This paper presents the findings from research conducted by the Poverty Outreach Working Group(POWG) at the SEEP Network on approaches among microenterprise development (MD) organizationsaimed at the very poor .
The underlying data in the research are case study responses submitted by twelveorganizations operating around the globe: five in Africa (Trickle Up in Mali, Freedom From Hunger withReseau des Caisses Populaires du Burkina in Burkina Faso, CARE in Rwanda, Kenya BDS in Kenya, andAlexandra Business Association in Egypt), five in Asia (Nirdhan in Nepal, Activists for Social Alterntivesin India, Christian Children’s Fund/LEEP in India, PACT/WORTH in Nepal, MEDA in Pakistan), and twoin South America (Pro Mujer in Peru, Friendship Bridge in Guatemala). POWG members selected these programs with the input by key industry specialists, as they were identified them as organizations aiming toreach and serve very poor people. The hope was that studying their methodologies would lead to a list of good practices to share with the entire industry. Reflecting this focus, the case study questions werestructured around four hypotheses that POWG developed of what an organization must do to be successfulin serving the very poor:1.Deliberately targeting very poor people.2.Offering products and/or services designed specifically for the needs of very poor people.3.Establishing a strong institutional culture of commitment to serving very poor people.
Accepting that the greater the institution’s efforts at reaching deeper below the povertyline, the longer it will take to achieve financial sustainability.
BT: Why should weaccept this? We can acknowledge current practice, but acceptance inhibitsinnovation.
This paper reports how closely the case study organizations adhere to each of the practices listed in thehypotheses and considers correlations between use of each strategy and actual depth of outreach to the very poor. This discussion also incorporates feedback provided at a POWG conference in October 2007 inresponse to a presentation of preliminary findings from the case studies. What emerges is not a definitivelist of “best practices”, as the microenterprise development field still struggles in reaching the very poor, but a finding of common elements in both the strengths and weaknesses of the case study programs. This paper ends by recommending areas for further research.There are several definitions of “very poor” or “extreme poverty”. The Microenterprise for Self RelianceAct (2000) by the US congress uses an absolute income-based poverty measure, but there are other possibleways of defining extreme poverty that are equally valid, as poverty is a multidimensional problem. Very poor people often lack basic skills, are socially excluded, or tend to exclude themselves from development programs and services, even when targeted at them. These various dimensions of poverty are manifest inthe challenges of reaching very poor people with microfinance and microenterprise development services.The Sustainable Livelihoods Framework (SLF) attempts to address poverty in all its dimensions, as itdistinguishes among five different types of capital: physical, natural, social, human, and financial. Viewedwithin this context, the large majority of case study organizations aim [present tense] to strengthen to someextent social and human capital in addition to financial capital, while almost none directly addressed [pasttense] deficits in physical and natural capital. But very poor people often live in remote rural areas,characterized by lack of infrastructure, relatively low population density, and undiversified economies.The case study research led to several interesting findings. The most surprising one was that theseorganizations counted at best one third of their clients among the very poor (using an absolute income- based poverty measure). Seven out of the 12 organizations did not measure their clients’ poverty on anabsolute scale, whereas those who did reported that between 6.8 and 28.0 percent of their clients classifiedas very poor. Related to this, the case studies revealed that those organizations that [which] targeted the
This paper defines “very poor” as
people living on less than US$1 a day (more precisely, on less than US$1.08 per day in purchasing power parity dollars at 1993 prices
BT: = average annual inflation of 0.55%. This number
should be verified.
) or those among the bottom 50 percent of people living below a specific country's poverty line.This definition of very poor matches the one used in the Microenterprise Self-Reliance Act passed by the U.S.Congress in 2000 (Public Law 106 309). This act was amended in 2003 and again in 2004. The 2003 amendmentrequires that 50 percent of all USAID microenterprise resources benefit the very poor.