Editorial for SSIR: Too Poor to Earn? Changing Assumptions About the Ultra Poor

Co-authored with Sorenson Impact Foundation chairman Jim Sorenson, this article was originally published 27 December 2011 on the Stanford Social Innovation Review blog.

The only context many of us have for comprehending the struggle of extremely impoverished families are the images of catastrophes—such as the earthquake in Haiti or the tsunami that destroyed wide swathes of Southeast Asia—that periodically flash across our televisions. Our instinct to give a family enough food, water, and shelter to meet basic needs comes from a place of pure compassion. However, providing help only when people are in desperate need may cloud how we think about helping extremely poor households in the day to day.

There are 1.4 billion households worldwide that are considered “ultra poor.” These households live on less than $1.25 a day not because of a catastrophe, but because systemic breakdown excludes them from earning a reliable income. Organizations spend huge sums of money on developing assistance programs under the assumption that extremely poor families need “rehabilitation” in the form of subsidized support. For example, the organizations provide free food and health care to alleviate households’ most critical needs, to stabilize them, and to prepare them for productive activity. To their credit, these programs have successfully identified effective ways of improving food security, housing quality, health care access, and financial literacy among the ultra poor. However, because they focus on expensive and unrecoverable handouts, the programs are too costly to be able to scale and reach the massive numbers still in need.

This is the challenge we set out to address with the Sorenson/Unitus Ultra Poor Initiative (UPI) in 2008. We saw that with structured intervention, it was possible to provide ultra poor households with the support they needed to make real progress out of poverty. We wanted to develop new, scalable models to accomplish this, knowing full well that we would need to take chances on untested ideas, quickly recognize failures, and adapt as we went along.

Working with five partner organizations in India, we were able to test the fundamental assumption that the ultra poor were somehow “too poor to work” and that they required extensive rehabilitation before they could be productive. We found that productivity itself was often the catalyst for rehabilitation.

Our successful pilots introduced job opportunities early on. With an increase in income, families improved their diets, took advantage of affordable health clinics, and attended skills training sessions. With dependable earnings in place, most people were willing to embrace—and even pay for—support services that traditional models fully subsidized and considered necessary precursors to earning a living. In turn, this change in thinking had a dramatic effect on the per-beneficiary cost of each pilot, and allowed partner organizations to better-leverage limited resources.

An example case is the Equitas Bird’s Nest (EBN) program, which worked with homeless people in the South Indian city of Chennai. The program was designed to find urban housing for these people, subsidize their first six months of rent, and provide food for them, but it struggled to enroll participants. Many potential beneficiaries who relied on income from begging feared that a move from high-traffic areas would severely impact their daily earnings. So EBN modified the program to promote new jobs that allowed participants to work out of their homes—work such as candle making and tailoring—and provided materials once individuals had moved into housing. In just 18 months, all beneficiaries had doubled their household income, had a roof over their heads, and were paying their own monthly rent.

Another partner, Uttarakhand-based Partners in Prosperity (PnP), also experimented with starting income-generating activity before introducing health care and financial literacy support services. Here, too, we saw that households quickly earned enough to meet their basic needs and showed a willingness to pay for quality services. Now able to recoup some of its costs, the PnP team estimates it could reduce the overall cost of its ultra poor program by as much as 80 percent.

One out of every five people on earth experiences persistent, extreme poverty. It is one of the defining crises of our time. Moving past the handout-reliant model may be the key to scaling ultra poor interventions. The good work of our partners has illuminated the possibility of less expensive—even self-sustaining—interventions. And while further work needs to be done to test these concepts, the best way to help the ultra poor is not by giving them a handout, but by giving them an opportunity.

Jim Sorenson is the chairman of the board of trustees of the Sorenson Impact Foundation and is a frequent partner of Unitus Labs on innovative poverty alleviation programs. Sachi Shenoy designed and managed the Sorenson/Unitus Ultra Poor Initiative (UPI) between 2008 and 2011, and is now executive director of Upaya Social Ventures. The Sorenson Legacy Foundation sponsored the UPI.

