14-20 July 2017 #867

Leapfrogging poverty

Vidyadhar Mallik
Nepal has shown satisfactory reduction in absolute poverty, and progress in social and economic indicators affecting poverty. However, the data need to be read with caution because of the impact of remittance and economic liberalisation favouring the entrepreneurial class, which was less poor to begin with. Further reduction in poverty will be more difficult because the remaining poor are ‘hard to access’ groups with multiple disadvantages – vulnerable groups with little social and economic capital, living in remote places.

The old formula of microfinance, donor-sponsored quick impact programs (QUIPS) focused on visibility of immediate results won’t work anymore. They will need more empathy and compassion, deeper and prolonged, often iterative engagement. Microfinance also does not serve the ‘hardcore’ poor, does not finance entrepreneurial innovations, and many programs charge exorbitant interest and service fees.

The Poverty Alleviation Fund (PAF) is a successful community-driven enterprise in reducing poverty, especially for really poor households. The focus is on social mobilisation, small-scale rural infrastructure and employment generation. It has reduced the number living in absolute poverty, and also raised their quality of life by investing in social infrastructure and community empowerment.

The flip side is that the PAF is regarded as an unsustainable donor-driven program (the World Bank is pulling out), lacks resources for up-scaling and is occasionally marred by corruption and elite capture, especially by the NGOs who facilitate community groups.

Most poverty reduction programs run by the government are supply-driven, heavily centralised and spend most of the budget on overheads. They are more like branding exercises of political parties, and rarely reach the really poor in remote areas. How local governments elected for the first time in 20 years will address this problem remains to be seen.

Mobile and off-line banking and e-banking could help Nepal leapfrog in fighting poverty. Universal cash transfers or smart targeted social security programs based on individualised unique identity could hold the key to poverty reduction. There needs to be coordination between agencies responsible for health, education, sanitation, rural infrastructure, financial inclusion and cooperatives. Elected local governments need to extend support for employment generation by community organisations set up by the PAF, which have billions of rupees in revolving funds.

It is a tough job that will demand innovation, accountability, grassroots democracy and less greedy microfinance institutions. People will now demand practical action for accessible and less costly services on the ground.

Vidyadhar Mallik is former vice-chairman of the Poverty Alleviation Fund.

Read also:

'Sun and water' , Shreejana Shrestha

Rethinking poverty reduction, Jomo Kwame Sundaram

Our remit, Editorial

Back to the golden age, Rishiraj Lumsali

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