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Studying the Past, Looking to the Future: Microfinance Lessons Become Foundational to PEPFAR Programs

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The microfinance industry we see today grew out of the competing views of dedicated professionals and interested policymakers. A healthy tension that drove the industry forward was between those promoting the commercialization of microfinance and financially viable providers (supply-side approach) versus those primarily focused on clients and the competing financial and social demands within a household (demand-side approach). As Jason Wolfe, a friend and former colleague, describes it, much of USAID's client-focused work is supported outside of the Microenterprise Development office. For example, microfinance programs funded through USAID's Food For Peace office and the President’s Emergency Plan for AIDS Relief (PEPFAR) program, reach some of the most vulnerable people in the world.  -Anicca Jansen

Microfinance Lessons Become Foundational to PEPFAR Programs

Interview with Jason Wolfe

Jason Wolfe is Senior Household Economic Strengthening Advisor with USAID's Office of HIV/AIDS where he supports PEPFAR programs to improve the economic circumstances of households affected by HIV/AIDS. Previously he served for 5 years with USAID’s Microenterprise Development office promoting inclusive value chain development, managing the Enterprise Development Implementation Grant Program, contributing to knowledge management and collaborative learning efforts, and coordinating special initiatives with youth, HIV/AIDS-affected households, and conflict-affected environments. He has 16 years of experience designing, managing, and assessing market development and technology transfer projects in 45 countries, with a particular emphasis on poor, rural, and marginalized communities.

How did you make the transition from the Microenterprise Development office to your current work in the Office of HIV/AIDS?

I started in the Microenterprise Development office in 2006, which I know when compared to all the other people who have written blog posts, is not that long ago but for me it’s a long time. At that time, the office was framed heavily around the economic growth agenda rather than around poverty and vulnerable groups. Evelyn Stark, who was also in the office at the time, focused most on vulnerable groups, and when she left, I got drawn into that area. I remember the first two groups at USAID that I engaged with were USAID’s Displaced Children and Orphans Fund (DCOF) and the U.S. President’s Emergency Plan for AIDS Relief (PEPFAR).  

I will never forget going to a presentation by Michele Moloney-Kitts, the assistant coordinator for PEPFAR at that time. The presentation was held at an Economic Growth event, and she talked about microfinance, microenterprise, and economic strengthening in the context of the PEPFAR program.  I can’t remember the exact number, but she tried to put a figure to what PEPFAR had spent on microfinance. It was a huge figure – like $80 million or $100 million.  It just blew me away that these folks at PEPFAR, on the health side, were spending money on the stuff that we did at the Microenterprise Development office.

This really brought home to me the need to share what we had learned within Microenterprise Development about how to do these kinds of programs well.  I became engaged with DCOF, which had a very serious interest in microfinance and microenterprise approaches to improve the welfare of vulnerable children. PEPFAR had a similar interest but focused on children affected by HIV/AIDS.

I learned very quickly that different parts of USAID had invested significant interest and funding in these programs but were not very happy with the results. USAID was concerned that it would not be able to achieve the outcomes it wanted to see for vulnerable children if there wasn’t an investment in the economic capacity of families.  Finding a better way to address this problem was a personal challenge for me because while I’ve always been interested in working with vulnerable groups, this was a whole new area for me – to understand the DCOF’s desired outcomes and how they related to microenterprise development.

Income generation was the major focus of DCOF’s microenterprise activities at the time.  While this was important, it did not address the big priority for vulnerable groups – assets and consumption smoothing.  All of this screamed microfinance and financial services to me rather than enterprise development, income generation, and the things they were doing.  But in terms of financial services, what seemed to make more sense was savings.

How did your work with the Microenterprise Development office inform your work with PEPFAR?

The Microenterprise Development office invested in savings groups. At that point it was a minor but strategic investment.  We were learning a lot about the value of savings for these types of vulnerable populations and asset-building and consumption-smoothing outcomes.

In trying to understand the conceptual framework around this, I started digging into things a little more and, at least for me, for the first time unearthed the work that had been done by the USAID-funded Assessing the Impact of Microfinance Services (AIMS) project. AIMS produced a wealth of work on household economies – modeling them, conceptualizing them – and using that as a framework to evaluate microfinance programs. The office had already invested significant resources in studying this issue. We just needed to apply what we learned, and perhaps update it a bit based on our own particular context. That was a huge revelation for me. The studies supported by AIMS became the basis for work with DCOF and PEPFAR – the foundation of all of our thinking. Then we had to operationalize that thinking about economic strengthening activities.

