Microfinance brings essential financial services to many poor women and men around the world, but much more needs to be done to reach those who are chronically or ultra poor. Nearly half a billion people live in chronic poverty, making an average of less than $1.25 per day. While ultra-poor households are economically active, their income tends to come from informal and unpredictable work, such as small-holder farming or wage labor. This seasonal, unreliable and sometimes dangerous work – coupled with the poor’s vulnerability to external shocks, such as illness – brings a high level of uncertainty that can often leave them trapped at this level of poverty for most of their lives.
Grameen Foundation believes that we can help ultra-poor women and men help themselves. Our Solutions for the Poorest initiative was created in 2009 to identify and expand innovative solutions that address financial volatility in the lives of these households. Serving the poorest requires 1) carefully planned and structured targeting to ensure we are reaching the right people, 2) more frequent, comprehensive interactions that address their vulnerabilities and 3) solutions that are crafted to meet their needs.
Innovative, sustainable solutions for the poorest must become an integral part of microfinance institutions’ operations. Grameen Foundation uses a two-pronged approach that focuses on creating income-generating activities for the poorest (livelihood) and developing suitable financial products. Our livelihood-development programs focus on business development (enterprise), linking smallholder farmers and suppliers to access to financing and services (value-chain financing and development), and microfranchising. Our financial products focus on microsavings and microinsurance.
Because ultra-poor women and men lack access to reliable income sources, Solutions for the Poorest looks for opportunities to connect them to sustainable, reliable income activities that are supported through training and mentoring. We focus on three main areas:
- Coupling microfinance and livelihoods training
- Ensuring that agriculturally-dependent rural ultra poor households are better integrated into the production cycle of value chains that have higher income earning potential
- Providing mobile phone-based solutions that help the poorest take advantage of microfranchise opportunities
Here are some examples of our work:
Targeting the Poorest
Targeting and selecting groups to work with, based on their poverty levels, can be a powerful first step in achieving greater social impact in development programs. In collaboration with a team at BASIX, one of India’s leading microfinance and livelihoods institutions, Solutions for the Poorest has developed and tested a composite poverty-assessment and targeting tool
to facilitate the identification and selection of the poorest households in our project area. This provides a model for other organizations working with very poor populations.
Integrated Livelihoods Model
In the Indian state of Bihar, one of that country’s poorest regions, we are working with 200 very poor households to test an integrated livelihoods model that provides a range of services. In this project, called “Livelihood Pathways for the Poorest,”
we are providing savings tools, livelihood education and market linkages, tailored loan products to support entrepreneurial activities, and women’s empowerment activities to support sustained movement out of poverty. Our goal is to test whether a single institution can provide integrated financial and livelihood-development services as part of a holistic approach to servicing the economic needs of the poorest, while also making sound business sense. In this project, we are collaborating with The Livelihoods School (TLS), which is part of the BASIX group.
Agricultural Value Chain Selection and Analysis
We are currently working in Uganda, Mali and Colombia to select and analyze value chains that provide the greatest benefit to poor farmers
in those countries. Our goal is to identify the bottlenecks in the systems that limit farmers’ ability to earn a reasonable income from their activities. In Uganda, we expect our work to enhance the impact of Grameen Foundation’s Community Knowledge Worker
To ensure that the poorest people have access to resources they can rely on to manage their finances and access better business opportunities, we developed a process that refines the current methods being used in the enterprise development community for identifying value chain systems.
Ensuring that poverty-focused organizations focus on a double bottom line (social as well as financial) is critical for microfranchise initiatives designed for the poor. To be truly effective, organizations must constantly gather and analyze data about their operations. This case study
details our work with an Indonesian social enterprise called PT Rekan Usaha Mikro Anda
(PT Ruma), providing an example of how data analytics changed its strategy toward and preconceptions about its clients.
Financial Products for the Poor and Poorest
Access to convenient, affordable and secure financial services can help very poor households better manage the risk of their daily lives. Solutions for the Poorest’s approach goes beyond simply creating and piloting a product. We focus on the entire “solutions development” cycle, including identifying how to operationalize the product in a way that will ensure smooth delivery to the customers. This involves people management
, information technology, internal operations controls, and financial risk management. We believe in the power of data to help us understand the behaviors and needs of clients. We use the Progress out of Poverty Index® (PPI®)
and other demographic and transactional data to understand how our customers currently use financial products and where the gaps in service lie.
The Microsavings Initiative, a three-year project funded by the Bill & Melinda Gates Foundation
, has a goal of reaching 1.45 million new savers in Asia and Africa by the end of 2012. We recognize savings as an essential tool for households to manage risk and build assets. Savings also strengthens microfinance institutions by creating a steady and more cost-effective funding stream for their loan portfolio. We are working with three microfinance institutions – CARD Bank in the Philippines, Cashpor Microcredit in India, and ACSI in Ethiopia – on a holistic approach to transform their operations. For more details on our initiative and links to our publications, go to our Microsavings page
Microinsurance in Uganda
We are conducting a survey with Ugandan smallholder farmers about their perception of risk and risk-management tools. Our survey seeks to understand the level of risk that farmers are currently taking, their existing risk-mitigation strategies, and how this influences their farming practices. This information will help us design a microinsurance product that not only meets their needs, but will be built on a sustainable business model. The farmers were selected in collaboration with Grameen Foundation’s Community Knowledge Worker