ppaf final
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Poverty Alleviation & Economic Development 1
Poverty Alleviation & Economic Development
Submitted to:
Prof. Shah Mahmood
Submitted by:
Umair Javed bbae2006-18
Mudasar Mushtaq bbae2006-12
Awais Arshad bbae2006-27
Muzamil Mushtaq bbae2006-03
Ammar Anwar bbae2006-21
Abdul Wahab bbae2006-42
Institute of business administration
University of the Punjab
Lahore
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Poverty Alleviation & Economic Development 2
Poverty Alleviation & Economic Development
Poverty is the shortage of common things such as food, clothing, shelter and safe drinking water, all
of which determine the quality of life. It may also include the lack of access to opportunities such as
education and employment which aid the escape from poverty and/or allow one to enjoy the respect
of fellow citizens.
Poverty is hunger. Poverty is lack of shelter. Poverty is being sick and not being able to see a doctor.
Poverty is not being able to go to school and not knowing how to read. Poverty is not having a job,
is fear for the future, living one day at a time. Poverty is losing a child to illness brought about by
unclean water. Poverty is powerlessness, lack of representation and freedom.
Poverty Alleviation (or poverty reduction) is any process which seeks to reduce the level of poverty in
a community, or amongst a group of people or countries. Poverty reduction programs may be aimed
at economic or non-economic poverty. Some of the popular methods used are education, economic
development, and income redistribution. Poverty reduction efforts may also be aimed at removing
social and legal barriers to income growth among the poor.
For many people in developing countries, acute poverty means difficulty making a living, as well as a
lack of basic services in education and health.
Some economists also highlight government corruption as a chief problem in reducing poverty inthe developing world.
In Pakistan, lack of access to credit, training in income-generating activities, basic social services and
infrastructure are critical factors behind the persistence of substantial poverty, especially in under-
served rural and urban areas.
Economic Developmentis the development of economic wealth of countries or regions for the well-
being of their inhabitants. It is the process by which a nation improves the economic, political, and
social well being of its people. From a policy perspective, economic development can be defined as
efforts that seek to improve the economic well-being and quality of life for a community by creating
and/or retaining jobs and supporting or growing incomes and the tax base.
Economic development is an important factor in reducing poverty and in generating the resources
necessary for human development and environmental restoration. The real per capita output is an
indicator that defines the real output per person in a nation.
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Poverty Alleviation & Economic Development 3
Causes of poverty
Many different factors have been cited to explain why poverty occurs; no single explanation has
gained universal acceptance.
Possible factors include:
Economics
Recession. In general the major fluctuations in poverty rates over time are driven by the business
cycle. Poverty rates increase in recessions and decline in booms. Extreme recessions, such as
the Great Depression have a particularly large impact on poverty
Economic inequality. Even if average income is high it may be the case that the poverty rate is also
high if incomes are distributed unevenly. However the evidence on the relationship between
absolute poverty rates and inequality is mixed and sensitive to the inequality index used.
Shocks to food prices. Poor people spend a greater portion of their budgets on food than richer
people. As a result poor households, and those near the poverty threshold can be particularly
vulnerable to increases in food prices.
Governance
Lackingdemocracyin poor countries: "The records when we look at social dimensions of
developmentaccess to drinking water, girls' literacy, health careare even more starkly
divergent
Weak rule of law can discourage investment and thus perpetuate poverty.
Poor management of resource revenues can mean that rather than lifting countries out of
poverty, revenues from such activities as oil production or gold mining actually leads to
a resource curse.
Failure by governments to provide essential infrastructure worsens poverty.
High levels of corruption undermine efforts to make a sustainable impact on poverty.
Welfare states
Welfare states have an effect on poverty reduction. Currently modern, expansive welfare states that
ensure economic opportunity, independence and security in a near universal manner are still the
exclusive domain of the developed nations, commonly constituting at least 20% of GDP, with the
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Poverty Alleviation & Economic Development 4
largest Scandinavianwelfare states constituting over 40% of GDP.[43]These modern welfare states,
which largely arose in the late 19th and early 20th centuries, seeing their greatest expansion in the mid
20th century, and have proven themselves highly effective in reducing relative as well as absolute
poverty in all analyzed high-income OECD countries.
