Strengthening The Economic Potential of the Ultra Poor

STEP UP

Poverty Outreach Working Group

The SEEP Network

CONCEPT PAPER

February 2011
Background
On of the greatest remaining challenges for microfinance and microenterprise development
is to reach those living in extreme poverty1 with products and services that can assist them
in building and protecting their assets. Households who live in extreme poverty face
different circumstances and require a different set of programs and services than those who
are moderately poor. First, economic strengthening approaches aimed at the very poor can
only be effective if social safety net programs are in place to address the most basic human
needs (such as food, water, sanitation, health, shelter, and education). Second, once able
to meet basic needs and minimum consumption levels, they remain highly risk-averse and
in need of ‘protective’ financial services (especially savings, to smooth cash flows) rather
than ‘promotional’ financial services (including credit, to invest in income-generating
activities). Likewise, rather than entrepreneurial skills, very poor people often need to first
build confidence, gain basic skills and diversify their livelihood activities. Economic
strengthening strategies can include social assistance programs, access to finance, skills
training, access to markets and employment.

In recent years multiple interventions, including social transfer programs, sustainable

livelihood approaches, savings-led microfinance and pro-poor market development have
produced exciting innovations that are reaching and benefiting those living in extreme
poverty. Some of these learning initiatives are implemented in isolation, or lack an exclusive
focus on the very poor as a separate market segment, but there is an increasing integration
among these approaches (such as health with microfinance, graduation from social safety
nets to microfinance, etc.) in an attempt to simultaneously or sequentially address the
multiple challenges of extreme poverty.

Purpose
The 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 social
safety net programs. By doing this STEP UP seeks to forge partnerships and mobilize
resources to increase learning about economic empowerment of those living in extreme
poverty and achieving Millennium Development Goal 1 (to eradicate extreme poverty and
hunger).

The STEP UP initiative will:

1) Highlight innovative products, services and programs that can show:

a. Outreach to households living in extreme poverty
b. Evidence that those households move out of extreme poverty
c. Potential to achieve sustainability and scale

1
We 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

1
 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
3) Consolidate the growing body of knowledge from different sectors on reaching the
very poor and strengthening their economic potential

Learning Activities and Products

The STEP UP initiative is a hub for knowledge about economic strengthening approaches and
innovations aimed at the very poor, focusing on:

 Design and implementation guidelines for products and services, incl. case studies.
 Cost-effective delivery models (e.g. through use of technology and integrated service
delivery)
 Integration of economic with non-economic (social, humanitarian) services to
improve effectiveness and sustainability of MED programs and services.
 Use of tools (e.g. poverty targeting, market assessment, poverty measurement) to
improve or understand effectiveness of products and programs within a broader
economic 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 center
focusing on economic strengthening for the very poor (ES4VP) approaches, including:

 On-line practitioner handbook, focusing on different thematic areas through

literature reviews, technical notes, case studies, evaluations, lessons learned,
guiding principles, training modules.
 Learning activities: on-line and live discussions, workshops, trainings.
 Practitioner exchange opportunities: expert databank, economic strengthening
programs map, practitioner surveys, conference.
 Networking: blog/newsletter, announcements, roundtable discussions, calendar of
relevant events.
 Action research programs.