Extreme Poverty is Widespread Over 1 billion people subsist on less than $1 per day About 2.8 billion - nearly half the world’s population - lives on less than $2 per day Nearly 20 countries in Sub-Saharan Africa are poorer today than they were a generation ago But poverty is multidimensional; raising incomes is crucial but low income is only one of the problems of poverty

Poverty is pervasiveness of early death In some countries such as Angola, Congo, Liberia, Mali, Niger, and Sierra Leone , more than one-fifth of all children die before age 5 from preventable causes. Life expectancy in Sub-Saharan Africa has fallen to below 47. In South Asia, nearly 1 child in 10 dies before age 5. The under-5 mortality rate is 126 per 1000 in low income countries, 39 per 1000 in middle income and 6 per 1000 in high income countries. Every day, nearly 30,000 children in developing countries die from preventable causes--over 10 million this year alone.

Poverty is Hunger and Poor Health 17% of world population is undernourished Micronutrient malnutrition affects 2 billion; Children face lifelong disabilities In many poor countries, parasites are ubiquitous A woman dies during childbirth every minute; almost none would die in North America or Europe Nearly 3000 children in Africa die from malaria each day The International Classification of Diseases includes Code Z59.5 - extreme poverty

Poverty is the Denial of the Right to a Basic Education There were about 875 million illiterate adults in the world in 2000 Some 40% of all adults in South Asia are illiterate A child in Europe, North America, or Japan can expect more than 12 years of schooling on average, but a child in sub-Saharan Africa and South Asia can expect less than 4 years of school Nearly 100 million children not in primary school In at least 12 Sub-Saharan African countries a child is more likely to die before the age of five than attend secondary school

Poverty is the loss of childhood At least 180 million child laborers are either 15 years old or younger or work in conditions that endanger their health or well-being according to the ILO 73 million working children are under 10 years old An estimated 8.4 million child laborers are trapped in slavery, trafficking, debt bondage, prostitution, pornography and other abhorrent conditions.

Poverty is also less quantifiable but no less oppressive conditions Poverty is vulnerability to destitution after a shock or catastrophic event, such as an illness, death of a draft animal, theft of your land. Each year about three quarters as many fall into poverty as escape. The struggle against poverty is often one of 4 steps forward, 3 steps back. But 300-420 million live in chronic extreme poverty Poverty is the ongoing stress of desperately trying to anticipate and adapt to vulnerability. Poverty is lack of access to markets that could offer a way out of poverty. Poverty is watching the environment on which you depend deteriorating year by year

Poverty is Powerlessness Poverty is systematic exploitation, theft, and abuse not only by the rich but by the government officials ostensibly there to help: The poor must pay larger bribes, as a share of their income, than the rich-- just to survive. Poverty is debilitating and deliberately created feelings of hopelessness and dependence- on whatever minimal remuneration is offered by a particular rich family in your sphere of life. Poverty is violence within the family and without. Poverty is powerlessness to stop things hurting you and your family and keeping you poor.

However alarming these indicators of poverty, they are significantly better than two decades ago This is partly due to growth in countries such as China, but also due to effective poverty policies. The glass may be seen as half full or half empty. But the call to action is compelling: Development and effective poverty reduction is not inevitable, but is possible. So we have an obligation to understand problems of poverty and development, and then to act. Why is it so difficult for the poorest of the poor to make further progress?

Poverty Traps Poverty becomes a trap when a vicious cycle undermines the efforts of the poor, in which conditions of poverty feed on themselves and create further conditions of poverty.

a. Child labor traps. In a child labor trap, if a parent is too unhealthy and unskilled to be productive enough to support their family, the children have to work. But if children work, they can’t get the education they need; so when they grow up, they have to send their own children to work. Or, if most children work, the unskilled wage is low, so parents making low wages cannot afford to take their children out of the workforce.

b. Illiteracy traps. Even if the family doesn’t need children’s meager wages, parents may be unable to afford transportation, a school uniform, and school fees. If they had access to credit, higher incomes received a few years later by literate children could repay these loans. Child labor is an alternative to credit- a family loan to be “repaid” with the child’s lower lifetime earnings.

c. Low skill traps. With no employer in the region seeking modern job skills, there is no incentive for individuals to invest in gaining these skills. But if there is no workforce available with these skills, outside investors are not likely to invest in the region. This type of trap is a chicken and egg problem-which comes first, the investment or the skills?

d. Working capital traps. Lack of credit plays a role in other poverty traps. In a working capital trap, a microentrepreneur must sell door to door with her tiny inventory that is all she can afford to hold. But this makes the chance of a match with what her customers want so low that income will be so meager that she will be unable to go out with a larger inventory the next day.

e. Debt bondage traps. But the wrong kind of debt is also a trap, when colluding moneylenders calibrate loan and interest payments to ensure perpetual indebtedness. Wages paid by these creditors may be too low even to pay interest. Although bonded workers are allowed basic subsistence so they can work, the surplus is extracted in an endless cycle of debt. The children of bonded laborers may be born into bondage.

