Pathways out of poverty: Applying key principles of the value chain approach to reach the very poor
23 January 2012
The value chain approach has traditionally focused on improving the competitiveness of the entire market system through engaging existing value chain actors; few programmes have deliberately targeted the extreme poor or disaggregated direct impact by poverty levels. This discussion paper from the USAID microlinks programme was designed to present guidance for practitioners, recognizing that consensus around best practice is still emerging.
While it is recognized that poverty is multifaceted and that raising income and increasing assets alone are often not adequate to sustainably reduce poverty, the principles discussed in this paper focus primarily on ways to leverage markets to improve the economic wellbeing of the very poor as an important facet of graduating people out of poverty. A substantial body of research finds that poorer households face greater vulnerability to shocks—such as the sudden illness of an income earner—and are often less able to mitigate potential risks due to inadequate financial or social assets. Their reduced ability to cope with losses creates a relative intolerance for risk. This implies that the very poor will respond differently to incentives and need to first build coping strategies before they are likely to engage in value chains.
The implication for practitioners is that the design and implementation of value chain programs will need to reflect the realities of the very poor, as will the application of the principles that guide these activities.
After releasing a draft version of this paper, USAID asked several thought leaders to respond to the paper and illuminate themes that reflect their area of speciality. The writers are: Harald Bekkers, a specialist in the Making Markets Work for the Poor approach; Jan Maes, co-chair of the SEEP Network’s Poverty Outreach Working Group; and Andrew Shepherd, director of the Chronic Poverty Research Center with a focus on labor.
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