Social Indicator Baseline: December 2011

In August of 2011, Upaya formalized its partnership with Samridhi Agri-Products to create steady employment for extremely poor women living on less than $1.25 per day. Through the LiftUP Project, Upaya is helping Samridhi develop scalable dairy operations and create hundreds of salaried jobs throughout Uttar Pradesh. In turn, these new positions will increase and stabilize household income for employees.

This Social Indicator Baseline provides a snapshot of the living conditions for women employed by Samridhi at the time of their hire, and serves as a baseline for their progress out of poverty. Data will be gathered and reported on a semi-annual basis as a way of demonstrating positive change throughout the partnership.

December Newsletter: "Building Bridges Out of Poverty"

Looking back at 2011, I am struck by all that Upaya has been able to build since our early summer launch. In that time, we’ve built a strong pipeline of potential partners with great ideas and amazing passion for helping the ultra poor. We’ve built a stellar team in India and the US that will fuel those partners’ successes. We’ve built an online presence that empowers individuals to support entrepreneurs they believe in. And we’ve built a base of financial and intellectual support that will be the bedrock of everything we do from this day forward...

Click http://eepurl.com/hNRaE to read the rest of the newsletter.

Microsoft Veteran Brian Arbogast Joins Upaya as an Advisor

Upaya Social Ventures is proud to welcome Brian Arbogast to the organization in an official Advisor role. Drawing from over two decades of experience developing products and launching successful business units for Microsoft, Arbogast will provide strategic counsel to Upaya’s management team and its LiftUP Project partners.

“As a long-time supporter of microfinance institutions, I recently started to wonder if any of them were going beyond giving loans to providing something even more transformative: a steady job,” said Arbogast. “I was thrilled to find an innovative start-up right here in Seattle, run by social entrepreneurs committed to doing just that, by finding – and funding – other visionary entrepreneurs within some of the world’s poorest communities. I look forward to helping Upaya pioneer this exciting approach,” he said.

After spending the last decade as a Corporate Vice President with the Redmond-based technology industry leader, Arbogast left Microsoft in 2010 to focus on the development of scalable solutions to some of the world’s most challenging problems. He has become an active investor and advocate in the clean technology space, recently joining the board of directors of the Northwest Energy Angels, the Pacific Northwest’s only cleantech-focused angel investor group.

“With tremendous experience building and scaling new organizations, Brian’s involvement will be invaluable to Upaya and the entrepreneurs we work with,” said Sachi Shenoy, Upaya’s Executive Director. “His track record of transforming ideas into successful businesses and building high-performing teams around a single vision will be a great asset for our partners who are trying to do the same.”

Editorial for WSJ India Realtime: Jobs Not Handouts Help the Very Poorest

This article was originally published 17 November 2011 on the Wall Street Journal's India Real Time platform.

You may not have known it from how the microfinance industry was portrayed over the past decade, but micro-lenders themselves have long known that small loans are not a silver bullet for the problems facing the more than 400 million Indians who earn less than a $1.25 a day.

Commonly referred to as the “ultra poor,” this population is highly marginalized and lives hand-to-mouth on meager wages from manual labor or by stretching subsistence farming income for months between harvests. For the ultra poor, it is extremely difficult to use loans for anything other than meeting their most basic food and healthcare needs.

Recognizing this gap, several organizations have tried to develop new ways of reaching and supporting the ultra poor, with the most effective being the CGAP-Ford Foundation Graduation Program , which was modeled on a system developed in Bangladesh by BRAC.These graduation programs initially provide a safety net of support involving food, healthcare and savings intended to stabilize the ultra poor’s circumstances, followed by a series of skill-building exercises to“graduate” participants into micro-entrepreneurship.

