Targeting the Ultra-Poor in PeruPDF version
Productive resources provide a means of escape from poverty, yet many of those living in extreme poverty lack the capital input necessary to receive higher education or start a business. Small loans can help the poor build cottage industries by providing them with capital necessary to purchase productive assets, and pull themselves out of poverty. In the past, microfinance institutions have been successful in reaching poor and low income households, but experience has shown that microfinance often does not reach people living in extreme poverty. These people tend to have unstable livelihoods and suffer from malnutrition and other major social and physical limitations. They may also be more vulnerable to income shocks (such as health events) and thus more likely to default on loans.
Governments have often attempted to address the needs of the ultra-poor by offering subsidies that can ultimately encourage dependency on public funds. Targeting the Ultra Poor attempts to apply a model, developed by the Bangladesh Rural Advancement Committee (BRAC), which believes that funds are best used to build human capacities that will allow households to acquire a sustainable livelihood. This study is part of a larger “Targetting the Ultra-Poor” project which intends to determine whether the model pioneered in Bangladesh is effective in other contexts, in this case the Peruvian Andes.
Rural communities in the provinces of Canas and Acomayo in the Department of Cusco, Peru engage in a range of livelihood activities that largely correspond to their climate, which changes at higher elevations. National census data suggests that these high-altitude areas are among the poorest in the country. Land tenure in the region tends to be communal, and there are established decision making processes for the general assemblies in each community. This cultural and political idiosyncrasy makes it critical for implementation and research teams to work within the boundaries of these established procedures.
This study targets ultra poor households that are not currently microfinance beneficiaries, and that have the potential to carry out a sustainable livelihood. The partner organizations, Arariwa, an NGO committed to rural development in Cusco, and Plan International, will be responsible for project implementation. The strategy is an adaptation of the Peruvian government’s Juntos Program, a conditional cash transfer program consisting of a monthly stipend equal to US$35 for ultra poor households with young children. The Targeting the Ultra Poor (TUP) project team will use a Participatory Wealth Ranking (PWR) in order to target the ultra poor in the chosen provinces. Overlap is expected between the TUP project beneficiaries and Juntos beneficiaries. The project will provide a nine-month cash stipend equivalent to US$35 to those not already receiving it from Juntos.
TUP will then build on the base of the Juntos program by providing all beneficiary households with a productive asset, which over two years, they will be trained to manage. During this time period, beneficiaries will be monitored with weekly visits intended to contribute to the holistic development of the family's economic potential. A microfinance promoter will also encourage beneficiaries to save in group mechanisms. At the end of the two year period, Arariwa will offer microcredit products to the beneficiary families that demonstrate characteristics of reliable clients.
In total, 80 communities will participate in the study. Three groups will be defined within these communities:
- Treatment households: an average of 20 treatment households will be selected in each of 40 treatment communities.
- Neighbors: an average of 20 comparison households will be selected from
each of the same 40 treatment communities, for comparison against their
neighbors who received the treatment. - Comparison households: an average of 20 comparison households will be selected in each of 40 comparison communities.
The impact of the program can be assessed by comparing groups 1 and 2 or by comparing groups 1 and 3. The two comparisons will give different answers if spillover effects are present.
Results forthcoming.