The PEPFAR program released new guidance  in 2012 on programming for orphans and vulnerable children.  There is actually a chapter on economic strengthening that is based heavily on the work that was done under AIMS and applied to PEPFAR’s context.  I think it is a very clear example of how PEPFAR has been able to apply investments made by the Microenterprise Development office.

What are examples of programs today?

We’ve made a big shift within PEPFAR as reflected in this guidance – away from income generating activities and into savings groups.  It is not the only thing we do; there is still a range of approaches that are encouraged based on context. But as a foundational intervention strategy, we are focused now on savings groups. A whole variety of programs are shifting into savings groups as the main intervention strategy for economic strengthening and a platform for other complementary interventions – for instance, integrating training on parenting skills and early child development or supporting people living with HIV to adhere to treatment regimens. Savings groups have become the Christmas tree upon which other tactics are hung. The point I want to get across is that this is a paradigm shift and that there are a many programs that fit into this category.


We have a flagship program for orphan and vulnerable children (OVC) in Ethiopia, called Yekokeb Berhan and led by Pact, that is valued at $92 million over 5 years. To my knowledge, never before have we attempted such a large and ambitious program – its objective is to improve the wellbeing of 500,000 highly vulnerable children.  Economic strengthening was planned as a core intervention, in line with our renewed focus on strengthening the capacity of families to care for children. But how would we do this at scale with something like 60 local partners? We focused on savings groups as the primary entry point – supporting basic outcomes like increased investments in child protection, education, nutrition, and health – as well as the first step to further support to expand income generation to sustain families on the pathway out of extreme poverty. The program certainly has weathered some challenges, but their achievements have been amazing. My numbers are probably a bit out of date, but they’ve established more than 1,600 savings groups with around 30,000 members. Pact is already seeing that parents are making better investments in their children, which shifts the burden away from the project needing to pay for schooling and other support directly.  Pact is really trying to document changes in family and child vulnerability resulting from these interventions, but everyone is really quite excited about the changes they’re seeing on the ground – and they have a firm belief that these improvements are very likely to stick as a result of our economic strengthening work.

Our best-performing project in terms of economic strengthening and savings groups is a project in Rwanda with Global Communities (formerly CHF International) called Higa Ubeho. It is our flagship OVC project in Rwanda. It probably has around 2,500 savings groups with 50,000 participants. There have been real changes in the lives of savings group participants as well as the children of those participants or caregivers – Global Communities has managed to measure the shifts in vulnerability over the past 3 years, and it’s truly remarkable. In Rwanda we look at outcomes in three areas at a child level: investment that parents are able to make in education, food security/nutrition, and health care. The biggest validation that the project is working is that it has been able to reduce project expenses in these areas and see parents and caregivers pick up those costs.

It is a strongly held belief in PEPFAR and other parts of USAID that you need to address these economic challenges. We are also learning that just doing economic strengthening alone is not a silver bullet to achieve these outcomes.  Our programs have been and will continue to include a range of interventions in addition to economic strengthening.

We are very focused on savings-led strategies – globally we’re supporting something like 13,000 savings groups with a quarter million participants. Credit-led strategies are hard to justify given the potential risks.  On the savings side, so far, we have seen nothing but positive results in terms of feasibility, in terms of targeting, and in terms of outcomes. So for us the question is not whether or not to do savings. We will be doing savings. Instead, what else might we consider doing on top of that to accelerate outcomes for people infected and affected by HIV?

What difference do savings groups make in households?

Participation in savings groups means changes in household money management and budgeting. This helps people understand how much money they need at a particular time of year to pay for regular expenses – schooling or food during the lean season. Households have better access to funds by leveraging their savings groups’ credit as a means to smooth consumption or they can use lump sum savings they receive at the end of the savings cycle to make an investment.  Hypothetically, this is where we are expecting to see the biggest impact. And, anecdotally so far, this seems to be consistent. We’re also starting to understand the immense non-monetary value for vulnerable families – things like social connections, peer support, and dignity that are hard to quantify but so obvious when you visit and talk to these folks. I hear time and time again that widows or people living with HIV felt “lonely” or “isolated” before and now they feel like they have “purpose” and “people to rely on”. Since stigma is such a strong driver of so many problems in connection with the HIV pandemic, these are not just nice stories but potentially really important outcomes.

What about the future?

PEPFAR continues to make a significant investment in savings groups. Our estimates show we are spending $40 to $50 million per year. Feed the Future is also making some selective and strategic investments that involve savings groups. USAID as a whole is making more investments in this area than people realize and across different programs.

One thing that PEPFAR makes clear to those considering an investment in savings groups is that the goal is not just the creation of savings groups; they are a means to an end, that of improved outcomes for vulnerable populations.