The State of Economic Inclusion Report 2021
Explore the impact of economic inclusion programs in lifting vulnerable households out of poverty and discover the role of partnerships in creating sustainable change.
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This report gives voice to one of the most stubborn challenges in development — transforming the economic lives of the extreme poor and vulnerable. The pandemic affected the poor and vulnerable most strongly, with early evidence suggesting disproportionate gender impacts. Economic inclusion programs face the dual challenge of adapting delivery norms during a pandemic and ensuring readiness to respond as part of the medium- and long-term recovery efforts.
Economic Inclusion of the Vulnerable
People who are poor and vulnerable face multiple constraints when encountering “poverty traps” for which a multidimensional response is required. Economic inclusion programs now under way in over 75 countries demonstrate that this hypothesis and response show signs of success. Defined here as a bundle of coordinated, multidimensional interventions that support individuals, households and communities in increasing incomes and assets, economic inclusion programs show flexibility in a variety of settings.
As economic inclusion programs for the poorest evolve, a story of great expectations and considerable skepticism emerges. A sustainable and inclusive economy that “leaves no one behind” is more important than ever. While transformative economic growth will be the ultimate driver of poverty reduction, it is not automatically inclusive and does not always penetrate the poorest households. In strengthening economic inclusion for the poorest, it is important to recognize “poverty traps” and to realize that unleashing the productive potential of people living in poverty involves the removal of multiple constraints through a multidimensional response. In practice, household, community, local economy and institutional constraints may impact specific population cohorts most strongly, such as women, youths, people with disabilities and those who have been displaced. As a crosscutting priority, economic inclusion programs tend to strongly emphasize women’s economic empowerment as a key driver for change.
Building Economic Inclusion into Existing Antipoverty Programs
Data from this report suggest there are three entry points through which governments are building on existing antipoverty programs to customize specific economic inclusion efforts:
- Social safety nets (SSNs)
- Livelihoods and jobs (L&J)
- Financial inclusion (FI)
While these entry points are not mutually exclusive — or exhaustive — they do serve as a foundation on which investments can be built and broader sectoral collaborations can be achieved. This carries important operational implications. Governments are deliberately integrating economic inclusion programs as part of national strategies and frameworks for poverty reduction. Economic inclusion programs are seen as an important complement to existing antipoverty efforts. For example, as countries expand the coverage and financing of safety nets, the terms social safety net-plus (SSN-plus) or cash-plus are gaining prominence. Economic inclusion is a key driver of the SSN-plus agenda, the “plus” indicating the potential to complement cash with additional inputs, service components or links to external services. Ultimately a trend from stand-alone to more integrated approaches presents opportunities for improved program delivery and fiscal and policy coherence.
Challenges to Scaling Up
Despite much progress, the potential to scale up economic inclusion programs is considered in light of critical debates on feasibility and program sustainability. Economic inclusion programs may be considered too complex or too costly to operate at scale. Governments in many countries, especially in low-income settings, will face capacity constraints to administer and manage multidimensional and cross-sector interventions. As programs scale up, political economy factors become more prominent, and the adoption and scale-up of economic inclusion programs will hinge on political acceptability and involve trade-offs, especially around program objectives and priority target groups. In this context, the report brings fresh perspective on program impacts and costs, with the aim of better understanding the evidence base and fiscal realities that will ultimately determine the question of scale.
Key Findings
- An unprecedented surge in economic inclusion programming is occurring worldwide.
- There is strong potential for economic inclusion programs to build on pre-existing government programs, and this may prove critical in the long-term recovery efforts arising from the COVID-19 economic crisis.
- The current scale of economic inclusion interventions is modest, and a sustainable approach to scaling up involves more than expanding program beneficiary numbers.
- Economic inclusion programs provide considerable flexibility for adaptations. Despite heterogeneity, there is common prioritization on rural development, fragility and the needs of specific vulnerable groups.
- Women’s economic empowerment is a key driver of economic inclusion programming, with nearly 90% of programs surveyed having a gender focus.
- Economic inclusion programs look set to increasingly adapt to the realities of informality, especially for youths in urban areas.
- Digital innovations will be critical to leapfrog capacity constraints and to strengthen program management.
- Economic inclusion programs build on a promising evidence base that will soon grow significantly.
- An improved understanding of basic cost structures is a vital starting point to assessing the cost-effectiveness of economic inclusion programs by more than just “sticker price.”
- Atrong partnership is integral to the success of economic inclusion programs.