whammy for someone who's poor.
TANIS: It can be really hard for people in poverty to take advantage of opportunities. There's fear that failure might leave you worse off than before. After all the meetings, Karlan and AVSI staff put their heads together. They decide to make some tweaks. Instead of a bank, they'll use mobile money online to help people access the block grant easily. And the coaches will have to keep encouraging the groups.
KARLAN: Over time, the block grant will get used more and more because of the group coming together and knowing each other better. So that's one thing that we're going to look out for in the next phase of this project.
UNIDENTIFIED CHILD: (Non-English language spoken).
TANIS: Back in the village, Karlan meets with a different group that shares a block grant. They gather under a gazebo surrounded by banana trees.
TUMORIWAY JUSTINE: (Non-English language spoken).
TANIS: This group's leader, Tumoriway Justine (ph), has a request for Karlan. AVSI's Ruth Ninsiima is translating. She says Justine has been calling Karlan a (speaking Runyankore), which in Runyankore means the top leader.
RUTH NINSIIMA: She's referring to you as (speaking Runyankore), like high authority, leader.
TANIS: And what Justine wants Karlan to do is to get them a tractor to do more farming.
NINSIIMA: High authority, if you can get them a tractor, oh, they'll be glad.
KARLAN: If they're leftover money in the block, yeah.
T JUSTINE: (Laughter).
TANIS: But Karlan says they don't need him to be the high authority to get that tractor. They can just buy it with the money they still haven't used that's sitting in the bank.
NINSIIMA: There's actually some. Yes. (Non-English language spoken).
(LAUGHTER)
TANIS: Fatma Tanis, NPR News in southwest Uganda. Transcript provided by NPR, Copyright NPR.
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