With Proper Cushions, the Very Poor Have Less Far to Fall

Despite the weather challenges and a day’s postponement, Margie Brand and Ben Fowler presented a very engaging Breakfast Seminar #55 on Friday, January 28. The topic, “Using Value Chains to Move Vulnerable Households Up the Economic Ladder,” only scratches the surface of what the speakers covered during the seminar.

Brand began the morning by painting a compelling picture of a rural family hovering just above the poverty line that nonetheless had a small home, food on the table and were able to send their children to school. What would happen, she asked, if one day the father became sick? Soon the family’s meager savings would be spent on medicine, the mother would have to spend more and more time away from the home scavenging for food and the children would have to leave school to look after their father. Brand’s story became increasingly dire as this hypothetical family was forced to give their young daughter away in marriage to an old widower, sell their home and move in with some relatives who, in turn, might begin to slaughter their milk-producing goats for meat to feed the increasing number of mouths. Brand calls these “extreme coping mechanisms.”

The moral of the story that I took away was that increased opportunities and expanded income aren’t enough; development practitioners also have to look at risk mitigation strategies that help vulnerable populations weather unexpected shocks. Otherwise, the pathway out of poverty might feel like one step forward and three steps back. Therefore, according to Brand, it is critical to understand why the target populations are vulnerable (beyond their poverty) and what coping mechanisms they currently employ and why. Traditional interventions focus on income maximization but underestimate the role of risk management in driving household decisions.

Brand then went on to explain why working with vulnerable populations often requires a push (as opposed to pull) strategy. Because vulnerable populations are less resilient in the face of shocks, it isn’t enough to strengthen value chains to create opportunities (pulling) because barriers to entry might still be high and vulnerable households rarely have good risk management tools at their disposal. Instead, Brand suggests that we need to “support households in taking more risks while creating cushions so that [the most vulnerable have] less far to fall.” Using several brightly colored throw pillows as props, she described some of possible cushions such as asset building, cash transfers, and buying down risk. For example, cost sharing the acquisition of equipment would be one way to assist the most vulnerable.

Brand and Fowler then went on to detail the types of interventions that can be designed once you’ve built a profile of your target population that takes the factors of vulnerability and risk into account. They describe these intervention types as stepping stones moving up the pathway towards both greater prosperity and greater resilience. Brand explains:

"The pathway represents an important breakthrough in the way we conceptualize support to households. Different types of activities are most applicable to households at different stages of the pathway. Households need well-diversified assets and need to engage in a varied portfolio of activities so that if one activity does not provide enough income, or fails completely, there are other livelihoods activities that can compensate."

The first set of activities fall under the category of Provision, like low-risk cash and asset transfers, social services, and social groups. As vulnerable households progress, activities become more Protection-focused, “which are more cash flow smoothing orientated, building self-insurance methods and protecting key assets.” Some examples include basic financial services (consumer credit, savings and insurance), expenditure reduction mechanisms, and investment in stores of assets. The third stage of activities is geared towards Promotion, i.e. “supporting the income/asset objectives of expanding and smoothing household income.”

The full screencast of this presentation will posted to Microlinks soon and I encourage you to check out what the presenters as well as facilitator Jason Wolfe had to say. Also, don’t miss the great Q&A session with questions/comments about defining vulnerability (in relation to extreme poverty), the difference between rural and urban activities, and whether, as an industry, we are overusing or misusing the term “value chain.”