f. Uninsurable risk traps. Poor farmers are unable to get weather insurance. So, they orient their farming to minimize the impact of a catastrophic shock. But this approach makes it unlikely they can take advantage of opportunities to build assets. As a result, they are unable to change their circumstances in a way that would let them gain more security against high risks in the future.

g. Information traps. Impoverished day laborers, housemaids, and others among the poorest work long hours for very low pay. Even if there are alternatives available that pay higher wages, one has no time or energy to learn about what these occupations pay or how to work in them. Of course, employers have no incentive to help them learn about better opportunities, and may work to prevent it.

h. Undernutrition traps. In undernutrition traps, an undernourished person is too weak to work productively, so her resulting wage is too small to pay for sufficient food to improve her nourishment, thus she continues to work with low productivity for low wages. A similar vicious cycle can keep chronically ill (but treatable) people in the bondage of poverty. These problems could be solved if there were sufficient demand for unskilled workers.

i. High Fertility Traps If most families have many children, and there are few good jobs, then you too must have many children, for a better chance that at least one of your children will find a job. Otherwise you face the likelihood that no one will have the means and willingness to take care of you when you are too old to work. But if all could have lower fertility, all might be better off. For example, with lower fertility, each family could invest more in their children’s health and education.

j. Subsistence traps. Specialization is key to increasing productivity. But if everyone practices subsistence agriculture, there is no one to sell to-perhaps just some small local trading. To produce for distant markets, you must learn about them, and convince distant buyers of quality. Middlemen vouch for quality, but cannot be expert in many products. So for a specialized agricultural market, there must be a sufficient concentration of producers. But without middlemen, there is no incentive to specialize… The result can be an poverty trap in which a region remains stuck in subsistence.

k. Farm Erosion Traps. In farm erosion traps, the poor are so desperate for food that they overuse their land even though they know the result will be lessened fertility next year. Even though you know you are overusing your soil and it will degrade if you do not rest it or plant less aggressively, these problems are in the future… So any gains in productivity can be negated by poorer soil quality. This is just one example of an environmental degradation trap.

l. Common Property Mismanagement Traps Lakes are over-fished, forests are not managed sustainably, land is overgrazed, in part due to a breakdown of community management of common-pool resources. “If I do not fish today even at unsustainable levels, someone else will catch those fish instead of me; either way, I will catch fewer fish tomorrow.” Once broken down, cooperative social agreements on use of shared resources are difficult to restore.

Keys to Capability: A Schema 1. Health and nutrition for adults to work and children to grow to their potential. 2. Basic education to build the foundations for self-reliance. 3. Credit and basic insurance for working capital, and defense against risk. 4. Access to functioning markets for income and opportunities to acquire assets. 5. Access to the benefits of new technologies for higher productivity. 6. A non-degraded and stable environment. 7. Personal empowerment to gain freedom from exploitation and torment. 8. Community empowerment to ensure effective participation in the wider world.

Keys to Unlocking Poverty Traps The 8 keys are basic capabilities the poor often lack, that facilitate escape from a range of poverty traps. Table 1: Some of the relationships between the keys and the poverty traps they can help unlock.

Poverty Traps the key helps address Key to Capability Poverty Traps the key helps address 1. Health and nutrition for adults to work and children to grow to their potential. h Undernutrition traps. i High Fertility Traps. 2. Basic education to build the foundations for self-reliance. a Child labor traps. b Illiteracy traps 3. Basic insurance, and credit for working capital, family emergencies, and other needs. d Working capital traps. e Debt bondage traps. f Uninsurable risk traps. 4. Access to functioning markets, with opportunities to acquire productive resources. e Debt bondage traps g Information traps. j Subsistence traps. 5. Access to the benefits of new technologies for higher productivity. c Low skill traps g Information traps 6. A non-degraded and stable environment. k Farm erosion traps l Common Property Traps m Collective action traps 7. Personal empowerment: Freedom from coercive exploitation and torment. o Poverty Entrapment 8. Full participation as a member of an empowered community. m Collective action traps. n Powerlessness traps.

NGOs are private, voluntary organizations serving a social purpose The book primarily features NGO programs (though also some government and for-profit activities) NGOs are formal organizations within the citizen sector (or civil society), having a social purpose Governments rely on authority to achieve outcomes Private sector firms rely on market mechanisms to provide incentives for mutually beneficial exchange In contrast, civil society actors utilize independent voluntary efforts to promote their values and aspects of social, economic, or political development NGOs are the equally important third leg of the stool on which development and poverty reduction rests NGOs are steadily growing in prominence

Comparative Advantages of NGOs in Hunger and Poverty 1. Innovation in hunger and poverty program design and implementation 2. Flexibility in designing and modifying hunger and poverty programs to suit local conditions; and greater opportunities for rigorous evaluation 3. Serving as repositories of specialized knowledge 4. Providing targeted public goods for poor communities 5. Common property resource management design and assistance with program implementation 6. Greater trust and credibility of NGOs by participants, and by perhaps developed country donors and firms 7. Representation and advocacy, based on affiliation with poor, socially excluded peoples