Photo by Noah Seelam/Agence France-Presse/Getty Images 

While successful where they have been replicated, these programs still struggle to scale up to a level that meets the massive numbers of those in need. Because the safety net aspects of the program are frontloaded to the first 18 months and involve expensive handouts and coaching, the per-person cost commonly amounts to several hundred U.S. dollars.

The Sorenson / Unitus Ultra Poor Initiative was launched in 2008 and worked with five Indian NGOs on a series of pilots to experiment with ways to cut costs and improve the sustainability of this “graduation” model. What we found was that the primary assumption – that the ultra poor require 12 to 18 months of “rehabilitation” and support before they can learn new job skills and earn enough to meet their basic needs – may unnecessarily limit the scalability of otherwise promising programs.

Instead, through this initiative, we have seen that if the ultra poor are given an opportunity to start earning a stable income from the program’s outset, they are willing and able to pay for food, healthcare, and other services. To illustrate, one NGO we worked with, Uttarakhand-based Partners in Prosperity, estimates that by launching its program with job-skills training and the resources to start a new activity, it could reduce the cost of its ultra-poor program by as much as 80%.  This dramatic reduction greatly improves the prospects for scale, allowing PnP to focus on making quality, affordable services available to households finally earning enough to pay for them.

This approach may seem intuitive to many. Dr. Aneel Karnani at the University of Michigan has been a particularly vocal advocate for a “jobs first” approach to poverty alleviation. But it represents a significant shift for those working specifically with the ultra poor. Some counter that the training provided during the subsidy-heavy first phase of a graduation program is necessary to build life skills and allows recipients to manage their households as much as it improves their ability to earn a living. They also contend the only way to build the necessary trust for a successful program is through intensive individual and community confidence-building activities, efforts that would be eclipsed by the demands of work.

Having worked with the ultra poor for many years, I can appreciate these concerns and agree that additional research will be necessary. But the idea that a group relegated to back-breaking labor is somehow unable or unwilling to take on a new, more dignified livelihood right away seems counterintuitive to me and I increasingly believe this view may be standing in the way of real progress in alleviating extreme poverty.

Taking a step back, if further experimentation shows that these findings hold up, it may open the door for the business community to play a potentially huge role in helping the very poorest.  Should steady employment – not micro-enterprise — really be the first step toward self-sufficiency for hundreds of millions of extremely poor families, we can no longer sequester certain segments of the population from the mainstream economy. Instead, we must do everything we can to create an environment that nurtures businesses with the potential to create jobs and provide affordable services for these families. With the number of people still living in extreme poverty in India, we can’t afford not to.

Sachi Shenoy designed and oversaw the Sorenson / Unitus Ultra Poor Initiative between 2008 and 2011. She is now the Executive Director ofUpaya Social Ventures, an organization incubating new businesses that employ and serve the ultra poor.

Upaya Announces Partnership with the Skees Family Foundation

 Upaya Social Ventures is proud to announce its partnership with The Skees Family Foundation (SFF). The formalized relationship will provide the organization with the financial and creative support needed to develop jobs and improve the quality of life for the 1.4 billion living in the most extreme poverty. 

An active supporter of Upaya since its incorporation, SFF has been instrumental in developing outreach messaging and materials, advocating on the organization's behalf, and providing funding critical for the launch of Samridhi's community dairy initiative. Now with this formal partnership, the Santa Cruz, CA-based family foundation has reinforced its commitment to Upaya's mission.

“Working closely with the Upaya team through their launch, we saw firsthand that they walk their talk of 'triple Ts': tenacity, transparency, and trust,” said SFF Founder and Director Suzanne Skees. “Convinced of the impact Upaya could have through training locally-led businesses and providing reliable employment for the ultra poor, we viewed this partnership as a chance to leverage a small grant to get two great organizations - Upaya and Samridhi - off the ground.”

Running through 2012, the funding provided by the Skees Family Foundation will allow Upaya to further its commitment to the Samridhi project. It also gives Upaya the resources to continue the search for the next wave of entrepreneurs creating new opportunities for the ultra poor.

