One of the challenges faced by the microfinance sector is whether and how to reach the very poor. While microfinance institutions have had great success at reaching poor and low-income households, casual evidence suggests that outreach to the very poor is much less successful. The very poor suffer from greater instability, a less developed skill set, fewer social and institutional connections, and fewer economic opportunities, relative to households among the “better off” poor. These circumstances suggest that the poorest of the poor may need additional support and preparation to participate successfully in regular microfinance programs.

In Peru, IPA is partnering with Arariwa and Plan to assess the impact of an asset transfer and subsequent enterprise development training on social and economic outcomes including: income, assets, school attendance of children, health, and food security. In addition, this study will provide some evidence regarding the impact and viability of “graduating” the ultra poor to microfinance.

The study is conducted in 80 communities, which are randomly divided into 40 control villages and 40 treatment villages. Within the 40 treatment villages, 20 of the poorest 40 households are the treatment households. The other 20 households are the control households. This design allows for assessment of the direct impact of receiving the program as well as the indirect effect due to spillovers.