Household Economic Strengthening: Concepts & Principles

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Presentation on fundamental concepts and principles of household economic strengthening for orphans and vulnerable children delivered by Jason Wolfe of USAID's Microenterprise Development office at the 2009 PEPFAR OVC Leadership Forum in Maputo, Mozambique.

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Household Economic Strengthening: Concepts & Principles

  1. 1. Household Economic Strengthening Concepts & Principles Jason Wolfe USAID/EGAT “ AIDS does not kill suddenly, but it comes and takes a lot of money away with it.” —Microfinance client, Uganda
  2. 2. WHAT IS ECONOMIC STRENGTHENING? <ul><li>Mitigating economic vulnerability </li></ul>Ability to cope with shocks <ul><li>Death of family member </li></ul><ul><li>Death of breadwinner / caregiver </li></ul><ul><li>Chronic illness </li></ul><ul><li>Care for additional family members </li></ul>
  3. 3. HOUSEHOLD ASSETS Source: www.livelihoods.org Human Social Natural Physical Financial
  4. 4. HOUSEHOLD ECONOMIC MODEL <ul><ul><li>HOUSEHOLD </li></ul></ul><ul><ul><li>ASSETS </li></ul></ul><ul><ul><li>Human </li></ul></ul><ul><ul><li>Physical </li></ul></ul><ul><ul><li>Financial </li></ul></ul><ul><li>HOUSEHOLD </li></ul><ul><li>ACTIVITIES </li></ul><ul><li>Production </li></ul><ul><li>Consumption </li></ul><ul><li>Investment </li></ul>Credit Providers Social Networks Inputs & Expenditures Income & Other Additions Source: M. Chen & E. Dunn, “Household Economic Portfolios”, AIMS, 1996
  5. 5. STRATEGIES FOR COPING WITH SHOCKS <ul><li>Risk Reduction: Income Smoothing </li></ul><ul><ul><li>Low risk (low return) income generation activities </li></ul></ul><ul><ul><li>Diversification of income generation activities </li></ul></ul><ul><ul><li>Insurance mechanisms: savings & assets, social ties, credit access </li></ul></ul><ul><li>Loss Management: Consumption Smoothing </li></ul><ul><ul><li>Stage 1: Insurance & reversible mechanisms </li></ul></ul><ul><ul><li>Stage 2: Disposal of key productive assets </li></ul></ul><ul><ul><li>Stage 3: Destitution: charity, household breakup, migration </li></ul></ul>Source: E. Dunn, N. Kalaitzandonakes, C. Valdiva, “Risks and the Impacts of Microenterprise Services”, AIMS, 1996
  6. 6. MARKET SYSTEMS <ul><li>End Markets </li></ul><ul><li>Enabling Environment </li></ul><ul><li>Inter-Firm Cooperation </li></ul><ul><li>Supporting Markets </li></ul><ul><li>Upgrading </li></ul>Source: O. Kula, J. Downing, M. Field, “Globalization and the Small Firm”, AMAP, 2006 Global Enabling Environment National Enabling Environment Financial (cross cutting) Input Suppliers Sector specific providers Cross-cutting providers Producers Wholesalers Exporters National Retailers Processors/Traders Global Retailers
  7. 7. ECONOMIC STRENGTHENING PATHWAY Recover assets and stabilize household consumption Build self-insurance mechanisms and protect key assets Smooth household income and promote asset growth Smooth household consumption and manage household cashflow Expand household income and consumption Decreasing economic vulnerability
  8. 8. TARGETING & ENTRY POINTS <ul><li>Less effective “targeting” </li></ul><ul><ul><li>Exclusive </li></ul></ul><ul><ul><li>OVC / HIV status </li></ul></ul><ul><ul><li>Mandating one size fits all </li></ul></ul><ul><li>More effective “entry points” </li></ul><ul><ul><li>AIDS-sensitive </li></ul></ul><ul><ul><li>Economic status </li></ul></ul><ul><ul><li>Responding to needs and aspirations </li></ul></ul>
  9. 9. PROGRAM STRATEGIES <ul><li>Recover assets & stabilize household consumption </li></ul><ul><li>Asset transfers, primarily in the form of cash, with or without conditions </li></ul><ul><li>Build self-insurance mechanisms & protect key assets </li></ul><ul><li>Income-based safety nets, with or without conditions </li></ul><ul><li>Savings mechanisms, individual or group </li></ul><ul><li>Microinsurance </li></ul><ul><li>Strengthening social networks </li></ul><ul><li>Smooth household consumption & manage household cashflow </li></ul><ul><li>Credit mechanisms, individual or group </li></ul><ul><li>Financial literacy </li></ul><ul><li>Strengthening social networks </li></ul><ul><li>Smooth household income & promote asset growth </li></ul><ul><li>IGAs (low risk/return), individual or group </li></ul><ul><li>Financial and market literacy </li></ul><ul><li>Expand household income & consumption </li></ul><ul><li>Self-employment through microenterprise (higher risk/return) </li></ul><ul><li>Employment through workforce development/employability </li></ul>
  10. 10. FACILITATION TACTICS & PRACTICES <ul><li>Principles </li></ul><ul><ul><li>Intensity </li></ul></ul><ul><ul><li>Relationships </li></ul></ul><ul><ul><li>Ownership </li></ul></ul><ul><li>Process </li></ul><ul><ul><li>Find leverage </li></ul></ul><ul><ul><li>Demonstrate </li></ul></ul><ul><ul><li>Scale up and exit </li></ul></ul>
  11. 11. PRINCIPLES <ul><li>Be clear about objectives and target population </li></ul><ul><li>Take a cross-sectoral approach and ensure open dialogue throughout the program </li></ul><ul><li>Base program design on sound market analysis </li></ul><ul><li>Seek household change in small, riskable steps </li></ul><ul><li>Develop interventions for sustainability and scalability </li></ul><ul><li>Avoid mixing the direct provision of OVC services and the facilitation of economic strengthening strategies </li></ul><ul><li>Identify robust indicators to effectively track performance, outcomes, and impact </li></ul><ul><li>Do no harm to the private sector </li></ul>
  12. 12. ADDITIONAL RESOURCES <ul><li>www.microlinks.org </li></ul><ul><ul><li>Principles of Economic Strengthening for Vulnerable Children: www.microlinks.org/ESprinciples </li></ul></ul><ul><ul><li>Financial Services: www.microlinks.org/fs </li></ul></ul><ul><ul><li>Value Chains: www.microlinks.org/valuechains </li></ul></ul><ul><ul><li>Youth Livelihoods: www.microlinks.org/youth </li></ul></ul><ul><ul><li>Breakfast Seminars: www.microlinks.org/breakfast </li></ul></ul><ul><ul><li>Speaker’s Corners: www.microlinks.org/speakerscorner </li></ul></ul><ul><ul><li>Notes from the Field: www.microlinks.org/notes </li></ul></ul><ul><li>www.povertyfrontiers.org </li></ul><ul><li>www.cyesnetwork.org </li></ul><ul><li>Microenterprise & HIV: hamed.seepnetwork.org </li></ul>
  13. 13. Asanteni Sana! Jason Wolfe, Enterprise Development Advisor USAID Microenterprise Development office jwolfe@usaid.gov | [email_address]

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