Wb Rural Poverty

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RURAL DEVELOPM T

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AttackingRuralPoverty: StrategyAnd PublicActions

DECEMBER2000

he international commuriity recognizes that reducing 1 world poverty is one of the major development challenges of our time. Many believe that poverty is a threat to global security,

Poverty exhibits certain common characteristics, but the rural population and the poverty they endure have distinct features. Rural areas are usually ethnically diverse with a small population that is widely dispersed across physically isolated locations. The rural poor generally faceinterlockingbarriers to economic, social, and political opportunities. They lack a political voice because they are remote from the seats of

Over one billion people - one-fifth of the world's population - live in abject poverty, and most are in rural areas. No country is likely to reduce

ing. To help countries better address the dimensions of rural poverty in their PRS, this Note discusses the profile of rural poverty, the impact

poverty and improve the general well-being of its citizens without adclressing the roots of rural poverty. Fully un derstanding rural poverty and defining an etlective poverty reduction strategy are p reconditions for public action to reduce depriva-

of policies and the political economy on the rural poor, key elements of an effective rural poverty reduction strategy, and how to measure progress. Profile of Rural Poverty

power. These factors limit their access to basic infrastructure, undermine their ability to obtain social services, and in some cases reduce their rights to own or access land. Due to heavy reliance on natural-resource-based production systems, the rural poor

tion in poor countries.

The incidence and intensity of poverty is usually higher in rural

are more vulnerable to climatic changes and natural disasters than

The 2000/2001 world Development Report describes different aspects of poverty and identifies measures to attack it. The governments of manly low-income countries are already preparing and/or implementing poverty reduction strategies (PRS). The donor community has also indicated its willingness to consider debt forgiveness for highly indebted poor countries that are participat-

areas than in the towns. Of the estimated 1.2billion people who live on less than $1per day (US dollars), about 75 percent live in rural areas of low income countries and are usually less healthy, less educated, and tend to experience poorer service delivery and declining employment opportunities (IFAD, 2000). Table 1shows the distribution of poverty by regions.

their urban counterparts. Empirical evidence shows that in most countries rural poverty is extremely heterogeneous. Some of the rural poor, both individuals and households, are economically active and possess a variety of income sources while others - such as the elderly, sick, and disabled -often rely on public support or family remittances.

Table1.Poverty distribution byregion (population livingonlessthan$1perdayandheadcount index selected years,.1987-1998). andtransitional economies, indeveloping

Region

Population covered by at leastone survey (%)

EastAsiaandthePacific Eastern Europe andCentral Asia LatinAmerica andtheCaribbean MiddleEastandN.Africa South Asia Sub-Saharan Africa Total

90.8 81.7 88.0 52.5 97.9 72.9 88.1

Numberofpeople livingonlessthan$1aday(millions) 1987

1990

1993

1996

417.5 1.1 63.7 9.3 474.4 217.2 1,183.2

452.4 7.1 73.8 5.7 495.1 242.3 1,276.4

431.9 18.3 70.8 5.0 505.1 273.3 1,304.3

265.1 23.8 76.0 5.0 531.7 289.0 1,190.6

1998test.) 278.3 24.0 78.2 5.5 522.0 290.9 1,198.9

19981%1 23.0 2.0 6.5 .5 44.0 24.0 1t0.0

Source:WorldBank,1999. SUSTA NABLE DEVELOPMENT NETWORK DEPARTMENT OFTHE ENV RONMENTALLY ANDSOCIALLY FROM THERURAL DEVELOPMENT

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Agriculture remainsthemainsource consume ontheirownland,usingonly liberalizing accessandremoving ofincome and employment for the family labor.Other rural house-holds, rural poor, and a prosperous agriculsuch as the landless, may be more ture sectoris essentialto reduce poverty. vulnerable.In many countries,a greater H-lowever, an increasing number of pro ortion of agricultural output is the poorevaealso tuncing tonthumbra o tradable than non-agricultural output. n poor ae are also turning to the rural Where the rural poor include both net on-farmsectr . RNFSas an alterproducers and net consumers of iurce of icome and employment, tradable goods,a real devaluation will Iincle agricultural production is affectthe welfareof these two groupsin nature, demployent and rheawagaes of opposte ways- net producersgain

market distortions, and increasing accessibility to infrastructure, knowledge, and information systems. The above measures would lead to faster accumulation/access of productive assets (human, physical, natural, and financial) controlled by thepoorand/ or increase returns to those assets. Public policy choices to increase rural incomes and assets include:

in rural areas often fluctuate greatly cLuringthe year.This seasonafvariation in income and consumption often leads to the poorest households experiencing acute deprivation curing lean times, which may have adverse long-term consequences for b:abiesand young children.

