In the previous article we read that Poverty reduction can be attained by stimulating economic growth to increase incomes and expand employment opportunities for the poor; undertaking economic and institutional reforms to enhance efficiency and improve the utilization of resources; prioritizing the basic needs of the poor in national development policies. While continuing to this subject Poverty Alleviation, the other strategies to eradicate poverty are as mentioned,
Promoting Microfinance institutions and programs:
Lack of finance is a big hurdle to the establishment of small scale businesses and other income generating activities in underprivileged communities in several developing countries. Through microfinance institutions, this hurdle can be removed and the much-needed credit provided to small businesses that are often unable to access credit from formal financial institutions. In this way, micro-credit can be instrumental in stimulating economic activity, creating jobs in the informal sector, increasing household incomes, and reducing poverty. Microfinance institutions have good potential to reach the rural poor and to address the basic issues of rural development where formal financial institutions have not been able to make a significant impact. Some advantages of obtaining credit from microfinance institutions include less stringent conditions with regard to providing collateral thus easing access to credit; the possibility of the poor obtaining small amounts of loans more frequently thus enabling the credit needs for diverse purposes and at shorter time intervals to be met; reduced transaction costs; flexibility of loan repayment; and an overall improvement in loan repayment. The small informal self-help groups that are often the units for microcredit lending are also valuable for social empowerment and fostering learning, the development of skills, entrepreneurship, exchange of ideas and experiences, and greater accountability by the group members. Microfinance as a viable and promising path to poverty alleviation as Bangladesh as a country where micro-credit has contributed to a reduction in poverty through group lending that enabled impoverished women who were previously considered un-bankable and not credit worthy to obtain small loans as working capital for microbusiness activities. Micro-credit by MFBs improve Poor rural women financial status due to economic opportunities, microcredit can be instrumental in reducing fertility rates and thus improve the abilities of households to save and provide better health and education for their children.
Improving the marketing systems for the Poor’s Produce:
Best way to reduce poverty is to raise the productive capacity of the poor. Efficient marketing systems are vital in enabling the poor to increase their production because they permit the delivery of products to markets at competitive prices that result in increased incomes. This is also the reason why developing countries need to explore ways of expanding export markets. Weaknesses and inefficiencies in the marketing of these commodities has resulted in the impoverishment of the farmers who face problems such as damage to their harvests, low commodity prices and thus low profits and incomes, and exploitation by middlemen. By improving the marketing system, the growers of these commodities can benefit from better storage that would cushion them from price fluctuations, the pooling of their resources that would enable a reduction of their costs, and the processing of their products to enable value-addition and an improvement on the returns. The implementation of these measures can stimulate local, regional, and national economies; underpin the establishment of a robust agro-industrial sector; create jobs; increase production and incomes; and, contribute to equitable and sustained reduction of poverty.
Cash or income transfer programs:
The fight against poverty needs to consider the fact that among the poor are those who cannot actively participate in routine economic activities and are therefore likely to suffer exclusion from the benefits of economic growth. This category of the poor includes the old and infirm, the sick and those afflicted by various debilitating conditions, families with young children, and those who have been displaced by war and domestic violence. Special affirmative actions that transfer incomes to these groups are required to provide for their basic needs and ensure more equity in poverty reduction. In impoverished regions where children contribute to the livelihoods of their families by supplying agricultural labor and participating in informal businesses, income transfer programs can provide families with financial relief and enable regular school attendance by children. Such investment in the education of the children is vital in improving their human capital and prospects for employment and can therefore play an important role in long term poverty reduction. Such programs performed in Sri Lanka and found that cash transfers in the country significantly reduced child poverty and also increased school attendance and child welfare. Cash transfer programs and contend that these programs are a key instrument in reducing poverty, deprivation, and vulnerability among children and their households. South Africa, Bangladesh, Brazil, Mexico and Chille as examples of countries where cash transfer programs have significantly reduced poverty and vulnerability among poor households. Cash transfer programs are beneficial to households because they are flexible and enhance the welfare of households given that households are free to use the supplemental income on their priorities.
Cash transfer programs are central to social protection that is much needed in developing countries that face heightened social and economic risks due to structural adjustments driven by globalization. Globalization has resulted in greater openness of developing economies and exposed them to changes in global markets leading to a greater concentration of social risk among vulnerable groups. It is noted Social protection as the most appropriate framework for addressing rising poverty and vulnerability in the conditions that prevail in developing countries. They recommend that if significant and sustained reduction in poverty is to be achieved, cash transfer programs be accompanied by complementary actions that extend economic opportunities and address the multiple dimensions of poverty such as food, water, sanitation, health, shelter, education and access to services. Worth to mention that the increased use of social protection programs such as cash transfers to alleviate extreme poverty and estimate that in 2014 these programs prevented about 150 million people from falling into poverty. It needs to be noted that although well designed cash transfer programs can be effective in reducing poverty, they are expensive and may be difficult to finance in a sustained manner. However, by reducing wasteful expenditures and instituting tax reforms, the required resources can be freed for investment in cash transfer programs. The viability of this approach is evident in the case of Bangladesh and a number of central and south Asian countries like Pakistan, Sri Lanka and India that have been able to successfully finance cash transfers from their national budgets. Countries that are not able to finance cash transfer programs from their own resources need to explore the possibilities of securing medium-term support from international organizations.
A major concern regarding cash transfer programs is that they have a short term focus of alleviating only current poverty and have thus failed to generate sustained decrease in poverty independent of the transfer themselves. Critics of cash transfers also argue that they are a very cost ineffective approach to poverty alleviation and an unnecessary waste of scarce public resources. Furthermore, they claim that many cash transfer programs are characterized by unnecessary bureaucracy, high administrative costs, corruption, high operational inefficiencies, waste, and poor targeting. The overall result of these weaknesses is that program benefits have to a large extent failed to reach the poorest households. Where these shortcomings exist, they need to be identified through rigorous audits and addressed through improved program design. But more fundamentally, it also needs to be recognized that cash transfer programs are not simply handouts but are investments in poor households that regard the programs as their only hope for a life free from chronic poverty, malnutrition and disease.
The writer is having vast experience in Banking and Finance sector for over one and half decade, where during his period of work he has experienced different economic and development initiatives taken for the wellbeing of the public masses through the banking channel.
He has worked for the Microfinance banks which are offering community based services among the under developed segment of the society.
The major work done in Financial Inclusion where several hundreds of people were brought to Banking channel to improve their businesses.
The under served segment of society like woman were given the chances to change their lives through credit facilities to grow their home based businesses which is also an imitative of Women Empowerment.
The Writer has also worked against different social issues and highlighting them for positive change in the society through public awareness and their active involvement to reach to the solution.
This journey of empowering people is on going and is never lasting till the time last person remains underserved.
