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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
           I. Micro-credit

Many projects for OVC ignore more than 30
years of experience of the microfinance
movement
  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!
  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.
       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.
 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.”
 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.
           II. Skills training

Most projects for OVC support skills training
without evidence that it leads to sustained
employment.
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.
   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.
 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).
             Also consider
• Catch-up education in literacy & numeracy;
• Life-skills training
• Entrepreneurship training
       III. Leakage of benefits

Households often redistribute benefits of
programs for OVC away from OVC.
    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.
 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.
       IV. Excessive benefits

Moreover, excessive benefits can harm OVC.
 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.
      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.
  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.
     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.
                     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.
                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
   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.

				
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posted:2/5/2010
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