Tackling psychosocial and capital constraints to alleviate poverty

Many policies attempt to help extremely poor households build sustainable sources of income. Although economic interventions have predominated historically, psychosocial support has attracted substantial interest, particularly for its potential cost-effectiveness. Recent evidence has shown that multi-faceted 'graduation' programmes can succeed in generating sustained changes. Here we show that a multi-faceted intervention can open pathways out of extreme poverty by relaxing capital and psychosocial constraints. We conducted a four-arm randomized evaluation among extremely poor female beneficiaries already enrolled in a national cash transfer government programme in Niger. The three treatment arms included group savings promotion, coaching and entrepreneurship training, and then added either a lump-sum cash grant, psychosocial interventions, or both the cash grant and psychosocial interventions. All three arms generated positive effects on economic outcomes and psychosocial well-being, but there were notable differences in the pathways and the timing of effects. Overall, the arms with psychosocial interventions were the most cost-effective, highlighting the value of including well-designed psychosocial components in government-led multi-faceted interventions for the extreme poor.