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 µprotective¶ financial services (especially savings, to smooth cash flows) rather than µpromotional¶ 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 crossdisciplinary 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 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 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
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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: y y y y 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: y 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.

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