a Urban labor markets can have a profound effect on poverty in urban and rural areasthrough labor migration. Generally, the more tradable the agricultural output and the more competitive the urban labor market, the more likely an increase in agricultural productivity will reduce rural

providing greater security for those assets they already possess, e.g., strengthening informal land rights and improving or preserving adults' health status; * widening market access by the poor to productive assets,including land, labor, and rural financial services;

pase in the spatialdistribution of pubc expenditures on healthd education, and economic infrastructure is still evident in many countries.

* facilitating private sector provision of rural micro-finance to promote the accumulation of assets; * providing infrastructure, such as rural feeder roads, and other local public goods; * accelerating the production and transfer of appropriate new technology to poor farmers and small non-farm businesses in rural areas; and

niature,employmentand real wages

In

orderto reduceriskoflowhouse-

told income and consumption curing periods of natural disaster or Iad harvests, non-farm economic activities are seen as opportunities to diversify and reduce the chances of marginal rural households falling back into poverty. Non-farm economic activities in rural areas are cDncentrated mainly in mining; the service sector, including tourism; and manufacturing industries. *) d thincome

Effectsof Policiesand the

Political Economy on Rural Poverty The degree of political stability, e aforcement o law and order, and quality of governance profoundly affect the level of rural poverty, as do niacroeconomic sectoral policies and institutional reforms. These factors are important because they affect the single most important macroecon umic determinant of poverty-the ru.teof economic growth. They also influence the allocation of pu blic e:,penditures and determine the type o: economic growth. High, widelyshared growvthreduces poverty d rectlyby creatingmorejobsand Simi r increases tax revenues theregby icallowi governmns, to inca spending on health and education, which reduce poverty indcirectly, Lown,d stablei tin also re t. reduce poverty, Some rural households may be better piotected from high inflation than uiban households because they pi oduce most of the food they

andnseltconsumcrslose.

poverty.Thepersistence of arn'urbav

Elements of a Rural Poverty Reduction Strategy The profile of rural poverty shows that the rural poor are diverseand the challengesthey face are many The poor lack more than sufficient to meet the minimum level of human needs, They often lack legal rights and representation lavoice on matters that affect them. Moreover, they also lack basic services and capacitiessuch as health, education, and nutrition. Reducing vulnerability, powerlessness, and inequality are important challenges.The 2000/2001 World Development Report has a detailed discussionof these challenges. At a minimum, a rural poverty reduction strategy(PRS) should cover the main determinantsof rural poverty, and promote economic opportunities, facilitate empowerment, reduce vulnerability and designexit strategies. Promotingeconomicopportunities for the rural poor.The main determinant of rural poverty reduction is a vibrant rural economy with sustained growth and efficiency.This necessitates improving agricultural productivity fosteringnon-farm activities, developing rural infrastructure, and expanding markers. A rural PRSshould promote rural incomes and employment by fostering economic growth in agriculture and non-farm sub-sectors,

* redistributinig existing assets in

favor of the rural poor, as in a land reform program. For poor pregnant women, the priority is to improve nutrition before and during pregnancy to avoid low birth weight. Similarly,for poor children the priority is to ensure adequate nutrition in infancy, followed by access to appropriate health care and education throughout childhood. Such opportunities are directly affected by the existence of functioning institutions, distribution arrangements, and efficiency of public expenditure choices. Facilitatingempowermentof the rural poor.Empowering rural populations to take charge of their development agenda is essential for poverty reduction. Development interventions should foster a social, legal, and policy framework that enables the rural poor to effectively influence public decisions that affect them and/or reduce factors that restrict their ability to earn a good living. Recognizing that the choice and implementation of public

actionsthat affectthe poor dependon the interaction of political, social, and institutionalprocesses,the rural

accessto public services.Therisks to which the rural poor are exposed differ from those of their urban

