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5.6.8. Analytical Tools for Working with the Very Poor

There are a range of analytical tools available for application in working with the very poor, many of which are summarized in the toolkit Pathways out of Poverty:  Tools for Value Chain Development Practitioners.  Many of these tools are specifically applicable at the value chain selection and value chain analysis sections of the value chain project cycle, while other situational assessment tools can be applied through the cycle.  The figure below demonstrates the application of the tools along the value chain project cycle. 

Tools at each of the above stages are presented here:

Situational Assessment

Value Chain Selection

Value Chain Analysis

Situational Assessment

Sustainable Livelihoods Approach

The sustainable livelihoods approach believes that a holistic understanding of a given context is necessary to ensure that activities and interventions will effectively address intended project goals. Many different tools have been developed by practitioners of the sustainable livelihood approach (SLA) that are relevant to working with vulnerable populations. Those with most relevance to using the value chain approach with very poor populations include: [1]

  • Participatory poverty assessment: Works directly with the poor to understand how they define poverty (as compared to local leaders), contributing factors (e.g. access to land and labor), what methods will be most effective for addressing their poverty, . PPA may use trend analysis to understand how poverty has changed over time, and review common coping strategies that are relied upon in times of need.
  • Stakeholder analysis: Contributes to understanding which stakeholders are involved in a given context, their comparative power and resources, and their potential impact upon project activities. Stakeholder analysis can be effective in understanding how certain groups, such as very poor populations, may be deprived of the benefits of a value chain intervention given weak political power or other factors. It can also assist in identifying stakeholders that may otherwise not be identified during a value chain analysis, such as absentee landlords.
  • Income portfolios: Assesses all sources of household income and lists them in percentage terms. The value of the tool is in identifying differences between social groups in their economic activities. If very poor populations are found to be pursuing very different livelihood strategies than other groups, for instance, their engagement in the program may be uncertain. The graphic below depicts the outcome of this process for coffee farmers in Tanzania.[2]

Mean household income portfolio, 1997

  • Strategic conflict assessment: Analyzes potential contributors to conflict and how external intervention may exacerbate or mitigate these risks. For instance, a value chain project that is going to improve incomes within a region may exacerbate existing tensions if gains do not reach volatile groups. A strategic conflict assessment can contribute to understanding these risks and how the project could tailor its strategy to reducing conflict, such as by looking for strategies for inclusion.

SLA sees improving the capacity to cope with the seasonality, trends, and shocks as an important aspect of supporting sustainable livelihoods and reducing vulnerability. These factors are all part of the vulnerability context. The following tools help to understand which of these factors are most relevant to a specific population, and to what extent they do or could affect their livelihood.[3]

Sustainable Livelihoods Approach tools

 

Household Economy Analysis

Household Economy Analysis (HEA) is a framework designed to analyze the extent to which different populations are vulnerable to national, international and geo-political shocks. It complements the value chain approach by providing information on how risk scenarios will impact segments of a community, and in particular very poor populations, while having less emphasis on how markets will adjust to changes in behavior. While HEA can be applied at different stages in the value chain development project cycle, it can be particularly useful to apply prior to value chain selection so as to inform the choice of value chains that are appropriate for very poor populations. Three types of information are collected in HEA:

  1. The ways that different socioeconomic segments of a community obtain food and cash,
  2. Their constraints, assets and opportunities, and
  3. What options they have when confronting crisis.

HEA baseline tools include livelihood zoning (mapping of areas with similar livelihood strategies), wealth breakdowns (distribution of poverty within a community), and analysis of livelihood strategies (how individuals generate their livelihoods). It then specifies potential problems and their impact at the household level, analyzes the capacity of households to cope with these shocks, and predicts the impacts of these shocks on the household. HEA complements the emphasis of the value chain approach on relationships through its analysis of the economic connections between areas and groups. This yields information on how assets are distributed within a community and how resources are shared. The box presents an example of applying HEA in Niger.[4]

Save the Children UK and HEA in Niger

Following a significant food emergency in 2005, Save the Children applied HEA in Niger to better understand livelihood strategies. Its application uncovered widening disparity in rural incomes and land tenure. Livestock—the key determinant of wealth across all wealth categories—is owned almost entirely by the relatively wealthy. Although mutually beneficial economic relationships do exist between rich and poor, they are limited and very poor populations are unable to withstand continued shocks to their livelihoods. The impacts of crop failures are actually far less severe than previously thought and do not push most households into extreme hunger; conversely, shocks to the livestock-related output and input markets are much more significant. These findings facilitate sector selection and an understanding of how value chain approaches can best reach vulnerable groups.

The following figure provides a simplified illustration of the analysis yielded by the HEA framework. Whereas the group in question is able to provide for their needs at first, a drought in a neighboring country floods the local labor market and reduces income from this source. Although individuals are able to compensate by selling additional animals, they are nevertheless unable to meet basic livelihood expenditures.[5]


Household Economy Analysis framework

Poverty Assessment Tools (PAT)

The Poverty Assessment Tools (PAT),[6] developed by the IRIS Center at the University of Maryland and USAID, help value chain initiatives to determine the poverty levels of those they are reaching. The tools allow implementing agencies to determine their overall poverty outreach by calculating the proportion of their clients who are below either the international poverty line ($1 per day) or the median national poverty line (bottom 50% below the national poverty line). For established projects, the PAT is used during the monitoring and evaluation phase of the project cycle to test how effectively the initiative is reaching very poor populations. Given the varying nature of poverty across countries, the tools to conduct the poverty assessment are contextualized to each country.