A starving female child during the Nigerian-Biafra war. Her abdomen is swollen due to Kwashiorkor
or severe protein malnutrition
People experiencing homelessness living in cardboard boxes in Los Angeles, California
Again in a developed nation council houses in Seacroft, Leeds,UKhave been deserted due topoverty and high crime
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Poverty Alleviation & Economic Development 5
Country Absolute poverty rate (threshold set at
40% of U.S. median household income)
Relative poverty rate
Pre-transfer Post-transfer Pre-
transfer
Post-
transfer
Sweden 23.7 5.8 14.8 4.8
Norway 9.2 1.7 12.4 4.0
Netherlands 22.1 7.3 18.5 11.5
Finland 11.9 3.7 12.4 3.1
Denmark 26.4 5.9 17.4 4.8
Germany 15.2 4.3 9.7 5.1
Switzerland 12.5 3.8 10.9 9.1
Canada 22.5 6.5 17.1 11.9
France 36.1 9.8 21.8 6.1
Belgium 26.8 6.0 19.5 4.1
Australia 23.3 11.9 16.2 9.2
UnitedKingdom
16.8 8.7 16.4 8.2
United States 21.0 11.7 17.2 15.1
Italy 30.7 14.3 19.7 9.1
Demographics and social factors
Overpopulation and lack of access to birth control methods.[47][48]Note that population
growth slows or even become negative as poverty is reduced due to the demographic transition.
Crime, both white-collar crime and blue-collar crime, including violent gangs and drug cartels.
Historical factors, for example imperialism, colonialismand Post-Communism (at least 50
million children in Eastern Europe and the former Soviet Union lived in poverty).
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Poverty Alleviation & Economic Development 6
Effects of poverty on economic development and vice versa
1. Less Developed Countries and Poverty
Economic development is an important factor in reducing poverty and in generating the resources
necessary for human development and environmental restoration. The real per capita output is an
indicator that defines the real output per person in a nation. It is calculated by dividingreal GNP in
a nation by the nations population. Nations are classified according to their real per capita output as
follows:
Real per capita output
Low income US$750US$2,900US$9,000
Personal income is defined as the amount of money that households have available to spend
before paying personal taxes.Table 1. presents an example of how personal income is calculated
starting with GNP. There is great disparity in levels of per capita income among nations in the
world. In general countries with per capita incomes less than US$1,000 per year are referred to as
the less developed countries. Thepoverty income threshold is defined as the income level below
which a person or family is classified as being poor. The poverty threshold used by the World Bank
to measure poverty in the developing nations is US$370 per person per year. Today, it is estimated
that 1.3 billion people in less developed countries are living on less than one dollar a day. In Africa,
for example, the per capita income in some very poor countries is less than US$200 per year.
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Poverty Alleviation & Economic Development 8
In the U.S. the measure of poverty is based on a Department of Agriculture survey in the 1950s that
showed that families spent about one-third of their incomes on food. Consequently, the poverty
threshold is set at three times the cost of an economy food plan defined by the Department of
Agriculture. The U.S. poverty threshold for a family of four, between 1985 and 1997, is shown
below:
Year Poverty Threshold*
1997 $16,404
1996 $16,036
1995 $15,569
1994 $15,141
1993 $14,763
1992 $14,335
1991 $13,924
1990 $13,359
1989 $12,674
1988 $12,092
1987 $11,611
1986 $11,203
1985 $10,989
*Poverty Threshold is weighted average threshold, for a family of 4
In contrast with the income definition of poverty, a broader definition is presented by the Human
Poverty Index (HPI), developed by the United Nations Developing Program (UNDP). The HPI
includes measures of low life expectancy, illiteracy, and lack of access to health services, drinking
water, and adequate nutrition. In some instances, like in Latin America, the percent of income poor
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Poverty Alleviation & Economic Development 9
in a country may be larger than the percent of human poor, implying that the poor are better off
since they have more choices and opportunities due to services provided by the government.