and livestockyieldsif successfUl; and *increasingthe integration of

PRS should ensure that the political

counterparts. These are linked to the production function, markets, service delivery, and the very foundations of society and polity. Some of these risks are ighly localized, while others are more general or even global in nature. For example, i smal.-scale farmers are risk-averse and choose patterns of land use with lower mean income and lower variance, this reduces the average return to their assets. Over time, such behavior can trap poor farmers in a low-level equilibrium, whil rural income inequality widens. e

markets over time and space and spatial market integration can be improved bv building rural roads, while liberalizing agricultural markets izing agrc intertemp oral price arbitrage By private tracers as a result of greater transparency, consistency, and credibility in food price policy. Possible priority actions to improve

environment is conducive to civic participation, and that public investments are financed and provided in a decentralized and transparent manner. A rural PRS should also advocate that subnational and social institutions are accountable to the poor, including the removal of social barriers that result from distinctions of ethnicity, ender, and social status. Suggested blicactions to facilitate empowerment of the rural poor include: improving +

the functioning of subnational and social institutions to facilitate economic growth with equity by reducing bureaucratic and social constraints to economic action and upward mobility; * Laying political, social, and legal foundations for inclusive development by establishing mechanisms for democratic and participatory decisionmakiing pyIng; ccreating, sustaining, and integrating competitive markets and related institutions for agricultural inputs and outputs, manufactured consumer goods, and financial services; * reducing social barriers by removing ethnic, racial, and gender bias in the operation of legal systems and encouraging the representation and voice of rural poor in community and national organizations; * fostering local empowerment and decisionmaking through administrative, fiscal, and political decentralization;

strengthening r the participation of the rural poor in public service delivery and ensuring that services are accessible to all citizens; * eliminating urban bias in agricultural pricing and other policies; and * increasing the proportion of public expenditures for social services in rural areas. Reducingthe vulnerability of the rural poor. Living in poverty implies not just an inability to guarantee a minimum of goods and services over a given time period, but also a vulnerability to unexpected fluctuations both in future real income and

since the rural poor who do not produce enough food to meet their household needs spend such a high proportion of their income on food, volatility of their consumption expenditure is generally treated as a problem of food security. Food security has three components: (i) availability of food from expanded production by increasing biological yields, intensifying land use, or expanding the area under cultivation; (ii)access to food to meet adequate calorie intake and avoid a micronutrient deficiency; and (iii) use of food to meet adequate nutritional status. Lack of access to food and poor nutrition are sometimes termed as 'food vulnerability: where seasonal or annual food entitlements are extremely volatile, food security may be a major problem. To address this problem for the rural poor, policymakers can take measures to reduce ex ante exposure to risk, including earlier and more accurate predictions of adverse shocks, and improve the expost capacity of the poor to cope wvithrisk. Priority actions to reduce ex ante exposure to risks might include: * developing early warning systems for the major climatic shocks and natural disasters faced by the country or particular regions within the country; rura areas.pbliwithinithe,countr rimprovlng pUlinc services, such as rural health clinics and roads, irrigation, drainage, and flood contro; * producing and transferring new agricultural technology to smallscale farmers, which raises crop

expost capacity to cope with risks might include: ublic works programs (e.g., food Lorwork), which have proved very effective in boosting the food entitlements of the rural poor after a shock and can be initiated quickly; and .facilitating the emergence of new insurance markets targeted at the rural poor such as: self-financing scheme would cover situations where the insured risks are highly interlinked, as they are for farmers within a single village or region. Insurance coupons would be sold to farmers and others who would buy as much coverage as they wished. The a gregate risk represented by t va ue of all coupons sold would then by re-insured in the private market. . Government would underwrite highly infrequent but worst-case scenarios (catastrophic risks), leaving the private sector to supply coverage over a narrower range of insurale risks.

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Exit strategies for the rural poor. while one of the primary goals of a rural poverty reduction strategy is to foster broad-based economic growth in rural areas that helps the rural poor climb out of poverty, in some cases this goal may be difficult to achieve. A possible reason could be that the natural resource base cannot support the growing rural population. It could also be that even when economic opportunities exist, some segments of the rural population, especially the old and disabled, are unable to support themselves. in such cases, possibe exit strategies for addressing rural poverty could take RDN 3

the form of mi ration out of rural

Monitoring requires choosing poverty

Medium TermExpenditure Framework

areas, which affects both the migrants and those left behind, and establishing social support programs (safety nets) that target public assistance to the poor. The rural poor may participate in different types of migration. In the long run, rural-urban migration is an integral part of the process of structural change and a powerful mechanism to redtuce ruralpoverty. In physically remote communities witth population density, a fragile c2nd limited natural resource base, 2nd a weak endowment of human capital, permanent out-migration may be the most cost-effective mechanism for reducing deprivation.