There is still limited experience with applying the PAT to value chain projects, as most early users have been microfinance institutions. Existing evidence suggests that there are both positive and negative aspects. Positively, the tools are free, publically accessible and have already been calibrated to the specific country contexts. Organizations can analyze the results using online software and can add additional survey questions that are relevant to their own learning agenda. However, the costs of implementing PAT can be substantial for smaller projects, and organizations have learned that they need to have a strong understanding of the survey questions and that survey questions may not always work in particular contexts. Overall, ongoing modifications to the tools and the lack of many other standardized options that have been applied to value chain projects make the PAT worthy of consideration.

Progress out of Poverty Index (PPI)

Similar the PAT, the PPI uses national data to develop country-specific poverty measurement tools for use by practitioners in the monitoring and evaluation phase of the project cycle. The PPI allows the measurement of a project client’s poverty status relative to $1 per day, $2 per day, or the national poverty line. This can be done for the entire organization at one point in time, or for an individual client over a longer period. As with the PAT, the PPI is individually calibrated for each country in which it is applied. Developed by the Grameen Foundation, the PPI was designed for use by microfinance institutions but can be used by any organization working with the poor. While there are some projects that are piloting the use of the PPI on the measurement of poverty for urban value chains[7], no results are yet available.

Relative to the PAT, the PPI is available in some countries where the PAT has not yet been calibrated. It also has fewer questions and thus requires less time investment for application and analysis. However, practitioners also note that there are fewer questions than for the PAT, making it comparatively easier for those who are applying the tool to anticipate what responses correlate with higher levels of poverty.

Two broader challenges have been raised about the benefit the PAT and PPI. First, the tools may not always adequately measure intra-household discrepancies, such as children's working conditions who are contributing to household income. Second, the collection of information may be difficult for value chain projects that are using a 'light touch' approach. Clients of value chain projects who are being involved indirectly through another market actor or are involved in a limited way with the project may be comparatively more reluctant to provide information about household assets and other personal information than would clients of microfinance institutions or other initiatives with a closer link.

Value Chain Selection

Comparative Value Chain Risk Assessment 

When undertaking value chain selection, a comparative value chain risk assessment11 informs the identification and elimination of value chains with unacceptably high risks for very poor populations. Risks are selected that are significant for the target population and then each of the value chains under consideration are analyzed against them.

Value Chain Analysis

RapAgRisk Assessment 

Produced by the World Bank, a RapAgRisk Assessment9 assesses the risks and vulnerabilities of a single crop-based agricultural value chain.  It guides the assessment of the likelihood and severity of various potential risks to identify those that are most critical to the performance of the value chain. It also assesses the capacity of various value chain actors to manage risk associated with high loss events.    

Equity of Opportunity Analysis  

Equity of opportunity analysis10 assists in assessing the varying capacity of different groups to engage in upgrading opportunities.  Once the very poor within a value chain are identified, the tool can be applied to specifically determining strengths and deficiencies in their assets and capabilities.  

Sensitivity Analysis  

Sensitivity Analysis12 identifies the sensitivity of a particular outcome to a change in inputs.  It can be applied to understanding the vulnerability of potential upgrading strategies to a change in conditions. For instance, a similar drop in the output price or demand may have very different implications for profitability of different investments. The results of sensitivity analysis can be used to determine which upgrading opportunities offer acceptable and unacceptable risks, as well as the risk factors that are most important to mitigate. 

Poverty-Focused Value Chain Mapping  

Poverty-focused value chain mapping13 adapts the traditional value chain mapping process in several ways to specifically understand the engagement of the very poor within the chain. First, enterprises owned by the very poor - such as smallholder farming are mapped separately when their engagement in the value chain varies widely from others. Second, the map highlights the engagement of the very poor as labor to other enterprises throughout the value chain.  Finally the map visually notes constraints faced particularly by the very poor, such as poorer access to support services. Poverty-focused mapping supports the identification of priority areas to address.  

Footnotes

  1. DFID, Sustainable Livelihoods Guidance Sheets: Sections 4.1 to 4.7, (2000).
  2. DFID, Sustainable Livelihoods Guidance Sheets: Sections 4.8 to 4.13, (2000).
  3. DFID, Sustainable Livelihoods Guidance Sheets: Sections 4.8 to 4.13, (2000).
  4. Save the Children UK, Household Economy in Rural Niger, (2009), 77-97.
  5. P. Holzmann and T. Boudreau, The Practitioners' Guide to HEA, Chapter 1: Introduction to the Household Economy Approach Framework, (undated) 4.
  6. Poverty Assessment Tools
  7. http://communities.seepnetwork.org/edexchange/node/116
  8. Measuring Food Security at Freedom from Hunger, (undated).
  9. World Bank, Rapid Agricultural Supply Chain Risk Assessment: Conceptual Framework and Guidelines for Application (2008)
  10. B. Fowler, Pathways Out of Poverty:  Tools for Value Chain Development Practitioners, (2012), 21-22.
  11. Development Alternatives Inc., MicroNote #169:  A Portfolio Approach to Value Chain Development Programs (2011), 4
  12. B. Fowler, Pathways Out of Poverty:  Tools for Value Chain Development Practitioners, (2012), 17-18.
  13. B. Fowler, Pathways Out of Poverty:  Tools for Value Chain Development Practitioners, (2012), 22-23.