In Africa, Asia and Latin America, more than a billion people remain in extreme poverty, trapped outside the formal economy. Even though progress has been made to reduce this number, there still remains a large gap in alleviating poverty especially in developing economies. It is therefore imperative that the question “what do people need to develop?” is raised and addressed.
Enabling people to move out-and stay out- of poverty is a complex process that requires more than just one intervention. Effective development programs are those that take into account multiple approaches such as education, micro-credit, health, and even spiritual improvement to address different contexts and groups of people.
A successful strategy for poverty reduction must have, at its core, measures to promote sustainable income generating activities. It is not enough to simply provide welfare grants to the poor; we have to equip them with the tools to not only earn a living but also sustain and eventually grow their income. This is the key to development.
Micro Financing Programs
A popular intervention, adopted in many developing countries, from Bangladesh to Cameroon to Guatemala, is microfinance. Successful microfinance takes into account both financial intermediation and social intermediation. According to the World Bank, Microfinance is not simply banking, it is a development tool. Microfinance involves extending credit of low amount (micro-credit) to people having little or no income, and people who have no access to formal financial institutions. Traditionally, microfinance was focused on providing micro-credit, but modern microfinance combines financial services such as small business loans, with non-financial services, such as training, insurance and health services, into inclusive growth programs known as Livelihood Development Programs.
Livelihood Development Programs
Livelihood Development Programs design a wide range of approaches to help poor people acquire productive assets and build the skills necessary to use them. Since improving the lives of poor people is the premier aim of development work, a livelihood approach identifies programs based on the priorities and goals defined by people themselves and seeks to support their own livelihood strategies. Livelihood interventions are thus developed by collaboration between development organizations and the communities involved.
Most of these programs offer a combination of a micro-credit component with job creation, training, education, financial literacy, market linkages and in some cases, early childhood development and Spiritual development components.
This focus on building resilience and enabling entire communities to move out of dependency, has become the driver of a range of innovative social protection approaches known as graduation programs.
Graduation Programs
Graduation programs are targeted interventions to tackle simultaneously the interrelated challenges faced by the poorest with a set of services, including access to saving services, intensive mentoring, technical skills training and the grant of a productive asset or seed capital.
“Graduation” is the point at which someone is able to exit from a classic safety net program because their circumstances have improved. This improvement is often measured using indicators such as an increase in assets or level of food security. Non-material benefits, such as improved self-confidence and participation in community activities have emerged as being equally significant, in measuring lasting positive impacts of graduation models.
Coaching
Another fundamental intervention is coaching. It is a known and proven fact that small businesses can help alleviate poverty with programs and projects that aim to improve the living conditions in underdeveloped communities. Strengthening the internal capabilities of these businesses is therefore a top priority to ensure the success of the business, and, in turn community development through job employment, higher wages and improved skills.
A study by the Aspen Institute, says that coaching focuses more on the process of planning and problem solving and less on technical business content. Coaching assists a wide range of clients, but especially those in the start-up phase and those who are intent on expanding their businesses. It addresses both business and personal issues and is therefore of great value to the entrepreneur.
In order for poor people to progress, and remain out of poverty, multiple interventions like those mentioned in this article, need to be implemented. There is a need to understand the best combinations of support for people in different contexts.
To accelerate the end of poverty, key stakeholders, such as development institutions, donors and governments should focus on developing enough capability for designing and delivering poverty reduction interventions.