indicators and setting poverty reduction targets. Poverty indicators should be reliable, quick, and cheap. unfortunately, all three characteristics usually cannot be found simultaneously. It is more useful to identify a few indicators and measure them well rather than measure many poorly Another desired characteristic of a core set of indicators is that they show the direction ofchange rather than make static comparisons. The most significant question is whether the value of e indicators has improved or at least maintained a satisfactory level. The patterns of improvement or deterioration could then be used to determine possible policy changes.

(MTEF).checking for consistency between short- and long-run taryets requires governments to explicitfy state how they want to get from the present to the set date, while targets set for the short-term poverty reduction strategy should be consistent with targets set within the MTEF

1low

Many migrants send remittances to family members who are left behind in rural areas. In some instances, remittances may be received with such regularity from migrant kin that they are considered by recipients as t art of permanent income. In other cases, expectations for remittances are less well defined, so that such transfers are better considered as a source of transitory income. Safety nets may represent the only route out of poverty for the rural poor who are not economically active and do not receive direct remittances from relatives in urban areas. The p ubXc assistance may be cash or in-Kind, but does require an effective targeting rechanism to minimize lfaiks and

reach the intclndedbeneficiaries. Measuring Progress in Reducing Rural Poverty It is important for governments to

nmonitor progress in reducing rural poverty. This is an effective way to inform citizens and civil society about the state of the country's rural w-ell-being and encourage debate on priorities, trade-offs, anT hold politici ans accountable. It also promotes evidence-based polhcymaung by senior decisionmakers, and aIlows feasible poverty reduction targets to be set for the future.

Once the indicators have been chosen, it is necessary to establish a baseline within a given timeframe against which targets can be set and future progress measured. The baseline might include values of the standard poverty measures calculated from the most recent household survey. if there has been no survey for several years, the baseline can either be set retrospectively, or drawn in the present by projecting changes in poverty since the survey year using the country's growth rate with an assumed poverty reduction elasticity. The selection of targets should be subject to at least two consistency checks - long-run poverty reduction goals and objectives defined within a

Conclusion Ponclusin

Poverty remains pervasive, and its incidence and intensity are usually higher in rural than in urban areas. The challenges facing the rural poor are not limited to lack of income to meet the minimum level of human needs, but also include lack of services, capacities, capital, security, and opportunity. There is no blueprint for overcoming poverty. Every developing country needs to prepare a mix of policies and take public actions based on its economic, sociopolitical, and structural context, and those policies should be targeted to address the different forms of deprivation that face the rural poor. The exit strategies for escaping poverty should also be included in a menu of policy choices that individual countries should undertake, consistent with their resources and institutional capabilities. In addition, they also need to establish a systematic monitoring process to assess the progress they may or may not make toward reducing rural poverty.

References IFAD (International Fund for Agricultural Development). 2000. EndingRuralPovertyin the2lst Century. World Bank. 2000. AttackingPoverty. World Development Report 2000/2001. Washington, D.C.: Oxford University Press for the World Bank. world Bank 2000 PovertyReductionStrategy Sourcehook. Washington, D.C. World Bank. 1999:PovertyTrendsand Voicesof the Poor.Washington, D.C. World Bank. 1997 RuralDevelopment:FromVision to Action. Environmentally and Socially Sustainable Development Studies and Monographs Series No. 12. Washington, D.C.

The Rural Development Note series summarizes good practices and key findings about topics related to ruraldevelopment. These Nates are distributed widely to Rural Familystaff and are also available on the Rural Sector website (http://essd.worldbank.org/ essd/rev/rdvhom.nsf/RuralStrategyHolder?OpenView). This Note was written by Nwanze Okidegbe, with input from Chris Scott ard Jock Anderson. Ifyou are interested in writinga note, please email your idea to Nwanze Okidegbe ([email protected]). For additionalcopies, please contact Melissa Williamsat (202) 458-7297. The ideas posed in this series do not necessarily reflect the policies of the World Bank. Edited by Seth Beckerman, originaldesign and layout by Condello Design, both of Pittsburgh, PA.