Figures 1-3 show the relationship between poverty and some human conditions.
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Poverty Alleviation & Economic Development 10
Figures presented by the United Nations in 1996 indicate that the gap between rich and poor
countries is growing: the income ratio between the richest 20% and the poorest 20% of the world
population went from 30 to one in 1960, to 61 to one in 1991. Within some countries the gap
between rich and poor is also increasing. Income inequality is a source of social instability and armed
conflict, which in turn are detrimental to economic development. A long term solution to this
problem is commitment by governments to provide better services (education and health care) to
the poor.
Causes of Low Per Capita Output in Less Developed Countries
The problems of a particular nation with low per capita output are unique. It is possible, however, to
list some basic causes:
1. Lack of capital and low rate of savings.
The key to economic growth is accumulation of capital, and to accumulate capital requires
savings. In less developed countries workers have little physical capital (roads, structures,
bridges, equipment, vehicles, etc) to work with. As a result, their productivity is low and
output per capita is low. Consequently, there is little or no savings, which in turn is necessary
to accumulate capital.
2. Lack of human capital.
Human capital is as important as the physical capital. Often the labor force in less developed
countries is illiterate or lacks necessary training.
3. Old fashion production methods.
The use of old technology is related to the lack of physical and human capital.
4. Political instability and government policies that discourage production.
Less developed countries are sometimes plagued by guerilla warfare, political insurgence, and
political corruption which create the wrong environment for investment and production.
All these problems are linked with each other and may require assistance from internationalorganizations or other nations to be resolved.
Development, Poverty and the Environment
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Poverty Alleviation & Economic Development 11
The World Banks ultimate objective is the reduction of poverty in the less developed world. In the
past, however, development projects encouraged by the World Bank and other international
financial organizations have been detrimental to the environment and to the poor. Some
development projects have deprived the poor of access to the natural resources on which their
livelihoods depended. For example, farmers have been evicted from their lands by dams, logging
concessions, and large scale agricultural and industrial projects. The financial cost of this destructive
approach to development is immense. Financial institutions while aiming to reduce poverty through
development may be, in fact, creating poverty.
The poor are also affected by the debt acquired by developing countries through loans for
development. In order for the countries to service their debts, they must earn foreign exchange.
Consequently, they are encouraged by the international financial institutions to reduce domestic
expenditure and to export more. In many countries, the impact of these policies on the poor has
been devastating, since they have implied a drop in wages and a slashing of education and health
services.
Improving the social environment and abilities of the poor
Subsidized housing development and urban regeneration.
Subsidized education.
Subsidized health care.
Assistance in finding employment.
Subsidized employment
Encouragement of political participation and community organizing.
Community practice social work.
Emphasis on improving maternal health
Community education
Millennium Development Goals
Eradication of extreme poverty and hunger by 2015 is a Millennium Development Goal. In addition
to broader approaches, the Sachs Report (for the UN Millennium Project) proposes a series of
"quick wins", approaches identified by development experts which would cost relatively little but
could have a major constructive effect on world poverty. The quick wins are:
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Poverty Alleviation & Economic Development 13
of governance. Policy become much more oriented towards what will get more aid money than it
does towards meeting the needs of the people.
Supporters argue that these problems may be solved with better audit of how the aid is used.[9]Aid
from non-governmental organizations may be more effective than governmental aid; this may be
because it is better at reaching the poor and better controlled at the grassroots level.[10]As a point of
comparison, the annual world military spending is over a trillion dollars.
Recent trends in absolute poverty
Poverty is usually measured as either absolute or relative poverty(the latter being actually an index
of income inequality). Absolute poverty refers to a set standard which is consistent over time and
between countries. An example of an absolute measurement would be the percentage of the
population eating less food than is required to sustain the human body (approximately 2000-
2500 calories per day for an adult male).
