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Strengthening The Economic Potential of the Ultra Poor

STEP UP

Poverty Outreach Working Group

The SEEP Network

CONCEPT PAPER

February 2011

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BackgroundOn of the greatest remaining challenges for microfinance and microenterprise developmentis to reach those living in extreme poverty1 with products and services that can assist themin building and protecting their assets. Households who live in extreme poverty facedifferent circumstances and require a different set of programs and services than those whoare moderately poor. First, economic strengthening approaches aimed at the very poor canonly be effective if social safety net programs are in place to address the most basic humanneeds (such as food, water, sanitation, health, shelter, and education). Second, once ableto meet basic needs and minimum consumption levels, they remain highly risk-averse andin need of protective financial services (especially savings, to smooth cash flows) ratherthan promotional financial services (including credit, to invest in income-generatingactivities). Likewise, rather than entrepreneurial skills, very poor people often need to firstbuild confidence, gain basic skills and diversify their livelihood activities. Economicstrengthening strategies can include social assistance programs, access to finance, skillstraining, access to markets and employment.

In recent years multiple interventions, including social transfer programs, sustainablelivelihood approaches, savings-led microfinance and pro-poor market development haveproduced exciting innovations that are reaching and benefiting those living in extremepoverty. Some of these learning initiatives are implemented in isolation, or lack an exclusivefocus on the very poor as a separate market segment, but there is an increasing integrationamong these approaches (such as health with microfinance, graduation from social safetynets to microfinance, etc.) in an attempt to simultaneously or sequentially address themultiple challenges of extreme poverty.

PurposeThe STEP UP2 Initiative intends to generate, consolidate, and share knowledge related to

economic strengthening of those living in extreme poverty. STEP UP encourages cross-disciplinary learning among practitioners, donors and researchers from microfinance,enterprise development, value chain development, livelihoods promotion, health and socialsafety net programs. By doing this STEP UP seeks to forge partnerships and mobilizeresources to increase learning about economic empowerment of those living in extremepoverty and achieving Millennium Development Goal 1 (to eradicate extreme poverty andhunger).

The STEP UP initiative will:

1) Highlight innovative products, services and programs that can show:a. Outreach to households living in extreme povertyb. Evidence that those households move out of extreme povertyc. Potential to achieve sustainability and scale

2) Connect practitioners from different sectors, both MED (enterprise development,microfinance, and associations) and other essential (human/social) sectors (health,education, food security) to learn with and from each other

1We define extreme (or absolute poverty) as absence of enough resources to secure basic life necessities. It is

estimated that 1.3 billion people live below the international poverty line of $1.25 at 2005 purchasing-power parity

(PPP).2

Strengthening The Economic Potential of the Ultra Poor

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3) Consolidate the growing body of knowledge from different sectors on reaching thevery poor and strengthening their economic potential

Learning Activities and ProductsThe STEP UP initiative is a hub for knowledge about economic strengthening approaches andinnovations aimed at the very poor, focusing on:

y Design and implementation guidelines for products and services, incl. case studies.y Cost-effective delivery models (e.g. through use of technology and integrated service

delivery)y Integration of economic with non-economic (social, humanitarian) services to

improve effectiveness and sustainability of MED programs and services.y Use of tools (e.g. poverty targeting, market assessment, poverty measurement) to

improve or understand effectiveness of products and programs within a broadereconomic strengthening framework.

The intended outcome of this initiative is for leading practitioners, program designers,evaluators, and researchers worldwide to build a virtual STEP UP knowledge centerfocusing on economic strengthening for the very poor (ES4VP) approaches, including:

y On-line practitioner handbook, focusing on different thematic areas throughliterature reviews, technical notes, case studies, evaluations, lessons learned,guiding principles, training modules.

y Learningactivities: on-line and live discussions, workshops, trainings.y Practitionerexchangeopportunities: expert databank, economic strengthening

programs map, practitioner surveys, conference.y Networking: blog/newsletter, announcements, roundtable discussions, calendar of

relevant events.

y Actionresearch programs.