Putting the Brakes on Poverty in Paraguay

For micro-entrepreneurs in Paraguay, rising out of poverty from the economic margins and into the formal economy is no small feat. Systematic barriers stand in their way, including bad economic policies that keep them in the informal marketplace where they can’t access the resources to grow their enterprises and income.

While traditional anti-poverty measures have focused on throwing public funds at the problem to little success, Atlas Network partner Fundación Paraguaya has stepped up to help families and entrepreneurs overcome the barriers that hold them back, providing the tools and mentorship they need to take charge of their own journey out of poverty.

Fundación Paraguaya has developed an essential tool for this effort, a methodology they named Poverty Stoplight. When combined with the mentorship the organization provides, the insight provided by the Poverty Stoplight system can be incredibly helpful for families and micro-entrepreneurs, including helping them gain a foothold in the formal economy, giving them a better opportunity to grow and thrive.

Poverty Stoplight starts with a survey completed by each individual or family, measuring each of the dozens of aspects of poverty they face. The survey results in a color-coded scorecard, using red, yellow, and green to help families identify which of the dozens of factors of poverty are most important for them to solve. The results form a comprehensive plan, called a Life Map, empowering individuals to take control of their financial future by turning red lights into green lights, achieving incremental goals over time.

Santiago Fiorio Vaesken, a Fundación Paraguaya program officer and head of global partnerships at Poverty Stoplight, describes how visualizing poverty can help families unravel the root causes in their unique situation, and build a concrete, achievable plan to take the steps needed to the appropriate incremental actions needed.

“The methodology starts with a self-awareness survey, where participants prioritize indicators marked in red or yellow, representing poverty or extreme poverty," he said. "Participants create solutions as a family and set timeframes for achieving goals."

Poverty Stoplight can be especially useful in helping entrepreneurs—who in Paraguay are usually earning just enough to survive—develop a plan to grow their businesses and livelihoods. The surveys often highlight just how much an entrepreneur is held back by remaining in the informal marketplace, said Fernando Stumpfs, a social researcher at Poverty Stoplight.

“The research findings on business formalization obstacles reveal that informality is prevalent among microenterprises led by self-employed individuals with low income and education levels, especially in rural areas and among women,” he said.

“While formalized entrepreneurs seek to access new markets and financial services, informal ones lack sufficient incentives, as their customers do not demand formality and their businesses' profitability is constrained.”

With a firmer grasp on how informality is hurting their livelihood, entrepreneurs are often eager to take full advantage of the other programs Fundación Paraguaya pairs with Poverty Stoplight, especially customized mentorship and microfinance opportunities.

Supported by an Atlas Network grant, Fundación Paraguaya compiled their findings from across Paraguay to produce a research report highlighting the obstacles entrepreneurs face in breaking out of the informal market. This report provided a roadmap for the deeper, more systematic reform that is needed to further empower entrepreneurs.

Atlas Network further invested in Fundación Paraguaya and Poverty Stoplight when the organization won the Think Tank Shark Tank pitch competition at Liberty Forum & Freedom Dinner 2022. Funding from that award has empowered Poverty Stoplight to expand their efforts, reaching more families in need.

The foundation has multiplied their impact beyond Paraguay’s borders by partnering with dozens of organizations around the world who employ their methodology, reaching 59 countries (and counting) on many continents, including Bolivia, Tanzania, India, the United Kingdom, the Philippines, and the U.S., where the Poverty Stoplight Program has a specialized office. By training these allies on how to deploy Poverty Stoplight, Fundación Paraguaya has contributed to helping tens of thousands of individuals and families take charge of their path out of poverty.

Santiago explained that Poverty Stoplight continues to reach more and more people, and the organization is continuing to see success with their methods. The vast majority of families that take part in the program report making meaningful advances out of poverty thanks to Poverty Stoplight. "Last year's implementation was very active, with around 120,000 families included in the program," he said. "Ninety percent of these families achieved better results in their Life Maps, demonstrating significant progress.”