The World Bankdefines extreme povertyas living on less than US $1.25 (PPP) per day,
and moderate poverty as less than $2 a day, estimating that "in 2001, 1.1 billion people had
consumption levels below $1 a day and 2.7 billion lived on less than $2 a day."[3]The proportion of
the developing world's population living in extreme economic poverty fell from 28 percent in 1990to 21 percent in 2001.[3]Looking at the period 1981-2001, the percentage of the world's population
living on less than $1 per day has halved.
Most of this improvement has occurred in East and South Asia.[4]In East Asia the World Bank
reported that "The poverty headcount rate at the $2-a-day level is estimated to have fallen to about
27 percent [in 2007], down from 29.5 percent in 2006 and 69 percent in 1990."[5]
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In Sub-Saharan Africa extreme poverty went up from 41 percent in 1981 to 46 percent in 2001,
which combined with growing population increased the number of people living in poverty from
231 million to 318 million.[6]
In the early 1990s some of the transition economies ofEastern Europe and Central
Asia experienced a sharp drop in income.[7]The collapse of the Soviet Union resulted in large
declines in GDP per capita, of about 30 to 35% between 1990 and the trough year of 1998 (when it
was at its minimum). GDP per capita in Ukraine dropped from $7,185 in 1990 to $3,628 in
1996.[8]As a result poverty rates also increased although in subsequent years as per capita incomes
recovered the poverty rate dropped from 31.4% of the population to 19.6%[9][10]
World Bank data shows that the percentage of the population living in households with
consumption or income per person below the poverty line has decreased in each region of the world
since 1990:
Region 1990 2002 2004
East Asia and Pacific 15.40% 12.33% 9.07%
Europe and Central Asia 3.60% 1.28% 0.95%
Latin America and the Caribbean 9.62% 9.08% 8.64%
Middle East and North Africa 2.08% 1.69% 1.47%
South Asia 35.04% 33.44% 30.84%
Sub-Saharan Africa 46.07% 42.63% 41.09%
Other human development indicators have also been improving. Life expectancyhas greatly
increased in the developing world since WWII and is starting to close the gap to the developed
world. Child mortalityhas decreased in every developing region of the world.[citation needed] The
proportion of the world's population living in countries where per-capita food supplies are less than
2,200 calories (9,200kilojoules) per day decreased from 56% in the mid-1960s to below 10% by the
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1990s. Similar trends can be observed for literacy, access to clean water and electricity and basic
consumer items.[13]
There are various criticisms of these measurements.[14]Shaohua Chen and Martin Ravallion note that
although "a clear trend decline in the percentage of people who are absolutely poor is evident ... with
uneven progress across regions...the developing world outside China and India has seen little or no
sustained progress in reducing the number of poor".
Since the world's population is increasing, a constant number living in poverty would be associated
with a diminshing proportion. Looking at the percentage living on less than $1/day, and if excluding
China and India, then this percentage has decreased from 31.35% to 20.70% between 1981 and
2004.[15]
The 2007 World Bank report "Global Economic Prospects" predicts that in 2030 the number living
on less than the equivalent of $1 a day will fall by half, to about 550 million. An average resident ofwhat we used to call the Third World will live about as well as do residents of the Czech or Slovak
republics today. Much of Africa will have difficulty keeping pace with the rest of the developing
world and even if conditions there improve in absolute terms, the report warns, Africa in 2030 will
be home to a larger proportion of the world's poorest people than it is today.
Relative poverty
Relative poverty views poverty as socially defined and dependent on social context, hence relative
poverty is a measure of income inequality. Usually, relative poverty is measured as the percentage of
population with income less than some fixed proportion of median income. There are several other
different income inequality metrics, for example the Gini coefficient or the Theil Index.
Relative poverty measures are used as official poverty rates in several developed countries. As such
these poverty statistics measure inequality rather than material deprivation or hardship. The
measurements are usually based on a person's yearly income and frequently take no account of total
wealth. The main poverty line used in the OECD and the European Union is based on "economic
distance", a level of income set at 50% of the median household income.