"One of the the most daunting things for a new organization is generating interest in a cause that may not yet be part of the mainstream discussion," said Upaya Executive Director Sachi Shenoy. "To have an ally like SFF willing to back its time and expertise with a generous grant really shows a genuine belief in our work," she said.

Suzanne is also a regular contributor to the Huffington Post and The Council on Foundations Re:Philanthropy blog. For more information on her writing and the Skees Family Foundation, go to www.skees.org. 

Update on 2012-01-05 17:52 by Upaya

The Power of Small (12 December 2011)

Update on 2012-01-05 17:51 by Upaya

Small Size Matters (10 November 2011)

Announcing The LiftUP Project: Jobs As The Pathway Out of Extreme Poverty

With the goal of developing robust enterprise solutions to combat the problem of extreme poverty, Upaya Social Ventures is proud to announce today the LiftUP Project,  a 24-36 month social business accelerator program for very early-stage, ultra poor-focused social enterprises. 

Demonstrating a strategy and commitment to serve the ultra poor (understood to be households living on less than $1.25 a day), social businesses selected for the program will have access to a supportive environment where they receive the funding and guidance to develop their business models.  In 2011, the LiftUP Project will focus on businesses that will provide formal, steady employment for over 1,000 ultra poor families across states in North India considered the poorest in the country. 

"Too often we've seen good ideas with the potential to create real change 'die on the vine' because the entrepreneurs did not have access to the tools, skills, resources, and network connections that allow any business to scale," said Sachi Shenoy, Executive Director of Upaya Social Ventures.  "Through the LiftUP Project, we've created a way for early-stage entrepreneurs to have access to professional management consulting services and flexible financing structures necessary for their long term success."

The LiftUP Project works with an early stage idea and transforms it into a proven concept, one backed by stable in-field operations and social outcomes data, poised for scale and replication.

"Upaya was founded on a vision of a world in which everyone can live a life of dignity and not struggle to meet their basic needs," said Melissa Lehman, Upaya Social Ventures's Board President.  "What is so exciting for us about the LiftUP Project is the chance to support a new generation of entrepreneurs as they create opportunities for the millions of families to escape that struggle."

For more information on Upaya and the LiftUP Project, click here.

Upaya Teams Up With Jolkona To Address Basic Needs Of The Ultra Poor

Sharing a commitment to the eradication of extreme poverty and a fundamental belief in transparent philanthropy, the Jolkona Foundation and Upaya Social Ventures have agreed to a fiscal sponsorship arrangement that will empower Upaya to connect donors directly to social entrepreneurs working in ultra poor communities.

"We're very excited to be partnering with Upaya as we feel the team's ability to demonstrate the outcomes of their activities closely mirrors our core values," said Jolkona CEO Nadia Mahmud. 

The Jolkona.org platform was built to connect donors with a variety of global philanthropic opportunities, and requires participating organizations to show the impact of supporters' contributions.  These fundamentals made for a natural fit with Upaya, where the aggregation of social outcomes data provides donors with a clear snapshot of how their support of an individual project is creating change.  Every donor who gives to an Upaya project through Jolkona.org will be able to track the progress of initiatives they support through their individual giving portfolio on the website.

"For Upaya, partnering with Jolkona is a great way for us to create deeper connections between supporters and the work they're contributing to," said Steve Schwartz, Director of Strategy & Operations for Upaya. "The relationship also challenges us to hold ourselves to a higher standard of transparency and authenticity in our interactions with donors."

Through the agreement, Upaya will be classified as a project of the 501(c)3 Jolkona Foundation and thus be able to receive tax-deductible contributions designated for its work.  Upaya will maintain independent operations through its own entity and management, while reporting quarterly to the Jolkona Board of Directors.  All of Upaya's financials will be reported on Jolkona's annual IRS 990 filing throughout the term of the agreement.  For more information on the relationship and variance power, click here.