NGOs also have limitations, when government or the private sector is more appropriate, or in the face of “voluntary failure” For-profit firms have comparative advantage in private goods Government has comparative advantage in public goods NGOs and CBOs have comparative advantages in intermediate goods, situated between these poles But “voluntary failures” can also prevent the citizen sector from realizing these comparative advantages in practice. Examples: 1. Institutionalization, causing loss of flexibility and participation 2. Goal deflection: displacement of ends by means, e.g. fundraising 3.Minority rule, in which NGO priorities reflect their own organizational origins rather than their participants’ priorities 4. Ineffectuality, or “philanthropic amateurism” 5. Philanthropic insufficiency, due to limited scale and resources 6. Philanthropic particularism, reflecting NGOs’ choice of clientele and projects, possibly neglecting greater needs

Identifying organizational comparative advantages of NGOs Typology of Goods within the Two Dimensions Of Rivalry and Excludability   Exclud- ability   Type IV Goods Type I Goods Club Goods, Ideas Private Goods   Type III Type II Goods Goods Common Public Goods Property Resources Rivalry

How the cases were selected Screen 1. Existence of a rigorous program evaluation study, especially using randomization, with identified high program impact Screen 2. Winning of a major juried poverty program prize Screen 3. Snowball sampling, starting with chiefs of evaluation or equivalent, of high-rated PVOs, emphasizing programs cited by peer PVO/NGO organizations

Type of Response Type of Trap Areas of NGO Comparative Advantage Specific NGO Programmatic Activities Program Examples Child labor traps Innovation, Flexibility, Advocacy Designing school programs to reach child laborers; advocating improved work conditions and regulations BRAC- NFPE, STC CHANCE; Peru STC school for street children; ILO affiliate programs Illiteracy traps Innovation, Flexibility Designing effective literacy programs for the very poor Pratham accelerated learning, India Low skill traps Club goods, Knowledge Develop training programs targeted to low skill marginalized groups SEWA, Mother Child Day Care Center Services Working capital traps Innovation; knowledge Microfinance, alone or with training, services such as health, solidarity etc Grameen, FINCA, BRAC, FFH Debt bondage traps Advocacy; Innovation; Flexibility Raising awareness, lobbying; Identifying bonded laborers and groups, developing alternative work Affiliates of Anti-Slavery International; Sankalp, India; Kamaiya FMMC, Nepal Uninsurable risk traps Innovation, Club goods Innovating targeted microinsurance for farmers BASIX/KSB, India Information traps Knowledge, innovation Providing information about alternative livelihoods, and training Grameen phone ladies program, BRAC TUP, Africare, ICS Undernutrition and poor health traps Advocacy, Knowledge Targeted food supplements; advocacy for affected areas Playpumps, BRAC, IRC, CRS High Fertility traps Innovation, flexibility Community mobilization and family planning ‘cultural transformation’ CARE, ICRW, various family planning and population NGOs Subsistence traps Knowledge, club goods Helping villages identify and market alternative crops Africare, Africa Now, BRAC, Technoserve, Heifer Farm Erosion traps Knowledge, flexibility Providing targeted packages of credit, training, and inputs TechnoServe and partners Common Property Mismanagement traps Common property resource Community organizational development and training Suledo, Tanzania; Gram Vikas, India Powerlessness traps Trust, flexibility, innovation Self-esteem building, legal and comprehensive training ADEW-Egypt, Child Helpline-India, World Vision

Illustrative Programs Building Assets & Capabilities for Escaping Poverty Traps 1. Illness and Undernutrition: Playpumps; Deworming 2. Child Labor and Illiteracy: Nonformal Primary Schools; Pratham tutoring and computer based learning; Oportunidades 3. Working Capital, and Information Traps: Grameen Bank/ Phone Ladies 4. Subsistence Traps: Access to markets through BRAC’s Targeting the Ultrapoor Program and BRAC Enterprises 5. Low Skills and Limited Access to Technologies: SEWA, India; Endeavor, South Africa 6. Common Property Mismanagement, and Subsistence Traps: Honey Care/Africa Now/CBOs in Kenya; Suledo in Tanzania; Fundecor in Costa Rica 7. Individual Powerlessness Traps: ADEW Girls Dreams Project in Egypt; Childline in India 8. Community Empowerment Needs (with Environmental Sustainability): Heifer, Peru; Africare in Uganda, Burundi

Three broad conclusions Extreme poverty is a hard problem because: many are caught in poverty traps; high growth is hard to ignite and sustain; and the poor may not benefit from growth. Practitioners know much about how to help the poor escape poverty traps even in countries without good prospects for high growth. Much good can be done with relatively little money, by identifying and supporting effective and innovative programs that develop key assets and capabilities, and utilizing rigorous evaluation. Development and poverty reduction rests on a three legged stool of private, government, and citizen sectors. The citizen sector including NGOs hold comparative advantages in addressing poverty traps, and so can play a central role in ending extreme poverty.

Working together we can help unlock poverty traps and eradicate poverty, hunger, and deprivation. Thank you.