Other aspects
Economic aspects of poverty focus on material needs, typically including the necessities of daily
living, such as food, clothing, shelter, or safe drinking. Poverty in this sense may be understood as a
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condition in which a person or community is lacking in the basic needs for a minimum standard of
well-being and life, particularly as a result of a persistent lack of income.
Analysis of social aspects of poverty links conditions of scarcity to aspects of the distribution of
resources and power in a society and recognizes that poverty may be a function of the diminished
"capability" of people to live the kinds of lives they value.The social aspects of poverty may include
lack of access to information, education, health care, or political power. Poverty may also be
understood as an aspect of unequal social status and inequitable social relationships, experienced as
social exclusion, dependency, and diminished capacity to participate, or to develop meaningful
connections with other people in society.[23][24][25]
The World Bank's "Voices of the Poor," based on research with over 20,000 poor people in 23
countries, identifies a range of factors which poor people identify as part of poverty. These include:
Precarious livelihoods
Excluded locations
Physical limitations
Gender relationships
Problems in social relationships
Lack of security
Abuse by those in power
Dis-empowering institutions
Limited capabilities
Weak community organizations
David Moore, in his book The World Bank, argues that some analysis of poverty reflect pejorative,
sometimes racial, stereotypes of impoverished people as powerless victims and passive recipients of
aid programs.
The Private Sectors Role in Poverty Alleviation and Economic
Development
A new term has developed in the field of management over the past decade: base-of-the-pyramid
(BoP) business. The meaning and nature of the term, though, is often misunderstood by academics
and practitioners alike. Maligned as merely selling to the poor, many overlook the most
compelling questions surrounding the concept: What is the most effective way for the private sector
to engage in poverty alleviation? Is it really best done by large companies making their products and
services available to a broader global audience? Or, does it require more sophisticated strategies
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where economic capacity building is rooted in the ability of firms of any size to work collaboratively
with poor communities to promote entrepreneurship and innovation? Is the best that companies
have to offer philanthropic in nature, or are there ways to channel the competitive character of the
firm toward the alleviation of socialand environmentalchallenges? How do companies,
governments, and NGOs need to work together to catalyze more effective economic development?
Researchers from a variety of fields at Cornell would likely agree that seeing poor, developing
countries as new repositories for existing goods and services is not where the private sector can have
the most impact. The agenda stretches across social and natural science lines. Managers and leaders
must find ways for private, public, and nonprofit sectors to work collaboratively with local
communities to address local unmet needs through the development of novel, profitable new
products, services, businesses, technologies, and markets.
Poverty in Pakistan
Poverty remains a serious concern in Pakistan, where the per capita gross national income (GNI) is
US$520. Poverty rates, which had fallen substantially in the 1980s and early 1990s, started to rise
again towards the end of the decade. According to the latest figures, as measured by Pakistans
poverty line, 32.6 percent of the population is poor. More importantly, differences in income per
capita across regions have persisted or widened as have gender gaps in education and health.
Pakistan Poverty Alleviation Fund Project(PPAF)
The World Bank funded Pakistan Poverty Alleviation Fund Project was designed to reduce poverty
and empower the rural and urban poor in Pakistan. The project provides access to much-needed
microcredit loans and grants for infrastructure and capacity building. As such, the PPAF project
aims to help the rural poor in Pakistan get out of a cycle of misery, and get into a virtuous cycle ofopportunities.
To help poor people gain access to resources to earn an income and to develop projects aimed at
improving their lives, the Government of Pakistan created the Pakistan Poverty Alleviation
Fund (PPAF) as an autonomous body working with local partners to provide loans, grants and
technical assistance to the poorest individuals and communities in the country. The PPAF was
http://web.worldbank.org/external/projects/main?pagePK=64283627&piPK=73230&theSitePK=40941&menuPK=228424&Projectid=P049791http://web.worldbank.org/external/projects/main?pagePK=64283627&piPK=73230&theSitePK=40941&menuPK=228424&Projectid=P049791 -
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funded by a US$ 90 million World Bank credit and an endowment of US$ 10 million from the
Government of Pakistan in 2000.
