Make a Difference TodayDonate to Village Enterprise
Make a Difference TodayDonate to Village Enterprise

Village Enterprise

Village Enterprise identifies the extreme poor in Kenya and Uganda and delivers a four part program to build businesses that increase household income: entrepreneurship training, a cash grant, business mentoring and a savings group. Businesses are started in groups of 3 participants which are later organized into Business Savings groups of 10 businesses each. 

Since its founding in 1987, it has trained over 154,000 owners who have opened over 39,000 businesses. There is strong evidence that the Village Enterprise program leads to a significant and persistent increase in income.

The Problem

Many of the world’s very poorest people are caught in a poverty trap because they face multiple reinforcing barriers to improving their standard of living, including lack of access to capital for productive investments, poor information about managing assets, and inability to make risky but potentially productive investments due absence of a safety net or savings buffer.

The Solution

Cash grants, business training and access to savings. Village Enterprise uses a one-year Graduation program to help people escape the poverty trap. The program provides business training and a US$150 grant to groups of three entrepreneurs for starting a business. Each business is assigned a local mentor and is organized into a Business Savings Group of 30 entrepreneurs to provide access to savings. Multiple studies show that Graduation programs lead to significant increases in household income, and that these benefits persist over a number of years.

How Village Enterprise is different from other charities

Village Enterprise addresses the fact that poverty is multi-faceted by providing a multi-faceted program. Their group-based approach builds stronger and longer-lasting change by bringing together diverse skillsets, spreading risk, building social capital and producing cost efficiencies.

Entrepreneurship can be risky and take time to pay off, so the program offers grants, not loans, to allow vulnerable people to immediately improve their standard of living. The goal of the Graduation model is to empower the ultra-poor to sustainably improve their lives, and results so far bear this out.

Village Enterprise has a strong commitment to testing and improving its approach through rigorous research such as its randomized controlled trial (RCT), independently run in collaboration with Innovations for Poverty Action. The RCT results demonstrated that Village Enterprise’s microenterprise graduation program led to increased consumption, assets, and income, as well as improvements in nutrition and subjective well-being, and that its cost-effectiveness is high.

Village Enterprise was chosen for the is the first-ever outcome-based Development Impact Bond (DIB) for poverty alleviation in Sub-Saharan Africa by a consortium of highly respected funders and international development experts including USAID Development Innovation Ventures (DIV) and UKAID (DFID).

At its annual Innovation Summit, ideas submitted by staff are researched and tested, with the most successful integrated into the existing program.

Why Village Enterprise is effective

Targeting and benefiting the ultra-poor cost-effectively

Village Enterprise targets individuals who live on less than US$1.90 a day, have no prior business experience, and are unable to provide for their family’s basic needs. To make sure it is reaching the very poorest people, the organization assesses poverty levels using a community-based Participatory Wealth Ranking exercise and The Progress out of Poverty Index (PPI). The ImpactMatters audit estimates that the average cost of the program is US$250 per participant, producing US$460 in additional lifetime household income and a return of US$1.80 of lifetime household income for every US$1 spent.

Evidence-backed methodology

There is a wealth of evidence that programs similar to Village Enterprise’s model have a positive effect on household income. Nine well-conducted randomized control trials from four academic papers provide strong evidence of the effectiveness of cash grants combined with business training.

Rigorous monitoring systems

Village Enterprise has strong systems for tracking key metrics and use the data collected to make management decisions and to test and continuously improve the program model.

Dedication to learning and iteration

Village Enterprise has a strong track record of making changes to improve its program based on high-quality data. Over the past three years, it has iterated its program six times based on evidence from pilot testing -- for example it made changes to improve its training procedures. Their randomized controlled trial is high quality and tests various aspects of their program using a multi-arm design, and is further evidence of Village Enterprise's commitment to learning and iteration.

Innovation in scaling

Village's US$5.26M Development Impact Bond will transform the lives of 12,000+ households in rural Kenya and Uganda by creating 4,000+ sustainable microenterprises over 3.5 years. the DIB is an innovative and performance-based financing tool that is designed to demonstrate how to scale a graduation out of extreme poverty program in a cost-effective way.

In 2016, Village Enterprise launched the Village Enterprise Accelerator to step up the rate of poverty alleviation it can achieve through partnerships. The Accelerator will provide technical assistance to NGO and government partners interested in replicating the model in other countries and partner with research institutions to further test and improve the model.

High Impact

Village Enterprise’s accountability and sustainability

Village Enterprise has been thoroughly assessed and evaluated by ImpactMatters, and is among the first non-profits to have an Impact Audit carried out on its programs. This audit concluded that there is strong evidence that Village Enterprise is reaching its target population, has outstanding monitoring systems and has a strong record of iterating its program based on high quality data.

The randomized controlled trial that Village Enterprise designed, funded and participated in was of high quality, and provided strong evidence of impact. Village Enterprise pre-registered this randomized trial and has published its previous research on its website.

Frequently Asked Questions

Why does Village Enterprise provide grants instead of loans?

Village Enterprise targets the extreme poor, and works with vulnerable people who have never started a business. Microloans often require payments very soon after a loan is made, and therefore do not give recipients much time to ensure their new enterprise is a success. Further, loans can prevent people from making risky investments with a potentially high return because of the required repayments and risks of default. A small seed grant can also allow profits to be used to address critical family needs rather than to make repayments.

What types of businesses do Village Enterprise business groups establish?

The most common businesses are livestock, agriculture, and retail.

What do participants usually spend their cash grant on?

Participants spend the cash on inputs needed for their businesses. For example, if entrepreneurs are starting a livestock business, they spend the cash on buying chickens/ducks/goats, feed, material necessary for shelter and vaccinations. For an agribusiness, the cash grant is spent on seeds, fertilizer and potentially renting a plot of land. Retail-service entrepreneurs spend their cash grant on necessary goods and transportation. Businesses often begin with basic inputs such as maize or chickens. As profits are generated from their group businesses, entrepreneurs reinvest to diversify and expand to more advanced products like cows and tomatoes.

Are investments in livestock and agriculture safe investments?

Livestock and agricultural investments can be subject to shocks to weather or market prices. To help alleviate these risks, Village Enterprise has introduced the Smarter Market Analysis Risk Tool (SMART), a mobile technology tool that provides farmers with up-to-date market information to allow them to make informed business decisions.

How will Village Enterprise use my donation?

Village Enterprise is investing new donations into strengthening the foundations for rapid scaling and implementing its five-year strategic plan, a two-pronged growth strategy adopted under the advice of Bain & Company in late 2015:

1. To continue to expand organically in Kenya and Uganda, with a stated goal of continuing to scale the number of businesses started directly by Village Enterprise by at least 15% annually;

2. To scale up in other countries in Africa by providing technical assistance to other NGOs and governments via the Village Enterprise Accelerator. Village Enterprise anticipates the Accelerator will eventually be financially self-sustainable, as it will earn revenue from licensing the Village Enterprise model and from providing technical assistance to other entities.

Why does The Life You Can Save recommend Village Enterprise?

We recommend Village Enterprise because they have successfully passed a rigorous “Impact Audit” conducted by Impact Matters

Is my donation tax-deductible?

Donations are tax-deductible in the US. Eligible UK donors can claim Gift Aid by donating through The Life You Can Save UK here.

More Information

Image credits: All photos courtesy of Village Enterprise

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