1.	In response to a deteriorating economic situation, the Asian Development Bank (ADB) has 
responded to a request from the Government of Mongolia for support to mitigate the socioeconomic 
impacts of the coronavirus disease (COVID-19) pandemic, particularly on poor and vulnerable groups. 
The Second Shock-Responsive Social Protection Project (SRSP2) will (i) deliver pro-poor child grant 
top-ups through support to the child money program, and (ii) strengthen social welfare programs and 
systems. Three key activities are planned under the second output: 
(a)	updating the poverty targeting system to better identify poor and vulnerable households, 
(b)	digitizing social welfare programs to make the application and benefit delivery processes more 
efficient and transparent, and 
(c)	pilot testing an economic inclusion program based on the graduation approach with selected poor 
households to help diversify livelihoods and strengthen their resilience. 

2.	The executing agency is the Ministry of Labor and Social Protection (MLSP). The introduction of 
a graduation pilot responds to both MLSP's calls for "smarter" social welfare and the Government 
Action Plan 2020–2024. Specific actions in the plan’s labour and social welfare section 2.5 include 
(i) making social welfare services targeted, to promote employment and reduce poverty (action 
2.5.7); and (ii) engaging adults in low-income households in vocational and skills training and 
providing support for employment (action 2.5.9). This terms of reference the graduation approach 
and the features of the SRSP2 Graduation Pilot Program. Details have been elaborated with the MLSP 
in a pilot design process led by an expert resource person from the BRAC Ultra-Poor Graduation 
Initiative and with the participation of the social protection consultant team engaged by ADB under 
the technical assistance project Building Capacity for an Effective Social Welfare System (TA 9893-
MON).   Implementation arrangements for the Graduation Pilot Program will be aligned with the 
proposed amendment to the Social Welfare Law for approval in 2022, which stipulates that services 
to support targeted household development should be increasingly contracted and outsourced to 
nongovernment organizations (NGOs). 

3.	The graduation approach works with poor households, building on a foundation of social welfare 
benefits with a holistic set of poverty reduction interventions that aim to address the multiple 
facets of deprivation. Also called economic inclusion, the approach starts from the premise that 
poverty has many dimensions, so no one single intervention alone (such as education, training, or 
cash support) will be able to tackle poverty completely. Instead, a multi-dimensional approach is 
needed that includes but goes beyond cash grants. Pioneered in 2002 by the international 
development organization BRAC, holistic graduation programs have since been adapted and rolled out 
in various forms in more than 75 countries,  accompanied by rigorous impact evaluation that 
confirms both immediate benefits and sustainable results long after the program interventions end. 

4.	Graduation programs offer poor participants a carefully sequenced set of solutions. These are 
usually time-bound, implemented over a period of 18–36 months. This time-bound nature tends to 
appeal to governments and implementing partners. Graduation supports household consumption in the 
short term (through cash or food support, depending on the context) while developing sustainable 
and resilient livelihoods in the long run. The interventions combine targeted social assistance 
with the transfer of a productive asset, support for financial inclusion, tailored skills training, 
livelihood development, social inclusion, and, very importantly, psychosocial support and life 
skills through a coach or mentor. The typical program components across different countries and 
contexts are: 
(i)	social welfare transfers (cash or food) to help families meet their immediate consumption 
needs; 
(ii)	an asset transfer selected by the participant from a list of options, based on a detailed 
local market assessment and value chain analysis; 
(iii)	focused technical and business skills training to develop the capacity to turn the asset into 
a productive enterprise;
(iv)	financial literacy training and financial inclusion; and 
(v)	regular coaching and mentoring by a trained facilitator or social worker who provides support 
tailored to each participant through frequent home visits, often based on a family development plan.

5.	The Graduation Pilot Program will support 1,520 working-age adults aged 18-55 in poor households 
with the goal of building on cash transfers to provide holistic support that leads to economic 
inclusion, diversified livelihoods, and poverty reduction. The pilot will be implemented in three 
districts of Ulaanbaatar, selected for their high concentration of poor and vulnerable households: 
Bayanzurkh, Chingeltei, and Songino Khairkhan.

PLEASE SEE THE ATTACHMENT FOR DETAILED TERMS OF REFERENCE.