The Pakistan Poverty Alleviation Fund (PPAF) represents an innovative model of public private
partnership. Incorporated under section 42 of the companies act 1984 it follows the regulatory
requirements of the Securities and Exchange Commission of Pakistan.
Sponsored by the Government of Pakistan and funded by the World Bank and other leading donors
the PPAF has on June 26, 2008 a resource base of US$ 1,030.17 million (Rs. 61,810.2 million).
As the lead Apex institution of the country wholesaling funds to civil society organizations, the
PPAF forms partnerships on the basis of rigorous criteria. Before finalizing partnerships the PPAF
ensures that the partners have well targeted community outreach programs that are committed to
enhancing the economic welfare and income of the disadvantaged peoples.
The Target Population for the project are poor rural and urban communities, with specific emphasisbeing placed on gender and empowerment of women. Benefits accrue directly to the vulnerable
through income generation, improved physical and social infrastructure, and training and skill
development support.
Unique Features of the PPAF
There are several unique features of the PPAF, the three most significant features are:
The establishment of an indigenous autonomous Apex institution with resource backed
capability of providing financial and non-financial support to civil society organizations on a
long-term basis.
A model public/private sector partnership with the role of government as an enabling
facilitator, and predominant role of private sector professionals for policy, strategy, and
management.
A dedicated market developer committed to the emergence of professional and sustainable
civil society organizations.
Organizations That Promote Poverty Reduction
Bill & Melinda Gates Foundation
CAFOD
Christian Aid
Compassion International
Free The Children
http://en.wikipedia.org/wiki/Bill_%26_Melinda_Gates_Foundationhttp://en.wikipedia.org/wiki/CAFODhttp://en.wikipedia.org/wiki/Christian_Aidhttp://en.wikipedia.org/wiki/Compassion_Internationalhttp://en.wikipedia.org/wiki/Free_The_Childrenhttp://en.wikipedia.org/wiki/Free_The_Childrenhttp://en.wikipedia.org/wiki/Compassion_Internationalhttp://en.wikipedia.org/wiki/Christian_Aidhttp://en.wikipedia.org/wiki/CAFODhttp://en.wikipedia.org/wiki/Bill_%26_Melinda_Gates_Foundation -
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Gawad Kalinga
Habitat for Humanity
Inter-American Development Bank
International Fund for Agricultural Development
International Monetary Fund
One Laptop per Child
Oxfam
Word Made Flesh
World Bank
World Vision
http://en.wikipedia.org/wiki/Free_The_Childrenhttp://en.wikipedia.org/wiki/Free_The_Childrenhttp://en.wikipedia.org/wiki/Free_The_Childrenhttp://en.wikipedia.org/wiki/Gawad_Kalingahttp://en.wikipedia.org/wiki/Habitat_for_Humanityhttp://en.wikipedia.org/wiki/Inter-American_Development_Bankhttp://en.wikipedia.org/wiki/International_Fund_for_Agricultural_Developmenthttp://en.wikipedia.org/wiki/International_Monetary_Fundhttp://en.wikipedia.org/wiki/International_Monetary_Fundhttp://en.wikipedia.org/wiki/International_Fund_for_Agricultural_Developmenthttp://en.wikipedia.org/wiki/Inter-American_Development_Bankhttp://en.wikipedia.org/wiki/Habitat_for_Humanityhttp://en.wikipedia.org/wiki/Gawad_Kalinga -
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BIBLIOGRAPHY
http://www.repoa.or.tz/
http://www.ide.go.jp/English/Researchers/
http://www.pimediaglobal.com/projects/poverty-research/
http://www.iedconline.org/
http://www.un.org/esa/research.htm
http://www.inomics.com/
www.economist.org/
www.ask.com
www.google.com